Tuesday, June 2, 2009

Give Me Healthcare, Or Give Me Death?

The state of US healthcare system is atrocious. It is in need of desperate reform. Unfortunately, the Republican Party lacks any coherent proposals to fix the broken system. This leaves the American people with a choice between the current unwieldy system or the big government, nationalized, nearly Socialist plan of the Left.

For years, the Democrats have been proposing state control of the healthcare system. They want to offer universal healthcare to every American on the taxpayers’ dime. While seemingly noble in aim, this is absolutely foolish. Not only will a government system crowd out the private industry, but it will be vastly inferior. As most know, the government does a substandard job at providing services, particularly services that can be supplied by the private sector.

Unfortunately, this is where the discussion stops for most Republicans. The criticisms of the Democrats’ model of universal healthcare are solid and well thought out. However, the Republican’s offer little in terms of a solution to the obvious problems in the healthcare industry.

A relatively clear-cut answer is to fall back on the free-market principles that form the base of American conservatism. While unquestioning defense of the healthcare industry often comes hand-in-hand with criticism of universal healthcare, this need not be the case. One of the bases of free market capitalism is the notion of competition. However, the current structure of the health insurance industry limits competition.

Contrary to other, non-health, insurance industries, the health insurance system is an employer-based system. This severely reduces the number of buyers of health insurance. A health insurance company only needs to pitch its product to a few large companies in order to capture a substantial portion of the market. This forces the insurance company to structure products that will appeal to HR representatives, not the insurance consumer. This limits the diversity of the products offered and gives the insurance companies greater market control. Health insurance consumers can veto bad insurance plans only by leaving their jobs. Certainly, this puts some limits on the downward movement of insurance quality- as competition remains at the firm level. However, it drastically reduces the specialization that would occur if each consumer were responsible for his or her own insurance.

The easy solution is to end the employer based health insurance system. Individuals would be responsible for finding their own health insurance. Companies, since they no longer have to pay for insurance, would increase salaries accordingly. This would leave individuals with the same amount of money as they previously had to purchase health care on the free market. Naturally, many new, specialized products would develop. This would allow individuals to spend more or less based on the type of care and services they want. Insurance companies would have to compete rigorously with each other to capture new, separate segments of the market. All this would lead to greater competition, lower prices, and increased services. Insurance companies that fail to deliver would find a swift exit from the market, thereby creating a marketplace of higher quality companies.

Critics of such a proposal argue that health insurance is far too complicated for the average American to purchase on their own. This, however, unfairly diminishes Joe Six-Pack’s ability to obtain the appropriate information that he would need. The average American is capable of doing their own taxes and finding homeowner’s or car insurance. For those that cannot, or do not want to be bothered, there are a myriad of brokerage services available. It is quite likely that insurance brokers would expand in scope as they aided individuals in searching for the right health insurance plan.

The answer to the health insurance issue is not increased consolidation and government regulation, but a move towards greater free market competition. Government controlled, universal healthcare will only deepen the systemic problems that already exist. A greater number of differentiated healthcare providers will facilitate cheaper, more universal healthcare, without sacrificing the quality of healthcare in America.


  1. i take issue with your basic premise: "As most know, the government does a substandard job at providing services, particularly services that can be supplied by the private sector."

    case in point: with welfare reform in the 1990s came a mandate that child support collection efforts be stepped up. in colorado, republicans claimed that the private sector could do a better job in enforcing child support court orders. lockheed, a company that sucks at the government tit in perpetuity, was awarded a contract to "compete" against the state's social services employees. you may be surprised to learn that lockheed tanked in a very big way. even though the child support enforcement technicians were strapped with sometimes more than three times the cases it was recommended they hold, they still beat out the lockheed employees (who worked for close to half the wage the state workers did).

    not all public sector work is wasted tax dollars. once you realize that 1 in 5 americans works for the government in some capacity, it might occur to you that you ought to stop slamming the hard work we all do.

  2. First of all, this, by no means, was meant to disparage the hard work that millions of Americans do in government service. This was an indictment of a system, not necessarily the people within the ranks that do the hard work. I presume you work in government services. How often have you been hindered by red tape? Or forced do something in a grossly inefficient or backwards way because some bureaucrat high up thinks he knows a better way? The problem with the government is that there are little, if any efficient ways to remove ineffectual and inefficient people and or methodologies. That is not to say that there are not phenomenal governement workers and even phenomenal government programs. I went to a superb public school system for instance. However, the free market has better mechanisms to find the best methodology. For instance encouraging merit based, rather than seniority based promotion and allowing bad businesses and ideas to easily fall by the wayside without special interests lobbying to keep them around.

    Second, by all means you are correct that some public sector work is necessary. In particular, the government has a role to play where the private sector cannot. The government needs to be a so-called filler where free markets are unable to reach. This certainly covers issues like military defense (coordination issues), environmental issues (pricing externalities), infrastructure (common goods), etc. However, the government's role needs to be limited elsewhere.

    As to your Lockheed example, I can't speak directly to it as I am not familiar with the situation. However, it seems to me that it was not a competitive market operation. I am in favor of a private, competitive market. This situation seems to be a government handout to a private company. Whatever backroom dealings that lead to Lockheed's contract do not necessarily signify that it was a private sector system. Just because it is a private company does not mean that it is free-market capitalism. In fact, I think I might agree wholeheartedly with you that in most instances enforcement of legislative and judicial rulings IS the responsiblity of the executive branch and not something that can be doled out.

    Again, I do believe some government is necessary. However, government should stick to governing and not other pursuits. As for the hardworking people, I commend the job they do. Just as I wouldn't blame the average Joe autoworker for the failure of GM, I don't blame the average government employee for the failures of the government organizations. Thanks for your comment!

  3. why is healthcare one of the spheres of life that is below the government's role? isn't it an environmental issue, the health of the people?

    what makes healthcare not an infrastructural, common good issue?

  4. The way I see it is that the government has a role where something could otherwise could not be provided. This entails items that have (1) externalities and (2) coordination problems. Externalities are positive or negative benefits that go to someone who is not involved (doesn't pay for) the product. Two examples would be pollution (negative) and parks (positive). In these cases we would naturally get too much pollution (b/c companies don't have to pay to pollute) and too few parks (b/c it is overly costly for one person to build a park and everyone would benefit from it. Therefore no one would have incentive to pay to build it).

    Coordination problems are issues that involve difficulties in people interacting to provide something they all need (can overlap with positive externalities). The military is a good example of this. We need a military to protect ourselves but is difficult for private militaries to coordinate. Also who would pay them?

    Universal healthcare doesn't fall in these categories. The reasoning comes from a sublety that you made in your question - "the health of the people" vs "the health of a person". You are right to say the the 'health of the people' is a government issue (public good), however the health of a person is not. This is really the difference between 'public health' and 'healthcare'. The government has a number of externalities to deal with in managing public health. Swine flu is a great example. The government must manage epidemics and national/regional health issues. However, that is a far cry from providing insurance to someone who breaks his leg. One deals with global, common issues; the other with personal. This is precisely why healthcare is not in the government domain. Public health can be handled in other ways (preventive- ie through education about vaccination, or emergency if an epidemic spreads)than providing full health insurance coverage.

    This goes hand in hand with the individualism that forms the basis of America. The government needs to stay out of private lives and only manage the public. I don't want the government dictating what risk I can take, however everyone else in America shouldn't be responsible if I take a risk and hurt myself.

  5. Josh, Correct me, if I'm wrong, your Capitalistic system depends on people always having a job that produces the income required to pay for Healthcare via an Insurance industry. First and obivious, the always known culprit of"middle-man" systems breeds wasted costs immediately paid for by consumer be it business or individual. The constant indisputable reality of "COBRA" payments (example of actual Insurance cost) far exceed the amount gained by eliminating this portion from a paycheck. Why is it so hard to address the core reason for Healthcare expense. As business models go, A Primary Care Doctor medium income is around $170,000 and a Cardiac Specialists medium is $420,000 - other Specialties pays are similiar. Administration positions can be in this arena and with no direct Healthcare function. Any other business model looks to Labor costs immediately to reduce costs, either for consumer relations or actual product/service popularity or purchase. In conjunction with these simple business truths, Drug Companies and the horrific supply chain to deliver these medications to the public clearly manipulate the entire system for gross, gross profit on Healthcare. Your following article, June 17th in reference to Union management of Healthcare (GM) again, you critize the "ultimate system" of lifetime coverage for the workers (union members) when you know, the ultra rich, Government employees (at higher levels) and others have this happen as a "perk" - why not the working guy? Can you find a better example of lop-sided Healthcare than when the ultra-rich, Steve Jobs, for no other reason than wealth, put aside "lists' and have instant organs. How much grotesque can a system be?? In short, the "free market" system financially benefits (in a HUGE way) a itty-bitty tiny little group of elitists that blantantly live far above the majority, provides the "best" care to those (and only those) that can AFFORD it, and delegates the rest to "middle-men" (Predatory Insurance Companies) that rape the consumer - business or individual with a close to useless watered down "benefit" (try Dental Ins. for useless) all under the disguise of free market. Can a well balanced New Republican idea correct these definitive issues with a look at compensation for the Public Good??

  6. I think you bring up a valid critique of the current health care system. I, by no means, am a believer in the current healthcare system. Along that line I would not consider the health care system an example of free market capitalism. It is broken precisely because it lacks a number of competitive attributes. COBRA is not an exemplar of an efficient insurance. It is a largely uncompetitve market that is not subsidized by corporations. One of the problems with COBRA is that wages are competitive based around a system where the average work does not need to pay for health insurance out of pocket. This puts COBRA users at a disadvantage since they generally will receive equivalent wages and still have to pay for health insurance.

    I do have to dispute that the American health care system benefits only an itty-bitty elite. For all its faults and excessive costs, most Americans are healthy and taken care of.

    Likewise, capitalism does not require anyone to continuously work in order to afford healthcare. With proper foresight and planning the capitalist system allows for building of wealth and surplus to provide for retirement. In fact, America currently has one of the longest periods of retirement in its history (and the world)- something that given the state of social security will most certainly diminish.

    This being said I think you hit on some valid criticisms of the system. The pay-for-service system has intrinsic contradictions. It gives doctors and insurance companies incentives to provide useless treatments and tests. The insurance companies also have excessive power.

    The crux of this problem is that the market, in many fashions, is uncompetitive. The solution to an uncompetitive market is to make it more competitive- by increasing the number of competitors and forcing them to compete on product, quality, cost. It also can entail changing the structure of the market to align financial incentives with procedural/health incentives.

    It does not however mean that we want to consolidate the system further. It boggles my mind when people criticize 'big insurance' and think the answer is 'big government'. One insurance plan in America is inefficient and anti-competitive and hence against the interest of the citizens of America. I don't see how one big insurance company is any different than one big government insurance plan. We need to fix a broken market, not trash the whole concept.


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