“Healthy” Debate

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Joe Klein and Justin Fox raise some excellent questions. What role does government play in our current health care system? How much of a role should it play?

Despite Klein’s interest in playing between the 40 yard lines, I believe we are in the red zone. Government already purchases 45 percent of health care in America. To keep with his football metaphor, that takes us 45 yards in the wrong direction. Employment-based health care systems account for some 30 percent of health spending, and due to perversions of the tax code, is essentially a government program. Why do I say that? The system takes employees’ money, provides few choices, and leaves millions of people without insurance or care, all while costs are exploding. Why should health care be dependent on your employer, especially when the typical employee will change jobs multiple times during her career?

Regulation is a formidable force in the health care game. By one estimate, health care regulations leave us worse off by an amount equal to 11 percent of health spending. For every $100 Americans spend on health care, we pay $11 to the regulator, which is to say nothing of the additional costs heaped on top by frivolous junk lawsuits and medical malpractice abuse. We’re backing up to the end zone and the socialized medicine crowd has the momentum.

To move the ball downfield, we must put control of health care spending in the hands of individuals. Government can use mandates, taxes or subsidies to force people to buy insurance, but only competition will reduce expenses. Health savings accounts are a step in the direction of ownership. When individuals take ownership of their medical care, two goods result. First, a diversity of preferences and choices emerge. Different people will choose different treatments and providers which is the keystone to the competitive process. Second, the information asymmetries that worry Fox begin to subside.

Look at the healthy components of our health care system. What they have in common is a large measure of independence from government subsidies and price regulation. For example, eye surgery centers, fertility specialists and cosmetic dental surgery. Costs have fallen dramatically, innovation abounds and safety improves.

Economists have a fancy term for this phenomenon. It is called price posting. When consumers see the prices available, they make better informed decisions and competitive pressures emerge and more information results which starts the virtuous circle anew. Unfortunately, by pushing consumers all the way back to their own goal line, past public policy decisions are a formidable defense against better health care in America.

There are other health care questions to be addressed and I’ll try to get to them in another post. For now, I have two simple points. Politicians can be judged by the direction in which they are pushing the policy agenda – toward socialized costs and government programs or toward market-driven responses and the end of crazy tax code incentives. As a corollary, health care consumers will be better off as we take steps toward giving them more control over their health care spending. They will be better informed, more appropriately insured, and certainly healthier.