A Four-Step Healthcare Solution (Archive)

This post will undoubtedly be met with a complete misunderstanding of what these solutions would actually do for those who cannot currently get health insurance (namely because of costs, resulting ultimately from government meddling, which has had a domino effect in the private sector). In particular, many will consider the proposal below of “[eliminating] all subsidies to the sick or unhealthy,” as a flagrant attack on the poor, sick and disenfranchised, when in reality, it will actually have the opposite effect of what might be expected. To many, such a proposal seems counter-intuitive, but the incentive created for the poor will be that costs are lowered, making it affordable for them.

I just wanted to preface the intent here, since some seem intent on framing such a proposal as “evil conservatism.” Such an assumption by some, to me at least, shows a great deal of intellectual dishonesty in not dealing with the argument proposed here. Letting the free market work, and getting the quasi-Marxism out of the mix, will have drastic effects on getting better healthcare coverage for all, including the poor and sick. If you disagree, fine. But don’t label such an idea as evil when clearly the goal is making healthcare available and more affordable for everyone.

The solution to our health care woes is not to put more regulations or government control over this sector of our economy or to provide a public option which will stifle competition and create less incentive in the market. The real solution is to free it from the bureaucratic and government constraints, getting rid of the subsidies and red tape. This will inevitably lower prices, which will create the incentive for many more people to purchase insurance at a reasonable price that cannot currently.

The solution is not more government (in contradistinction to the administrations’ assumptions), but rather no government intervention. Let the free market create incentive, all around. The more red tape, the more constraints you put on the market, the less incentive will be created and the less quality care the poor and the average person will receive. From doctors, to medical equipment, to insurance companies, to patients, all of our current problems are a result of cost-creating government involvement and meddling. It’s actually quite simple. And before you write off some of the ideas based on the first sentences alone, read the entire solution, not just part of it. Here are the four ideas being proposed by Hans-Hermann Hoppe from the Ludwig von Mises Institute:

  1. Eliminate all licensing requirements for medical schools, hospitals, pharmacies, and medical doctors and other health-care personnel. Their supply would almost instantly increase, prices would fall, and a greater variety of health-care services would appear on the market.Competing voluntary accreditation agencies would take the place of compulsory government licensing — if health-care providers believe that such accreditation would enhance their own reputation, and that their consumers care about reputation, and are willing to pay for it.Because consumers would no longer be duped into believing that there is such a thing as a “national standard” of health care, they would increase their search costs and make more discriminating health-care choices.
  2. Eliminate all government restrictions on the production and sale of pharmaceutical products and medical devices. This means no more Food and Drug Administration, which presently hinders innovation and increases costs.Costs and prices would fall, and a wider variety of better products would reach the market sooner. The market would force consumers to act in accordance with their own — rather than the government’s — risk assessment. And competing drug and device manufacturers and sellers, to safeguard against product liability suits as much as to attract customers, would provide increasingly better product descriptions and guarantees.
  3. Deregulate the health-insurance industry. Private enterprise can offer insurance against events over whose outcome the insured possesses no control. One cannot insure oneself against suicide or bankruptcy, for example, because it is in one’s own hands to bring these events about.Because a person’s health, or lack of it, lies increasingly within his own control, many, if not most health risks, are actually uninsurable. “Insurance” against risks whose likelihood an individual can systematically influence falls within that person’s own responsibility.All insurance, moreover, involves the pooling of individual risks. It implies that insurers pay more to some and less to others. But no one knows in advance, and with certainty, who the “winners” and “losers” will be. “Winners” and “losers” are distributed randomly, and the resulting income redistribution is unsystematic. If “winners” or “losers” could be systematically predicted, “losers” would not want to pool their risk with “winners,” but with other “losers,” because this would lower their insurance costs. I would not want to pool my personal accident risks with those of professional football players, for instance, but exclusively with those of people in circumstances similar to my own, at lower costs.Because of legal restrictions on the health insurers’ right of refusal — to exclude any individual risk as uninsurable — the present health-insurance system is only partly concerned with insurance. The industry cannot discriminate freely among different groups’ risks.As a result, health insurers cover a multitude of uninsurable risks, alongside, and pooled with, genuine insurance risks. They do not discriminate among various groups of people which pose significantly different insurance risks. The industry thus runs a system of income redistribution — benefiting irresponsible actors and high-risk groups at the expense of responsible individuals and low-risk groups. Accordingly, the industry’s prices are high and ballooning.To deregulate the industry means to restore it to unrestricted freedom of contract: to allow a health insurer to offer any contract whatsoever, to include or exclude any risk, and to discriminate among any groups of individuals. Uninsurable risks would lose coverage, the variety of insurance policies for the remaining coverage would increase, and price differentials would reflect genuine insurance risks. On average, prices would drastically fall. And the reform would restore individual responsibility in health care.
  4. Eliminate all subsidies to the sick or unhealthy. Subsidies create more of whatever is being subsidized. Subsidies for the ill and diseased promote carelessness, indigence, and dependency. If we eliminate such subsidies, we would strengthen the will to live healthy lives and to work for a living. In the first instance, that means abolishing Medicare and Medicaid.

Only these four steps, although drastic, will restore a fully free market in medical provision. Until they are adopted, the industry will have serious problems, and so will we, its consumers.