"In a real market, we would probably
see medical care work much like veterinary care today -- mercifully free
of too much government involvement -- in which you pay per service.
Prices are clearly posted. Consumers pay the full cost of
non-catastrophes. And there is healthy competition among providers who
are trying to treat you best at the lowest price. Indeed, the restoration
of the price system is the central requirement of any sane reform.
"In a free market for healthcare, one can easily imagine
subscription services emerging -- think of Spotify, Netflix, or Amazon
Prime for health services -- but they would unlikely have anything to do
with employment. The whole link between your job and your healthcare --
and the third-party payment system through huge and cartelized
institutions -- came about because of wartime price controls. It’s
completely arbitrary and massively distorting.
"A purely market-based medical system in the 21st century might
offer some wonderful surprises. The prices would continually fall, and
perhaps be free for routine care, just as so many services on the
Internet are free. Even now, even with all the absurdities and bloat and
interventions, private-sector insurers operating in the non-profit space
are able to offer a form of mutual aid for a quarter of the price of the
big players in the insurance market (see, for example,
Samaritan
Ministries
)."
THE PURSUIT OF HAPPINESS
Catastrophic Plans
The largest, fastest failure in the history of
welfare programs
NOVEMBER 20, 2013
by JEFFREY A. TUCKER
A president stands disgraced. Congress is scattering. Bureaucrats are
baffled. Pundits are reaching. Industry is scared. Politicians are
scrambling to do something, anything, to make it better. One political
party is in meltdown and the other loving every minute of it, hoping to
ride the calamity to electoral gains.
The so-called “Patient Protection and Affordable Care Act” -- the
showpiece of democratic welfareism in the 21st century -- has made
history as the largest, fastest failure in the history of State-provided
welfare programs.
It turns out that you can’t just pass a law that causes everyone to get
all the healthcare he or she desires at extremely low cost. Nor can
government create a market-like environment out of a non-market good or
service and expect it to achieve efficiency, productivity, and customer
satisfaction.
Maybe this seems rather obvious to you. If so, you know more about
economic reality than the many thousands of certified experts who worked
for many years, in and out of government, to create the perfect storm
that Obamacare has become.
Like many people, I had a passing interest in the debate over Obamacare
for several years, fully expecting bad things to happen but unable to
predict the extent of the damage. There have always been two mitigating
factors to consider: First, the existing system was badly in need of
reform before Obamacare, and it was simply not the case that a beautiful
market-based system was being threatened by a socialist takeover. Second,
Obamacare in no way represented some unprecedented threat. Both parties
had been making a mess of the whole system for decades, at both the
federal and state levels.
After all, we’ve had 100 years of intervention in the medical market,
beginning with the regulation of medical schools that had already
cartelized the system. The whole panoply of interventions needs to be
uprooted to allow a viable system to emerge, but absolutely no one in
Washington dares to speak this way.
In addition, all the non-negotiable talk about “health insurance” is
fundamentally flawed. Insurance pertains to risks of events that are not
brought about through human volition, which is to say they are
unexpected. That’s why real insurance is able to make money. If you bring
about the insured-against “risk” through your own choice -- you set your
house on fire -- that’s insurance fraud. There are unexpected events in
the area of health, but most fall under the category of
catastrophic.
In a real market, we would probably see medical care work much like
veterinary care today -- mercifully free of too much government
involvement -- in which you pay per service. Prices are clearly posted.
Consumers pay the full cost of non-catastrophes. And there is healthy
competition among providers who are trying to treat you best at the
lowest price. Indeed, the restoration of the price system is the central
requirement of any sane reform.
In a free market for healthcare, one can easily imagine subscription
services emerging -- think of Spotify, Netflix, or Amazon Prime for
health services -- but they would unlikely have anything to do with
employment. The whole link between your job and your healthcare -- and
the third-party payment system through huge and cartelized institutions
-- came about because of wartime price controls. It’s completely
arbitrary and massively distorting.
A purely market-based medical system in the 21st century might offer some
wonderful surprises. The prices would continually fall, and perhaps be
free for routine care, just as so many services on the Internet are free.
Even now, even with all the absurdities and bloat and interventions,
private-sector insurers operating in the non-profit space are able to
offer a form of mutual aid for a quarter of the price of the big players
in the insurance market (see, for example,
Samaritan
Ministries).
Given all of this, Obamacare was just another step in the wrong direction
-- albeit a big one -- not unlike that which had occurred once every five
years for the last 50 or so. It was hard to tell just how bad the effects
would be. Everything we know about government and economics suggested
that this plan would not end well. But not even the biggest skeptic could
have fully prepared for the calamity that ensued in the weeks after the
program was finally put in place.
What does failure mean? The most obvious was the exploding healthcare.gov
website that in the first day of operation only managed to enroll six
people in the program. Looking through the notes from the war room, one
observes all the troubles that every highly ambitious and poorly
constructed website has: tangled databases, bad connections, leaky memory
explosion, mixed-up authentication rules, and about a thousand other
things.
Will it be fixed? Possibly. But at what price? To prepare the site, the
feds have already spent some $600 million and deployed a dud. More than
twice that sum will be spent on repair, but with what results? If the
site follows the usual government pattern, it will only work as long as
it is frozen in time. It can’t adapt to change and will become antiquated
in only a few years, and will thereby require other massive infusions to
keep up.
A government-run website is the digital-age equivalent of the failure of
government to run factories and farms in the 1920s and 1930s. Under
socialism, it was true that with enough force and money, even Soviets
could produce trucks, grain, and bombs. But every economic decision
involving physical resources and time requires trade-offs: If you do
this, you are not doing that. The real question is, at what cost? Lenin
made some progress in electrification even while major parts of the newly
socialized Russia were experiencing famine.
Likewise, healthcare.gov has become a costly symbol of a wider system
failure.
The website can and probably will be fixedbut will the program itself
achieve its aims? The ACA promised to retain existing health-insurance
coverage and then expand it. Upon implementation, the ACA immediately and
dramatically reduced coverage by forcing many individually provided
healthcare plans to be dropped. Otherwise, most are experiencing sticker
shock.
In many cases, mandated coverage of new ailments made continued service
economically unfeasible. In other cases, existing plans were suddenly
outside the law. For example, the government said that plans must cover
outpatient care, emergency room visits, lab tests, hospitalization,
maternity, preventative services, pediatric services, prescription drugs,
and much more. If the plan didn’t, it was essentially declared illegal
and had to be cancelled.
In other words, the companies who dropped millions from the rolls were
merely complying with the law. They were obeying government diktat. That
few people expected this outcome reveals the true nature of government
planning. Two lessons emerge from the mess: Planners cannot account for
all contingencies and/or they must lie to get what they want.
Then came the doubling -- in some cases tripling -- of premiums of many
individual plans because of the requirement that insurers take no account
of pre-existing conditions, which is a bit like requiring that auto
insurers cover drunk drivers who are training for NASCAR.
It is very easy after the fact to look at any government failure and
point to all the reasons why the failures should have been anticipated
and thereby prevented. But remember that this is knowledge gained after
the fact. Before the trial, there are a million possible contingencies,
and it is not possible for anyone to prepare for them all. That’s why
markets specialize in embedding trial and error as a feature of the
system. A market system learns over time, copying success and avoiding
failure. Governments are terrible at this. They build, release, and
forget about it -- with very little ongoing adaptation.
After the disaster took place, some politicians immediately responded by
saying: Make it illegal to stop dropping coverage. This response piles
error on error. It amounts to a form of nationalization of already
cartelized companies -- another step away from the market and toward
fully socialized healthcare. Of course, those who’ve always called for a
single-payer system won’t mind -- even as it will turn U.S. healthcare
into a Brezhnevian breadline.
Politicians from the other side proposed that the law be changed to say
that whatever plans existed before the calamity should just be made legal
again. That sounds fine but for one thing: this proposition only
increases the uncertainty of what legislation permits or disallows.
Insurers are there to make money, and they do this through long-term
customer relationships. Endless legislative jockeying does not inspire
the confidence needed to make business work.
The system was broken before and now it is broken beyond repair. Daily we
read reports of doctors, consumers, and institutions just bailing out
completely. Businesses that take people abroad for high-quality, low-cost
healthcare are suddenly booming. It seems that everyone is looking for a
way out of the official system. This is the only promising development to
emerge from the great healthcare disaster of 2013. If a new and
independent sector emerges despite every attempt by government to stop
it, the irony is that there will be a good basis for optimism about the
future.
Government can’t and won’t fix healthcare. Only the private sector can do
that. The full solution, then, will require complete secession from every
plan put out by every politician, every political party, and every
national commission of experts purporting to know better than the people
who make up the market order.
http://www.fee.org/the_freeman/detail/catastrophic-plans#ixzz2lZhIfdLw
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