January 6, 2009 12:54PM

How Should Developing Nations Regulate Health Care?

The latest issue of the journal Health Affairs publishes a letter I wrote to the editors concerning articles on health care regulation in China and India.  The entire letter follows (links added):

Recent articles on China and India (Jul/Aug 08) share the assumptions that markets for medical care and health insurance require extensive government regulation and that each nation should focus on universal coverage.

I am unfamiliar with the history of regulation in those nations. But the track record of clinician and insurance regulation in the United States is not encouraging. Both have been used by incumbents to block competition, leading to higher costs and lower quality. Gerald Bloom and colleagues worry that unless India imposes clinician licensing, "the natural process of competition is expected to force each insurer to come up with its own accreditation policy and reimbursement procedures." Does that mean that prepayment would compete openly with fee-for-service? And that physicians could not increase costs by blocking health plans from employing mid-levels when appropriate? Dear God—not that.

Ashoke Bhattacharjya and Puneet Sapra write, "It is encouraging to note that notwithstanding the myriad issues and challenges discussed above, both countries are developing a constructive working framework to balance the interests of government, providers, employers, the insurance industry, and patients, en route to the goal of universal coverage and fairness in health care financing." That’s just the problem: a policy of universal coverage puts too much power in the hands of elites. It inevitably "balances" those interests, when patients’ interests should trump all others. Does not the fact that "these countries lack the fiscal resources required for universal coverage because of their...low average wages" suggest that many residents have more pressing needs than health insurance? For things that might just deliver greater health improvements? In a profession where universal coverage is a religion, such questions are heresy,I know.

China and India are in the process of a slow climb out of poverty. It is entirely possible that the best thing those governments could do to improve these markets and population health would be to enforce contracts, punish torts, contain contagion, and nothing else.

Michael F. Cannon
Cato Institute, Washington, D.C.