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A Four Step Health
Care Solution by Hans-Hermann Hoppe
It's true that the U.S. health care system is a mess, but this
demonstrates not market but government failure. To cure the problem
requires not different or more government regulations and bureaucracies,
as self-serving politicians want us to believe, but the elimination
of all existing government controls.
It's time to get serious about health
care reform. Tax credits, vouchers, and privatization will go
a long way toward decentralizing the system and removmg unnecessary
burdens from business. But four additional steps must also be
taken:
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.
