Real reform

Free-markets in insurance and medicine.

See also: Health care “reform” bill is immoral & won’t work for a summary of arguments against so-called health care “reform”.

Arguing for free-market medicine and medical insurance:

Politicians claim to want “reform,” but the policies they advocate would actually entrench bad parts of the status quo.  Real reform would be toward free-markets in medical care and insurance.

Patients, physicians, and insurance companies have the right to relate to each other voluntarily, free of mandates and prohibitions from politicians. This is a private matter between consenting adults. Neither individual citizens nor government employees have the right to interfere.

Such interference in the free market has made medical care and insurance expensive in the first place – the problems that many politicians want to solve with yet more controls and programs.

Political controls on insurance

Politicians enforce a tax policy that encourages employer-based insurance. Consequently, insurance companies aim to please your employer, and not you. Most employers offer just one or two plans. If you prefer one of the several plans shown at eHealthInsurance.com, you face a stiff tax penalty. Insurance companies know that you’re essentially stuck with the policies your employer buys from them.

Tax-discounted insurance has turned insurance into prepaid health care, the opposite of ideal insurance. If car insurance worked this way, it would cover predictable expenses like oil changes and replacement tires. You wouldn’t price compare or consider whether services were really necessary. Rather, you’d ask if “it’s covered.” Prices would soar. This has happened with medical care.

When patients pay for medical care prices are stable or even decrease. It’s no surprise then that price of the health plans to most resemble real insurance have increased less than comprehensive plans.

Removing the tax code’s bias for employer-sponsored insurance can alleviate problems with job lock and pre-existing conditions. While some employers would offer insurance to attract employees, more people would buy policies directly from insurers when still healthy. Customers could choose — as many already do — a guaranteed-renewable policy, so the insurer cannot terminate coverage or raise premiums because you get sick.

The rigorous competition of a free insurance market could yield innovative products that protect against pre-existing conditions. For example, “health-status insurance” would pay for increases in your insurance premiums should your health status change, and you’d retain the freedom to buy a policy from insurers competing for your business.

State-level bureaucrats forbid us from buying affordable insurance merely because we live in the wrong state. University of Minnesota economists estimate that freeing consumers to buy more affordable policies available in other states would reduce the number of uninsured by 12 million.

Politicians succumb to special interests by burdening small-group policies with many mandated benefits we do not need. Largely because of such controls, along with guaranteed issue and community rating, the average price of individual and family insurance in the five most expensive states is three times the price in the five least expensive states.  Community rating, which limits how much insurers can increase premiums in response to risk,  increases premiums by more than 20%.  It also encourages insurers to sell policies and customer service that is unappealing to high-risk people who make many claims.  The combination of guaranteed issue and community rating laws have  destroyed insurance markets in several states.

Government-run insurance

Medicare, Medicaid, and SCHIP unfairly crowd out private insurance and charities, keep recipients in a low-wage trap, bust state and federal budgets (Medicaid, too), and increase premiums for those with private insurance – who already pay taxes to fund these programs.  “Medicare for all” would bankrupt the country; it should be phased out.

If you want to donate to these programs, fine.  Why not promote an accountability tax credit: Let taxpayers have the option of donating to a non-government health care charity.  For every dollar donated, the government program loses the revenue.

Medical licensing and drug prohibition

Medical licensing shields physicians from competition and makes medical care unaffordable. Instead of government licensing, non-government certification agencies could do the job.

Similarly, the FDA makes prescription drugs more expensive. Their default position to ban medications they do not approve of keeps life-saving drugs from patients. The FDA could certify medications for safety without banning them, and allow physicians and patients assess the risks and benefits of taking new medications.  And if the FDA is about drug safety, why does it require costly testing for effectiveness? Let doctors and patients figure this out.

Another alternative to the status quo is drug approval denationalization , which would allow Americans to take medications approved by certification agencies other countries. And yet another alternative is to let non-government certification agencies rate drugs for safety and effectiveness, just as they do for automobiles, electronics (Underwriters Labs), and the American Society for Testing of Materials.

Politically-controlled medicine is a disease masquerading as its own cure.


Responses to common arguments for politically-controlled medical care.

They say: “Health care is a right.”

Response:  A right is a freedom to act, like self-defense or free specch.  Rights are not entitlements to what others create.  Health care is a value that people create.   Physicians, scientists, engineers, and entrepreneurs.  From their own benevolence and choice, they choose to provide charity care every day.  Anyone who insists they have a “right” to such care is saying that producers must provide them health care, not out of their own benevolence, but because the need of others obliges them.  This kills benevolence and true charity, and treats producers of health care like an inanimate resource to be exploited.

More on rights here.

They say: “The free-market doesn’t work for medical care and insurance.


Possible response:  Give examples of how markets encourage competition and innovation. 
This is true, but it implies that the justification of a free market is good results, as defined by politicians in power.  So people’s freedom is at the mercy of showing authorities that they are “doing good” by “serving society.”

Better response:
1.  We do not have a free-market in medical care or insurance.  Give examples of: tax-subsidized employer-sponsored insurance, mandated benefits, FDA, etc.  (See end of this document for a summary)

2. You say the free-market does not “work,” as if it’s some kind of machine or tool that you use. Like a car, computer, or a drill.  But “the market” isn’t a thing, it’s just the result of individuals trading with eachother on a voluntary bases according to what’s best for each of them.  Each trade “works” for them.  Otherwise they would not do it. 

To say that “the market does not work” implies that people, when free to act as the please in a peaceful and voluntary manner, aren’t doing what you want them to do.  But people do not exist on this planet to do what you want.  And to expect government to make the market “work” is to treat people like a tool or machine that you use to your own end.  No one likes a user.

They say: “Other industrialized countries provide health care for its citizens.  It’s shameful that a country as wealthy as the United States does not.”

Possible response: Actually, people do get care, in the ER…(Take foot out of mouth).  Or cite studies showing better results in the U.S. (But health care in the U.S. is largely government-run already, so don’t defend it too much!)

Better response:  The reason people in the United States are so wealthy is the extent to which government protects free markets. That is, each of our right to trade with others on a voluntary basis, or choose not to trade with others.  Government’s meddling in the medical care and insurance markets have made medical care and insurance prohibitively expensive.  It’s time for a free market in health care and insurance.

They say: “[Medicare, Medicaid, SCHIP] has shown good results.” or “Health care is better in [another country] where government runs it.

Possible response
: Try disputing this, but that’s not the point.  It implies that if the government program has shown good results, then it’s legitimate.  It is not.

Better response
:  “This government program is essentially government-run insurance that competes unfairly with non-government insurance companies and non-government charities.  Most people (who aren’t politicians) who have something good to offer create a product or service, and if people want it, they buy it (or donate to it, if it’s a charity). If the program is so good, why must the government make it a crime not to participate in it or fund it? 

If the reason is that “everyone must participate for it to work,” then the program just exploits the people who wouldn’t choose to join.  I don’t treat people that way.

They say: “Without government-run programs like Medicare, Medicaid, and SCHIP, there won’t be programs to assist the elderly, poor, and youth in affording medical care.

Possible response: Charities did exist before government programs crowded them out, as historian David Bieto’s writes in From Mutual Aid to the Welfare State.  Also, Americans give about 2% of their income to charitable causes, regardless of tax rate.  Had taxes not increased to fund government charities, Americans would have higher incomes, and would have donated much more to charity — equivalent to half the spending of unaccountable government social programs.

Better response: If you want a government to assist people in affording health care and insurance, politicians should repeal laws that make it so expensive.  For example, tax-subsidized insurance that shields insurers from competition and locks people to their jobs, insurance mandates that force people to buy more insurance than they need, and occupational licensing that shields doctors from competition from competent and qualified nurses.

If you still want government to take an active role, it’s better to use tax dollars to subsidize consumers rather than producers.  That is, do away with Medicare, Medicaid, and SCHIP and provide tax credits and/or vouchers to people so they can buy medical care and insurance in the competitive marketplace that seeks to please consumers? (For more, see here.)

They say: “Medicare has lower administrative costs…we need “Medicare for all.”


Possible response:  Point to all the fraud in Medicare resulting from lax administration.  Or describe that the calculation is wrong, etc.
But this accepts the premise that if the admin costs were low, Medicare is justified.  And it’s boring.

Better response: If government employees can keep administrative costs down, and you think that’s such a good thing, then why not let Medicare compete with insurance companies?  If Medicare is so good, why do you need to make it crime for people not to fund it?  Or if you view Medicare as a type of charitable organization, why not let it compete with other non-profits?  That is, get these government employees and politicians out of the government sector and into the unfree market where they can offer their allegedly superior product!
(You’re reframing Medicare here: As a competitor to private insurance or a a competitor to voluntary charities)

They say: “Insurance companies treat us like dirt.  They are the problem.  Let’s do away them.  We need single-payer health care.”

Possible response: Could say how bad single payer is, site horror stories. 
This could be effective to get people off balance.  But it implies that if single-payer could “work,” then it’s OK – which it’s not.  Further, you risk entering into a duel of horror stories from different counties.

Better response:  If you think our current system is bad, single payer is worse for the same reason: unaccountable bureaucracies that need not be responsive to patients.  How’s that?  Because the tax code deeply discounts employer-provided insurance, you’re essentially stuck with your employer’s non-portable plans. Hence, insurance companies can afford to be stingy and deny you care; they know that losing you as a customer requires that you change jobs. With government as “single-payer” it’s even worse: to change insurance providers you must move to a different state or country.

They say: Anything bad about health savings accounts.
Possible response:  Dispute the claim, counter with other evidence, and hence confuse your audience and miss the point.

Better response: The tax code should not discriminate on how we buy medical care and insurance.  That choice is best left to individuals and their families, not politicians.  HSAs wouldn’t even be an issue if it weren’t for a biased tax code.  So if you don’t like HSAs, then push for removing the tax-subsidy for employer-provided insurance that chains us to our jobs, shields insurance companies from competition, and hence the need to have quality products and service. 

For more, see:
http://www.patientpowernow.org/2008/07/21/moral-health-savings-accounts.

They say: We need “community rating” so insurance companies don’t charge higher premiums to higher-risk customers.

Possible response:   Some states require that insurers offer policies to everyone (called “guaranteed issue”) while also not charging a higher premium based on health risks (called “community rating”.)  The combination of these political controls increases premiums drastically – by hundreds or thousands of dollar more per month.  This results in what’s known as the “death spiral.”  As a Milliman Group report describes:

Increasing premium rates can, in turn, drive more low risk policyholders from the insurance pool, which leads to further rate increases. If this continues, the pool or market will essentially collapse or shrink to include only the higher risk population.

The report also describes how insurers stop selling policies in response to community rating and guaranteed issue controls. Fewer people enrolled for insurance, rates increased, and there was no significant decrease in the uninsured population.

Better Response: Expose community rating as a stealth method to force the healthy to subsidize the unhealthy — something consumers may not accept if they were explicitly taxed for it.  Ask the community rating supporter why he’s not more straightforward about this, and whether or not consumers should have the choice whether to donate to such a charitable cause, given the many others they could support.

(The general idea here is to separate government mandates and prohibitions from tax subsidies.  Both are bad, but mandates and prohibits hide the subsidy, and muck up competitive markets.)

They say: Everyone should have medical insurance so the uninsured do not shift costs to consumers, it should be mandatory.

They say: “For-profit health insurance is the problem.”

  • Actually,  insurance companies with large market share are already non-profits.
  • Profit is good. As economist John Lott says:

    Getting rid of profits wouldn’t make costs go down – they would go up, because without profits there would no longer be the same incentive to hold down costs. Profits are the reward that firms get for figuring out what customers want.

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