Instead of surrendering the argument on health care, I say we should come up with a health care reform that leans more toward libertarian principles.
In my view, free-market health care means health insurance policies designed by insurance companies to meet the needs of consumers, rather than designed by regulators. Thus, the core of any libertarian health care reform has to be be deregulation of health insurance—eliminating mandates and any restrictions on health insurance companies' methods of managing risk. Such reform would allow risk-based pricing, for example.
Red Staters who are intrigued by such ideas but who nonetheless believe some sort of government intervention is necessary may want to consider Red State offering of long-term catastrophic re-insurance. If a health insurance company issues a policy to an individual (this would not apply to employer-based health insurance, which is over-subsidized as it is), the Red State would pay health insurance expenses that exceed a five-year deductible. The deductible would be based on the person's family adjusted gross income, divided by the number of people in the family. Divide that number by two, and make that the five-year deductible.
Under such a plan, if this is 2006 and you are an individual whose adjusted gross income last year was $60,000, then your five-year deductible will be $30,000. If your health care expenses in 2006 through 2010 exceed $30,000, then the state would pick up the additional cost. A health insurance company that offers you a policy in 2006 would be obliged to accept your submissions of expenses for five years, whether the insurer continues to be your policy provider or not. The insurer could offer no additional coverage beyond the $30,000 deductible (in which case, it should only charge an administrative fee), or it could layer other coverage on top of that (such as a lower deductible, in which case the insurer would be bearing some risk).
My thinking is that, if not truly libertarian, such a plan would have the virtue of making the health insurance playing field less tilted toward "insulation" (prepaid health care plans) and allow a market to develop in real health insurance. Yes, the state could end up being adversely selected by people who are really sick, but that is much better than putting taxpayers on the hook for supporting health insurance policies with really low deductibles for everyone, which is where we seem to be headed with Blue State health care reform.