May 8, 2006 2:43PM

Libertarianism and Health Care

I recently did an interview with Catallarchy, a group blog made up of young libertarians. Sample Q&A:

While you come out in favor in free‐​market reforms in your book, how politically feasible do you think these reforms are?

Not at all. The most important proposal I make is to phase out Medicare. That’s a non‐​starter politically. But these ideas only become possible if you start to talk about them and people begin to understand that they make sense.

Many people view the US healthcare system as “free‐​market” and the rest of the world, especially England and Canada, as “socialized”. Is this the case?

The more I look at, the less free‐​market it seems. Take health care finance. In every major country, the consumer is insulated from at least 80 percent of health care costs. In the U.S., it’s 85 percent, which is one of the highest rates of third‐​party payments, or what I call insulation. In most other countries, it’s 80–85 percent government, and 10–15 percent paid for by consumers out of pocket. In the U.S., it’s about 45 percent government and 40 percent private insurance, with 15 percent out of pocket. So if we’re more market‐​oriented, it’s because of that 40 percent that’s paid for by private insurance. That is not a big deal.

As I have realized lately (since writing the book), health insurance is a favorite playtoy for state regulators. You could say that in most states, insurance products and services are designed by regulators, and the private companies just compete in terms of marketing. So insurance companies cannot innovate either in terms of product or in terms of risk management. In my book, I say that the main benefit of markets is innovation. The way the insurance market is regulated, we don’t get that. What’s not in my book is my rant about regulation of health care providers, with its heavy credentialism and rent‐​seeking. My latest pet peeve is physical therapy, which I suspect could be taught reasonably well in a one‐ year trade school course to high school graduates, and which recently instead had its requirement raised to three years of post‐ graduate training!

Although it uses my new Cato book Crisis of Abundance as the main focus, the interview ranges into other topics, from teaching economics to where I like to take vacations.