What about the free market?

Dale Franks has a take on the health care debate that has largely gone unnoticed. He begins with with this:

We need to face a few facts about health care reform. Our current system of health care funding is broken. It’s not broken because we have a free market in health care. It’s broken because we don’t.

He goes on to explain that the US health care system is stuck in limbo between a free market and a socialized approach. He argues that restrictions and regulations are so onerous as to choke the life out of our oft-described "free market" system and that it may, in fact, be more efficient to turn the entire enterprise over to the government.

Frank writes:

Part of the problem is that we really don’t have a free market in health care. Individuals, by and large, don’t buy health care policies. Health insurance is employer-provided. In effect, however, this is underwritten by the US government by making health care premiums deductible for businesses, which results in billions of dollars in lost tax revenues. And then, of course, you have to throw in the $300 billion or so that the state and federal governments spend outright to provide health care. And, of course, once you hit 65, you’re on the government’s health care gravy train, because you’ve got your Medicare, which also covers prescription drugs, now. . . .

So, really, we have what is, in many ways, the worst of both worlds. We have a market-based system, but one in which market incentives are minimized through regulation and subsidies. In effect, government policy bids up health care prices, while at the same time interfering with the market forces that keep a lid on prices.

It’s no wonder that more and more people are looking at single-payer, government-provided health care as an alternative to what we already have. At the very least, a single payer system would end the inefficient and fragmented ways by which health care is currently purchased.

And, indeed, this piece of data drives home the point:

Because of various government interferences, more than 1/3 of all health care spending is purely administrative. By contrast, Canada’s administrative burden on health care funding is about 1%. If we were to switch over to a single payer system, there is an excellent chance that we would, in fact, spend less money on health care than we currently do.

So our current debate, whether we should retain the current system or turn things over to Washington, is incomplete. It ignores the alternative of actually returning to a free market system. I quote at length here, because Frank lays it out much better than I can summarize.

The alternative, of course, is to make the case that our current system costs so much, and is so distorted, because of government interference. We have a mixed system of health care funding in which the government’s intervention imposes a wide range of unnecessary costs. So our choice is not to keep what we have, or eliminate the administrative overhead by turning it all over to the government. The third choice is to return to a free market in health care.

Eliminate state by state coverage mandates, which result in 50 different–and sometimes wildly so–regulatory regimes. Eliminate federal and state laws that prevent insurers from creating nationwide plans and risk pools. Eliminate employer health-care coverage, and personalize it, to make it personal and portable.

Here’s another idea: allow people to buy health insurance. That isn’t what we have now. We have pre-paid health care. The two things are wildly different. For example, look at how auto insurance works. Imagine how much your car insurance would cost if we expected our insurance to cover 80% of the cost of oil changes, tire rotation, wiper blades, new tires, regular service, etc. But that’s precisely what we expect medical insurance to do. And then we wonder why it costs so darn much.

We need to allow insurers to offer simple catastrophic care coverage, with varying deductibles. That way, you can pick up the tab for your own doctor’s visits, but you don’t have to worry about bankrupting yourself if some idiot runs a stop sign and knocks you off of your motorcycle. We need to allow anyone who wants to set up a medical savings account. Heck, if we really want “the government” to finance it, we could offer a 100% tax credit for health care expenditures.

We don’t need the government to rescue us from the unsatisfactory state health care is in. We can accomplish the same goals of universal coverage and lower cost, by getting the government out of health care as completely as possible. There are so many ways we could use free markets to relieve us of the distress the current system of funding is in, that they’re almost impossible to enumerate.

This makes a lot of sense. It's a lesson we learned (or should have) from Ronald Reagan: Government is the problem, not the solution.

Throughout the financial crisis, we were constantly told that the free market had failed and that we must give Washington the power to moderate it. But when you start peeling away the layers you find that government had a heavy hand in directing the very elements that failed -- through the Community Reinvestment Act, which put heavy pressure on banks to make bad loans; through racial quota systems which forced banks to ignore sound lending practices; by backing those bad loans through Fannie Mae and Freddie Mac. All down the line, the government was pushing bad decisions that wouldn't have been made in a free market.

The same thing is going on with our health care system. And more government control will only make it worse. I caught an interview with Tucker Carlson yesterday in which he isolated a single aspect of the debate and brought it to clarity. He pointed out that we are telling private insurance companies that they must provide coverage to everyone. We are telling them that they must cover pre-existing conditions. And we are telling them that they aren't allowed to charge more for what will undoubtedly cost them more. Then comes the simple question: what do you expect will happen to the insurance business because of this?

And finally, it bears repeating that the two areas of health care where there is the least government interference -- plastic and lasik surgery -- are the only two areas where costs have actually dropped.

So why aren't we taking a look at a true free-market approach?