Health Insurance: Why Markets Are a Better Bet Than Government

Two trends in job-based health benefits demonstrate why markets are a better bet than government for containing health-care costs and preserving choice.

Today’s New York Times reports:

even if they are fortunate enough to have a job at a company that still offers health benefits, many workers are finding that the buffet of options has been trimmed to a very short menu…

this year, at more than 100 large companies and hundreds of smaller ones … high-deductible plans are the employee’s single take-it-or-leave-it option.  One of those companies is the automaker Nissan, which is offering only high-deductible plans to its 15,000 United States employees for the coming year. Another is Delta Airlines.

Expect to hear the usual nonsense about how employers are cost-shifting to workers (they aren’t) and how high-deductible coverage will harm workers’ health (it won’t).

The real lessons to be taken from this news are:

  1. Markets are better than government at cost-control. The cost of both public and private health insurance is rising.  Despite being badly hampered by government intervention, the private sector is responding by cutting back on overly generous health coverage, a move that will reduce use and cost growth.  How is the government responding?  By expanding public subsidies, which contribute to cost growth.
  2. Forced pooling reduces choice. In unregulated markets, the healthy quite happily subsidize the sick.  But when government forces the healthy to do so, healthy people bolt from comprehensive health plans, which then causes those plans to collapse.  One of the ways that government badly hampers private health-insurance markets is by herding us all into job-based insurance pools, in an attempt to force the healthy to subsidize the sick.  And wouldn’t you know, employers are now having to drop comprehensive plans.

There must be a lesson in here for Obauckennewyden.