Government is Ruining Health Care
I just stumbled across this great piece (15 years old but more relevant than ever) by Hans-Hermann Hoppe (a senior fellow at the Mises Institute) on how the problems with American health care can be solved not by increasing government involvement in health care but by getting government out of health care entirely:
A Four-Step Health-Care Solution
Here’s the meat of the piece:
1. Eliminate all licensing requirements for medical schools, hospitals, pharmacies, and medical doctors and other health care personnel. Their supply would almost instantly increase, prices would fall, and a greater variety of health care services would appear on the market.
Competing voluntary accreditation agencies would take the place of compulsory government licensing–if health care providers believe that such accreditation would enhance their own reputation, and that their consumers care about reputation, and are willing to pay for it.
Because consumers would no longer be duped into believing that there is such a thing as a “national standard” of health care, they will increase their search costs and make more discriminating health care choices.
2. Eliminate all government restrictions on the production and sale of pharmaceutical products and medical devices. This means no more Food and Drug Administration, which presently hinders innovation and increases costs.
Costs and prices would fall, and a wider variety of better products would reach the market sooner. The market would force consumers to act in accordance with their own–rather than the government’s–risk assessment. And competing drug and device manufacturers and sellers, to safeguard against product liability suits as much as to attract customers, would provide increasingly better product descriptions and guarantees.
3. Deregulate the health insurance industry. Private enterprise can offer insurance against events over whose outcome the insured possesses no control. One cannot insure oneself against suicide or bankruptcy, for example, because it is in one’s own hands to bring these events about.
Because a person’s health, or lack of it, lies increasingly within his own control, many, if not most health risks, are actually uninsurable. “Insurance” against risks whose likelihood an individual can systematically influence falls within that person’s own responsibility.
All insurance, moreover, involves the pooling of individual risks. It implies that insurers pay more to some and less to others. But no one knows in advance, and with certainty, who the “winners” and “losers” will be. “Winners” and “losers” are distributed randomly, and the resulting income redistribution is unsystematic. If “winners” or “losers” could be systematically predicted, “losers” would not want to pool their risk with “winners,” but with other “losers,” because this would lower their insurance costs. I would not want to pool my personal accident risks with those of professional football players, for instance, but exclusively with those of people in circumstances similar to my own, at lower costs.
Because of legal restrictions on the health insurers’ right of refusal–to exclude any individual risk as uninsurable–the present health-insurance system is only partly concerned with insurance. The industry cannot discriminate freely among different groups’ risks.
As a result, health insurers cover a multitude of uninnsurable risks, alongside, and pooled with, genuine insurance risks. They do not discriminate among various groups of people which pose significantly different insurance risks. The industry thus runs a system of income redistribution–benefiting irresponsible actors and high-risk groups at the expense of responsible individuals and low risk groups. Accordingly the industry’s prices are high and ballooning.
To deregulate the industry means to restore it to unrestricted freedom of contract: to allow a health insurer to offer any contract whatsoever, to include or exclude any risk, and to discriminate among any groups of individuals. Uninsurable risks would lose coverage, the variety of insurance policies for the remaining coverage would increase, and price differentials would reflect genuine insurance risks. On average, prices would drastically fall. And the reform would restore individual responsibility in health care.
4. Eliminate all subsidies to the sick or unhealthy. Subsidies create more of whatever is being subsidized. Subsidies for the ill and diseased breed illness and disease, and promote carelessness, indigence, and dependency. If we eliminate them, we would strengthen the will to live healthy lives and to work for a living. In the first instance, that means abolishing Medicare and Medicaid.
Only these four steps, although drastic, will restore a fully free market in medical provision. Until they are adopted, the industry will have serious problems, and so will we, its consumers.
Couldn’t have said it better myself (although I made an attempt with Legalize Health Care).
Hoppe for President of the Galaxy! (Hey, Zaphod had his chance.)
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Comments
Comment from Darren
Time: March 13, 2008, 3:14 pm
Sorry, I meant to respond earlier. As usual, thanks for your take on things, Mike.
You say:
If one adopts a defensible position of free markets-free choice in all things including health care options, then voluntary certification options for providers to be used by the wary and informed coupled with vigorous prosecution of dangerous practices and practitioners through the tort system will be the only method of protecting the gullible and punishing those who do harm in exchange for money…
I certainly agree with the idea of voluntary certifications inasmuch as that is likely what would emerge in a free market (and has already started to–just look at all the private organization certifying various nutritional supplements and others that provide test results of these products to consumers on a subscription basis). All your points could apply equally well to the auto industry. Very few of us have a detailed enough understanding of cars to make truly informed choices. That’s why we rely on recommendations from Epinions, Consumer Reports, etc. Otherwise it would be easy for a salesman to get us to buy a nice-looking death trap.
As for courts, I of course favor a free market approach to justice, as well–private arbitration agreements, boycotts, etc. There is, after all, something inherently unjust about a court system that one is forced to use and which is paid for by forcibly confiscated tax dollars.
…something all civilized societies no matter how libertarian probably have an obligation to attempt.
I don’t believe ’society’ has any obligation to do anything, only an obligation not to act. Once you concede that society has some sort of obligation, you allow for a coercive state representing that society to carry out that obligation. As I see it, only private individuals and entities have obligations. No one–not even the majority–can speak for an entire society.
Comment from Mike Russell
Time: September 12, 2008, 5:49 pm
Yeah, that’s the occasionally controversial point … obligations of “society”. Perhaps I should say “social obligations”, the obligations moral individuals and by extension groups of moral individuals probably by definition feel for one another. At my most libertarian moments, I think government (i.e. coercive society) exists to keep one person from violating the natural rights of another. That amounts to preventing theft, murder, etc. Fraud? not so sure. maybe that’s why we have to put up with lawyers.
Comment from Michael W. Russell, MD
Time: March 6, 2008, 2:42 pm
I love these discussions. I have offered my perspective on health insurance in the “legalize health care” discussion, so I’ll be brief here.
I have heard other proposals to eliminate licensing and drug/device regulation entirely. The libertarian in me is fine with that conceptually. If, as H.L. Menken once said, you want to resort to chiropractic (or crystal effects or aromatherapy or past-life regression, etc.) to cure you of diptheria, who am I to resist “the devine will that there be one less radio fan” in the future (Menken wrote that in the 30’s I think). Having said that, the ideal of unfettered consumer choice is based on at least a reasonable modicum of consumer understanding or judgement about the choices available. With standard consumer products the choice is often driven by preference, taste or aesthetics. Do I buy blue suede or black patent leather shoes? The current state of knowledge of biology, science and what constitutes medical evidence in the general population is concerning, to say the least. There are very good books about the consequences of scientific illiteracy and “innumeracy” … the inability to understand mathematical concepts like statistical methods for establishing “proof” and the assessment of relative or absolute risk. Suffice to say that chosing chelation therapy over chemotherapy because you prefere to believe in chelation could result in your immediate death from a curable cancer. Worse, if you are told by a good salesman that you need “detoxification”, whatever that means, when what you really need is antibiotics for a simple infectious disease, then you have been defrauded at the very least and possibly injured severly or killed outright. If one adopts a defensible position of free markets-free choice in all things including health care options, then voluntary certification options for providers to be used by the wary and informed coupled with vigorous prosecution of dangerous practices and practitioners through the tort system will be the only method of protecting the gullible and punishing those who do harm in exchange for money, something all civilized societies no matter how libertarian probably have an obligation to attempt. In effect, one would substitute court and educational intervention for government (state or federal) regulation. Since the former is less subject to the whims and pressures of “interest groups” who have no difficulty influencing legislation to their material benefit, I would be willing to accept elimination of government licensing and regulation of pharmaceuticals and devices as a positive move. I remain very skeptical that it will ever happen, though. In an effort to reform the health insurance industry in a way that has been discussed elsewhere and make it possible to offere a variety of products with a range of associated costs … an effort I do think has the potential to succeed … I would not make elimination of licensing and safety regulations a high priority.