In the comments of this post, Wally asks:
If you were given a free hand to reform the health care system in the US, what would you do with it? What would be the philosophical goals (if any) of the system?
What follows is my short answer. I will elaborate on them more in future posts.
1. Eliminate the tax advantage employers have over individuals for health insurance (either give the same advantage to individuals or remove it from employers).
2. Modify the emergency care act to encourage responsibility. A couple of ideas include putting a limit on the freebies that can be received and having the expectation that something will be paid somehow.
3. Allow for experimentation and choice. If someone living in New York wants to buy an insurance policy that meets Idaho’s state mandates, let them. Btw, before Obamacare, Idaho’s insurance plans were dirt cheap compared to New York’s. Nobody seemed all that interested in understanding why.
4. Convert as much of medical care as possible to first-party payments. This can be done with health savings accounts and medical stamps for the poor. See Singapore.
Update: In the comments, Mark Rossow reminded me of some excellent pieces by economist John Cochrane on health care.
Here’s a link to Cochrane’s paper and an EconTalk podcast where he discusses it. I previously discussed the paper here and here.
Also, I elaborated on #1 in this post from 2009, Fix Pre Existing Condition, which explains how I think the tax advantage for employers provided insurance contributed to the oft cited problem of pre-existing conditions. Cochrane agrees.
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See also John Cochrane’s remarks on Econtalk: http://www.econtalk.org/archives/2012/11/cochrane_on_hea.html
I agree. That was an excellent podcast, as was his health care paper that he discussed while on it.
I posted about the paper here: https://ourdinnertable.wordpress.com/2012/11/02/free-market-masterpiece/ and here: https://ourdinnertable.wordpress.com/2012/11/20/government-caused-the-pre-existing-condition-problem/
Thanks for the post, Seth.
From everything I’ve heard from paramedics and folks who work in the ER, your #2 suggestion would be greatly appreciated. Sounds like there are some regular customers of the service that shouldn’t have regular customers that are costing the rest of us quite a bit in premiums.
As for #4, aren’t the medical savings accounts in Singapore mandated by the government? Meaning, don’t they require employers to deduct a certain percentage of each citizen’s paycheck and put it into the account? (I could be misunderstanding their system entirely… it seemed like a really interesting combo of universal health care and private health care. All I did was read the wikipedia article.)
“As for #4, aren’t the medical savings accounts in Singapore mandated by the government?”
I believe so. Similar to how we are forced into paying into Social Security and Medicare. But, I think there’s a key difference. Instead of paying into a system and having your money spent by bureaucrats, you retain ownership of your balance and decide how to spend it — which means that a lot of third party medical payment in our system would become first party payment, where I think the incentives are strongest to drive affordability, quality care and innovation.
I’m not a big fan of the mandated part, but if I had to choose between semi-sorta forcing people to buy a government-approved health insurance policy and forcing them to save for their own insurance and medical expenses, I’d choose the latter.
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“But, I think there’s a key difference. Instead of paying into a system and having your money spent by bureaucrats, you retain ownership of your balance and decide how to spend it — which means that a lot of third party medical payment in our system would become first party payment, where I think the incentives are strongest to drive affordability, quality care and innovation.”
That is an important difference. The consumer gets to choose when and where they spend their money.
“I’m not a big fan of the mandated part, but if I had to choose between semi-sorta forcing people to buy a government-approved health insurance policy and forcing them to save for their own insurance and medical expenses, I’d choose the latter.”
That’s an interesting admission. Do you think we need to force people to save for medical expenses? We already force people to save for retirement with social security (I think that’s supposed to be the premise anyway), as you point out.
Is there another solution besides mandating savings? Or is this something where the feedback loop is weak enough (people don’t get critically ill that often so it isn’t something they are reminded of to save for, plan for or insure against) that a mandate makes economic sense?
Good questions, Wally.
In a world where medical freeloading in unacceptable, I don’t think people would need to be forced to save for medical care and/or make responsible choices (like buying a catastrophic policy before getting the cell phone upgrade), because as Mike M once on this blog, they wouldn’t be able to afford not to.
But, in a world that has a tendency to allow medical freeloading, I think it’s tough not to have some force somewhere — otherwise, enough people take advantage.
Once, on this blog, I suggested a reform to Social Security that might work here too. My libertarian friends probably don’t think much of this, but here goes. Let’s say you were expected to put 10% of your income into retirement savings.
If you put 0% in, then 10% would be taken out like it is with Social Security now. If you elect to 3% into a retirement account, then 7% would be put in the ‘Social Security’ account. If you put 10% into a retirement account, then 0% would be put into a Social Security account.
You could do something similar with medical savings.
Here’s another thought to consider. I personally believe that if the medical market were freer, we’d eventually get to the point where catastrophic insurance would be freebies given away as marketing ploys, sort of like how credit card companies offer travel insurance if you book their travel through them, because costs of care would go down.