In today’s bureaucratically dominated health care system, the patient’s major role is to sign the forms that authorize one large, impersonal organization to release funds to another. Government, through Medicare and Medicaid, buys close to half the health care provided in America today. Most of the other half is paid for by insurance companies, through policies purchased by third parties, because the tax laws encourage people to rely on first-dollar health coverage from their employers.
When health care appears to be free or very cheap, people buy more than they would if they were paying the full cost. The resulting casual attitude toward shopping for health care drives up prices, drives up insurance premiums, and creates hardship for business and those without insurance.
The Goodman and Musgrave solution is to restore power and responsibility to individuals. They propose that consumers be free to set up tax-free medical savings accounts to cover routine medical expenses. Since the money in those accounts would be the property of individuals, they would have an incentive to spend wisely on health care.