Free Market Health Care Reform

There is the inevitable dialectic between those favoring an ever increasing role for government and those endeavoring to preserve some vestige of the private sector.  It is that same private sector that our founding fathers sought to protect through the Constitution, which manifestly seeks to limit the power of government.  Still, the reflex by some to envision certain inequities as offenses requiring the benign offices of our government to correct is intractable and perhaps nowhere is this tendency in greater evidence than in the matter of health care.

The current debate around which swirls the conflicting philosophies is the effort by some to expand the State Children's Health Insurance Program or “SCHIP.”  I quote from the Wall Street Journal Editorial Page:

“SCHIP, started in 1997, was originally intended to cover children from poor families who make too much to qualify for Medicaid but has grown to include the middle class and even adults - and it gets bigger every year.  The program is set to expire in September without reauthorization and Congressional Democrats want to increase its $25 billion budget by $60 billion over five years.” 

We find further that some states already cover families at or above 200% of the federal poverty line, even 400% or $82,600 as New York is planning.  At such levels, SCHIP will be an incentive for many new potential recipients to give up already existing private insurance.  It will also provide coverage in some cases up to age 25, which hardly qualifies as “children.” 

What we have here then is an effort led chiefly by Democrats to create a new middle class entitlement, to bring more and more citizens, even some who are relatively affluent, under the benevolent influence of our government, with an eye to usher in incrementally their cherished dream of “universal” socialized medicine for the whole country.  The attempt, however, should be resisted and for good reason: it is unpaid for, will increase dependency and enlarge the government. 

But the debate does provide an opportunity to address the larger question: what direction should the country take in order to bring greater health care to more Americans:  a government run single payer or our current private system, albeit reformed? 

We begin by stating the obvious: we should do nothing that would weaken the evident strengths of our existing system.  By this we refer mainly to the quality of our care - itself based on American preeminence in medical research and development.  Almost 80% of global biotechnology research is performed in the US compared with, for example, only 16% in Europe, a former leader but now fallen off, encumbered as it is by the heavy hand of socialism.  Our state-of-the-art health care derives from our free market system, which rewards innovation and risk taking and puts doctors and patients in charge of health decisions not government bureaucracies; it gives us the most gifted doctors and nurses, the most advanced hospitals and facilities and the most promising medical research and pharmaceuticals.  Most Americans are satisfied with the quality of their health care.    

In state run systems such as are found in Europe and Canada, there is a tendency to invest in staff and infrastructure but not in new drugs or technology.  The reasons are straightforward: strikes and unhappy personnel can result in immediate complaint while research is long term and can be shortchanged with no one noticing.  Research therefore lags.  Because health care in socialized models operate based on government targets and compete with other budgetary items for funding, quality issues arise that would never be tolerated in America.  These include lack of access to specialists and sophisticated technology such as MRI scanners, shortages of various kinds, rationing, poorer quality drugs, and interminable waiting periods. 

To put it another way: the single payer model works well as long as nothing major is needed.  But for those who require advanced care, say a hip replacement or bypass surgery, outcomes are less than salutary and waiting times prohibitive.  And a single payer system for a nation as large as the US would create a nightmare of a bureaucracy: it would be massively expensive, inefficient, with spending caps, a stifling of research, reduced quality and access, and for patients and doctors, very little say.  It would probably also bankrupt the country. 

The question is how to preserve the dynamism and innovation of American health care while addressing some of its entrenched problems, chief of which are affordability, lack of portability, and the uninsured.

The answer lies, for the most part, in the free market.  President Bush's proposal for a $15,000 standard tax deduction for every family with private health insurance is an excellent place to start.  This would encourage the self employed or those who work for small businesses to purchase their own insurance just as the mortgage interest deduction encourages Americans to buy their own homes.  It would lower tax bills for those who receive employer based health insurance and provide a tax break for the first time for those who purchase their own.  More Americans will be able to buy their own insurance that they can keep regardless of place of employment. 

Health Savings Accounts allows individuals to purchase low cost high deductible insurance and place the savings into tax free medical accounts that can be used to meet deductibles and future health needs.  Insurance deregulation, so that individuals can purchase insurance across state lines, will increase competition and lower insurance costs.  Insurance markets mediated by states and even at the federal level can be arranged that will increase purchasing and bargaining power for individuals buying their own insurance.  Subsidized private health insurance for poor families that do not qualify for Medicaid is preferable to government run health care.  Expanding COBRA will allow displaced workers to keep their insurance.  Through free market mechanisms, Americans can own their own portable insurance at affordable prices and preserve the flexibility and quality of what is in many ways the best health care system in the world.