It's true that the US 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 removing unnecessary burdens from business. But four
additional steps must also be taken:
-
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 would increase
their search costs and make more discriminating health-care choices.
-
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.
-
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 uninsurable 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.
-
Eliminate
all subsidies to the sick or unhealthy. Subsidies create more of
whatever is being subsidized. Subsidies for the ill and diseased
promote carelessness, indigence, and dependency. If we eliminate such
subsidies, 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.
Hans-Hermann
Hoppe, an Austrian School economist and libertarian/anarchocapitalist
philosopher, is professor emeritus of economics at UNLV, a
distinguished fellow with the Ludwig von Mises Institute, and founder
and president of The Property and Freedom Society. Send him mail. See his article archives. Comment on the blog.
This article originally appeared in The Free Market, April 1993.
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