Change that Will Save You Money
Over the past several weeks Congress has been working on health care legislation that would inevitably lead to a socialist, single-payer system. As usual, the president is saying one thing (the bill will be "deficit-neutral") while the facts say otherwise (see Congressional Budget Office).
This is difficult to accept for Republicans, we believers in individual responsibility and limited government. And while we seek a better alternative to offer, our party leaders have offered nothing worth rallying around.
However, a persuasive alternative to the Democrat plan to complete the government's takeover of the health care industry was, in fact, laid out by the great free-market economist Milton Friedman over a decade ago, before his death. His plan would actually reduce costs and expand coverage, as the president claims to seek. If only Republicans in Congress would dust it off and adopt it as their own....
In his study "Input and Output in Health Care," Friedman identified the two biggest contributors (bearing 70% of the responsibility, Friedman claims) to the spiraling costs of health care:
1. The tax-exempt status of employer-provided health care, which a) leaves medical arrangements in the hands of the employer rather than the individual (who's gonna care more?) and b) makes health care relatively cheaper than, say, food, which is paid for with income that has already been taxed (this artificially causes patients to demand more medical services)
2. The bureaucracy and regulation of health care that resulted from the establishment of Medicare and Medicaid
Together, these factors have lead to the grotesque distortion of the free market that is our health care system today, in which a third party--the government or an insurance company--both sets the price of and pays for medical treatment. Ideally, the seller (the doctor) and the buyer (the patient) would come together and set to a price that is mutually agreeable.
In order to bring costs down and avoid government control of health care, Friedman argues that we must dismantle our current system, incrementally if we prefer, with the following actions:
1. Abolish Medicare and Medicaid - This would result in huge immediate savings from less bureaucracy and the restoration of a sane, free market relationship between buyer and seller to set prices. This could be immediately replaced with a program for the poor and elderly under which they would receive money from the government (as much as they currently get, for instance) to use only towards health care; they would keep what they don't spend on health care, and it would be taxed as income.
Alternatively, to win the support of Democrats, every American could be required to have health insurance geared towards catastrophic illness or injury, akin to fire insurance for a home or car insurance if your vehicle is totaled. All other health expenses would be out-of-pocket. Many Americans would find this coverage sufficient and wouldn’t seek additional insurance.
2. End the tax exemption of employer-provided health care - This would a) make health care relatively more expensive for most Americans, increasing the incentive to keep costs down, b) make the labor market more flexible since workers would be more willing to switch employers, and c) result in a movement towards individuals paying for their own health care, rather than companies managing it for them (this is good, because the individual knows what's best for themselves and is more likely to try to save money).
3. Remove the draconian regulations on health insurance - This would result in greater choice among insurance options, perhaps leading even to a system under which insurance covers only catastrophic health problems and the rest is paid for by the individual, as noted above.
These reforms would eliminate wasteful spending on health care bureaucracy and send health care back into the arms of the free market. Health insurance would probably be purchased only by individuals, not by companies, resulting in higher wages. And, as Milton Friedman wrote, "The first question asked of a patient entering a hospital might once again become 'What’s wrong?' not 'What’s your insurance?'"
If only our lawmakers had the courage to propose such bold, but beneficial, reforms.
Over the past several weeks Congress has been working on health care legislation that would inevitably lead to a socialist, single-payer system. As usual, the president is saying one thing (the bill will be "deficit-neutral") while the facts say otherwise (see Congressional Budget Office).
This is difficult to accept for Republicans, we believers in individual responsibility and limited government. And while we seek a better alternative to offer, our party leaders have offered nothing worth rallying around.
However, a persuasive alternative to the Democrat plan to complete the government's takeover of the health care industry was, in fact, laid out by the great free-market economist Milton Friedman over a decade ago, before his death. His plan would actually reduce costs and expand coverage, as the president claims to seek. If only Republicans in Congress would dust it off and adopt it as their own....
In his study "Input and Output in Health Care," Friedman identified the two biggest contributors (bearing 70% of the responsibility, Friedman claims) to the spiraling costs of health care:
1. The tax-exempt status of employer-provided health care, which a) leaves medical arrangements in the hands of the employer rather than the individual (who's gonna care more?) and b) makes health care relatively cheaper than, say, food, which is paid for with income that has already been taxed (this artificially causes patients to demand more medical services)
2. The bureaucracy and regulation of health care that resulted from the establishment of Medicare and Medicaid
Together, these factors have lead to the grotesque distortion of the free market that is our health care system today, in which a third party--the government or an insurance company--both sets the price of and pays for medical treatment. Ideally, the seller (the doctor) and the buyer (the patient) would come together and set to a price that is mutually agreeable.
In order to bring costs down and avoid government control of health care, Friedman argues that we must dismantle our current system, incrementally if we prefer, with the following actions:
1. Abolish Medicare and Medicaid - This would result in huge immediate savings from less bureaucracy and the restoration of a sane, free market relationship between buyer and seller to set prices. This could be immediately replaced with a program for the poor and elderly under which they would receive money from the government (as much as they currently get, for instance) to use only towards health care; they would keep what they don't spend on health care, and it would be taxed as income.
Alternatively, to win the support of Democrats, every American could be required to have health insurance geared towards catastrophic illness or injury, akin to fire insurance for a home or car insurance if your vehicle is totaled. All other health expenses would be out-of-pocket. Many Americans would find this coverage sufficient and wouldn’t seek additional insurance.
2. End the tax exemption of employer-provided health care - This would a) make health care relatively more expensive for most Americans, increasing the incentive to keep costs down, b) make the labor market more flexible since workers would be more willing to switch employers, and c) result in a movement towards individuals paying for their own health care, rather than companies managing it for them (this is good, because the individual knows what's best for themselves and is more likely to try to save money).
3. Remove the draconian regulations on health insurance - This would result in greater choice among insurance options, perhaps leading even to a system under which insurance covers only catastrophic health problems and the rest is paid for by the individual, as noted above.
These reforms would eliminate wasteful spending on health care bureaucracy and send health care back into the arms of the free market. Health insurance would probably be purchased only by individuals, not by companies, resulting in higher wages. And, as Milton Friedman wrote, "The first question asked of a patient entering a hospital might once again become 'What’s wrong?' not 'What’s your insurance?'"
If only our lawmakers had the courage to propose such bold, but beneficial, reforms.
