I believe, however, that having the means and the opportunity to make better choices is not sufficient. Consumers also need a motive, which is why I think that our system needs to eliminate the insulation provided by our poorly‐designed forms of health insurance. Instead, I would like to see insurance policies with higher co‐payments and higher, longer‐term deductibles.
I would be very modest in portraying government’s role in giving consumers the means, the motive, and the opportunity to make more cost‐effective decisions. I think that government can contribute to gathering data and providing analysis, because it would be difficult for a private provider to profit from such an undertaking (information wants to be free). If doctors and patients need to have better conversations about treatment options, I do not see government as the natural driver of that. Finally, if the nature of insurance is going to change to give consumers more responsibility, that is going to require a less politically‐tilted health care finance system, including a higher age of eligibility for Medicare and fewer tax advantages for employer‐provided health insurance.
A bad idea for dealing with cost is “cost containment.” What that means is cracking down on the prices and incomes of doctors, hospitals, and drug companies. Government attempts to do this run afoul of organized political opposition. Moreover, it is very difficult to implement heavy‐handed negotiations on price without at some point stifling innovation and hurting quality. When it is allowed to operate, the market generally does a better job of cost containment. The example of laser eye surgery is frequently cited to support this in health care.
The government gets ugly when it regulates health care providers. My pet peeve is the requirement in Maryland that someone must obtain a doctorate to become a physical therapist. That regulation clearly was enacted for the benefit of incumbent physical therapists (who are exempt, of course) and works to the detriment of patients.
If health care is ever going to be rationalized, made efficient, deploy technology in a cost‐saving way, and so forth, then practice regulations and licensing regulations will have to be revised. The anti‐competitive nature of today’s regulatory environment is discouraging.
The Superior Efficiency of Socialism?
One question concerning cost is whether costs would decline if we went with a single‐payer health care system. Two arguments are typically made in support of the idea that socialism is the route to superior efficiency.
1. Other countries have single‐payer systems, and they spend less on health care than we do.
2. Health insurance companies do not disburse all of their premiums to health care providers. Instead, they “keep” a large portion to pay for overhead and profits.
The amount that a country spends on health care is mostly a function of supply. In fact the amount that an individual state within the U.S. spends on health care is mostly a function of supply. One of the reasons that Massachusetts is a difficult state in which to try to offer universal coverage is that the supply of specialists and high‐tech equipment is so high there. Given the vast supply of expensive health care providers in the United States, there is reason to doubt that shifting to a universal system provided by government would bring down spending.
Government is not as efficient as it might seem. While the government can operate without profits, it cannot operate without taxes. Taxes discourage work, thrift, and risk‐taking. The deadweight loss from taxes as a percentage of revenue is higher than insurance company profits as a percentage of their revenue.
As to eliminating overhead, if all of private health insurance were ended, government would face a new responsibility: setting price schedules for every medical service in every section of the country. As it stands today, prices are negotiated with private insurers, and government programs feed off of these “usual and customary” charges. Deprived of this market information, government would have more overhead and would have difficulty correctly assessing the relative values of different services.
Overall, I am not persuaded that socialized medicine will prove more efficient in the United States. However, I am not a big fan of the insurance industry as it operates today, and I think that it would be interesting to see an experiment with single payer at a state level.
As it stands, none of the leading Presidential contenders is advocating single payer. Instead, some candidates propose additional government mandates and/or subsidies, while keeping our existing private insurance systems intact. It seems unlikely that this will reduce the cost of providing insurance.
Solving the Problems
I believe that there are things that government can do to enhance access, improve quality, and lower the cost of health care. However, I believe that we would be best served by having government focus on the policies that I put into the “good” category–clinics in poor neighborhoods, vouchers, high‐risk pools, and better information on the effectiveness of services and the performance of providers. If we look to government to take a larger role in running our health care system, then my prediction is that things will get ugly.