In the first four parts of this series (part 1, part 2, part 3, part 4) I presented the concept that our current employer provided health care system is accidentally designed to reduce liberty, increase costs, and reduce satisfaction. I also explained the paradox that our competing private and public health care subsidy systems raise costs more than would having a single system one way or the other. I briefly mentioned what a more ideal system would look like. In this final segment I will explore this in a bit more detail.

David Miller’s 6/19/09 Pursuit of Liberty post highlighted a Downsize DC post that simplifies the health care issue down to two questions:

• For whom does your doctor work?
• Do you pay for your health insurance directly?

These questions are important because they drive to the incentives of the people involved in the health care system. Each of us responds to the incentives in the systems in which we operate. This is true on the road, in the home, workplace, supermarket, city council chamber, church, clinic, etc.

I once knew a family that lived in an area where it was determined that the properties in the area had been required to install private septic systems due to an error by the municipality. To bring the city into compliance with state requirements, the city agreed to pay to hook these few homes to the sewage system. The contractors hired by the city did the job per the city’s specifications. But the families were unexpectedly left without water for several days and their yards were left a mess. Every interaction between the families and the contractors turned into problems because the contractors were working for the city, not for the families.

The Downsize DC post aptly states, “If your doctor tailors his or her care to the policies of your insurance company, or some government program, then you don’t really have a doctor who works for you….” While your health care providers may be sympathetic to you, they respond to the incentives offered by their paymasters in the insurance companies and in the government. This limits innovation, cost cutting, and customer service incentives.

How often do you make claims to your homeowner insurance? Quite rarely, I’ll wager. Shouldn’t it be that way with health insurance? Wouldn’t it be better to be free of the oppressive rules that require you to carry a heavy health insurance burden so that you can buy the coverage that suits you best? Wouldn’t it be better to deal directly with health care providers instead of every interaction occurring through a bureaucratic screen? Downsize DC says:

“It’s really that simple. As long as insurance policies and/or government programs fund most of your health care, doctors will work for them and not for you.

“The same holds true for health insurance. As long as our health care coverage comes mostly from employer controlled insurance or the government, we won’t have a competitive health insurance market, and the cost of both insurance and health care will grow constantly.

“When Americans care about the impact that their use of health care has on their insurance premiums in the same way that they care about the impact that speeding tickets and minor scrapes have on their car insurance, you’ll know that our health care system has really been reformed.”

Since we are in charge of most of our home and auto maintenance issues, we are incentivized to take care to reduce the chance of making an insurance claim. We take steps to keep the kids from breaking windows with baseballs, for example. We try to avoid getting dents and scrapes. Shouldn’t our approach to our own health be like that?

But isn’t it true that people’s physical bodies are not created equal? Some have health problems due to no fault of their own. As far as I know, nothing I did contributed to the fact that I have Multiple Sclerosis. Wouldn’t the healthy bear much lower expenses than those with problems? And what about the elderly? Don’t we all generally have more health problems as we age, regardless of how well we care for ourselves? What about the poor or sick that can’t find affordable insurance?

There are parallels to this in housing. Even poor people somehow manage to carry homeowner insurance policies, even if it occurs through paying rent. In a freer system we could develop myriad ways of helping the poor and dealing with those with greater health care needs without hamstringing an entire industry. Greater liberty does not necessarily translate into fewer people having their needs met and meeting people’s needs does not require coercive policies.

The U.S. today seems intent on creating a health care system that is even worse than what we currently have. Instead of continuing to shackle themselves to coercive systems that promise security, Americans should instead consider how to increase individual liberty for all parts of our health care system.
Continue reading at the original source →