Health Care, Choice, and the Role of Government
Over at Cato-at-Liberty Michael Cannon has an interesting post. Cannon argues that the Republicans are moving more and more towards a Big Brother view of government.
The Cato Institute has noted for some time that conservatives and Republicans have abandoned their limited-government principles when it comes to health policy. Examples can be found here, here, here, here, and here.
The New America Foundation just made our job a little easier, by producing a paper titled, “Growing Support for Shared Responsibility in Health Care.” In this context, “shared responsibility” means allowing the government to force all Americans to purchase health insurance — a power the Left has craved but no government had dared assume until Massachusetts did so this year.
Unfortunately, there has been too little debate within the limited-government camp over this idea. This is in part because Heritage Foundation scholars have repeatedly declined to debate Cato scholars or other free-market critics of their proposal.
Until we’re able to have that fuller debate, here’s a helpful algorithm for judging this and other health care proposals:
- Does it limit government power?
- If not, move on to the next proposal.
I am sympathetic to Cannon’s view here. The direction most people seem to be either in favor of, or coming around to is that the government should take over health care. Further, that this move towards bigger and bigger government is one of the big problems with Republicans these days.
However, I think that Cannon is ultimately wrong here. Not wrong in principle, but wrong from the stand point of can his view win.
The problem is that currently we have laws that forbid hospitals from treating patients on the basis of ability to pay. That is a hospital cannot refuse service/treatment based on ability to pay. This creates some serious incentive problems for any market based approach.
Consider the following:
- Bob is young (25 years old).
- He is single.
- He is healthy.
- He doesn’t have much in the way of seizable assets (i.e. no house, a mid-priced car that is now used, etc.)
For somebody like Bob, buying insurance is a sucker’s game. Why buy it? He wont likely get out of insurance what he pays in. Further, even if he does do a number on his noggin while snow-boarding he will still get treatment. And so what if he can’t pay; what are they going to do, take is crappy car? No, for Bob, there is no incentive to go out and purchase insurance.
Consider this case:
- The Johnsons are struggling.
- They have 2 kids.
- They are healthy.
- They don’t own much in the way of seizable assets.
For the Johnson’s also buying insurance might look very much like a suckers game. If they need treatment and go to the emergency room they will eventually get it. If they can’t pay, there isn’t much that can be done to them. The Johnson’s might rationally decide to forgoe health insurance in favor of things like paying rent, buying food, and so forth.
In both cases the law that requires hospitals to treat patients irrespective of ability to pay creates a very serious incentive that will lead to a quite possibly very expensive market failure.1 As such, a market based approach will almost surely fail in that only those who have assets and/or have reason to think they will need insurance will purchase it. This means that premiums will be higher to cover the costs of those who do not purchase health insurance since those expenses will have to be covered somehow.
One could argue that the law requiring treatment irrespective of ability to pay be revoked. I contend that this view is such a dead horse politically there isn’t even a horse to beat anymore. Think of it, a politician gets up there and flashes a picture of some cute chubby faced child who has some horrible medical need through no fault of the child’s. But those hospitals have wheeled this child to the curb to suffer and eventually die unless something is done. Sure, I imagine that in many cases charity will come through, but in all of them? And as a parent would you want to take the risk of having to rely on charity? Nope, this just isn’t going to happen.
I see the solution of requiring, by law, that all people have catastrophic health insurance along with a government voucher program for health insurance to be the only real solution. This solution has the benefit of still giving consumers choice over which company insures them and promotes competition.2 At the same time everybody has insurance thus taking the wind out of the sails for those who think the government should provide payment for all health care.
Basically, this is a rear-guard fight at this point. The idea that we can go to a purely market based system is, in my view, a totally unrealistic idea. To continue to push for it will only provide the opening for those who want government provided health care to get what they want. I don’t know if the idea of vouchers along with mandantory catastrophic health care meets the Cannon test for health care policies.
1Please note that I am not saying that all people without insurance are like this. I am merely trying to highlight the perverse incentive that a well intentioned piece of legislation has created.
2For example, if people can find insurance that is less than the value of their voucher they might be able to keep a portion of the money.