Private Health Care Would Be Less Expensive for All

Private Health Care Would Be Less Expensive for All
Ricardo Rolon/The News-Press via AP

Bernie Sanders recently declared that “health care must be recognized as a right, not a privilege.”

There are a number of problems with this idea — some philosophical and some economic. While Senator Sanders is right that in a society as wealthy as ours, a person should not be denied proper health care because of lack of income, his approach will not solve this dilemma. In fact, it is likely to result in a less efficient health care industry with lower health outcomes than if we moved to a market-based health care system.

Let’s begin with the philosophical problems: health care as a right. Sanders believes the federal government must ensure this right by government provision of health insurance for all. But why stop with health care? Should nutritional needs also be a right? What about shelter or transportation?

Basic rights — such as the right to free speech, freedom of association, and others outlined in the Constitution — do not require other persons to provide them through their tax dollars. You may have the right to free speech, but I do not have to pay taxes so the government can provide you with a megaphone. The right to health care, food and shelter, however, are quite different in this respect. A right to having your health care provided for by the federal government is a clear step on the way to a centrally-planned state.

Here, many argue that health care for all is a matter of fairness. But to this, one may easily ask why the barista at the local Starbucks should have to pay taxes to pay for the health coverage of Mark Zuckerberg. This is what will wind up happening with Senator Sanders’ plan to provide “Medicare for all.” Mark Zuckerberg would be receiving free health insurance by the time he was 37, courtesy of the tax dollars of America’s wage and salary earners.

The Senator is correct that people should not lose their health insurance coverage when they lose their jobs. However, the reason health insurance is tied to your employer goes back to federal wage and price controls in World War II, and continues largely due to federal regulations and tax treatment favoring employer-provided health insurance.

This brings us to the economic problems. It is important to realize the current system is not particularly market-based. The Affordable Care Act imposes thousands of pages of regulation, and the federal government is the largest purchaser of health care. It spends over $1 trillion on Medicare and Medicaid alone. No wonder other countries have better health outcomes.

A quick look at how well veterans and Medicaid recipients fare under government health care might cause you to think twice about adopting Senator Sanders’s plan. Only about 70 percent of physicians will accept Medicaid patients.

What’s more, government insurance has led to inefficiencies in the use of resources in health care due to the incentives of the system. Since the patient will ask if Medicare or Medicaid pays for the service rather than how much the service costs, providers have a strong incentive to engage in activities that are very costly and only marginally advance patient health, but that will be paid for by the government.

A solution much more likely to aid the poor is for the government to move Medicaid and Medicare to a form of health savings account. It would provide complete coverage for catastrophic care, and fund an account for recipients that they could use on health care spending. This would cause people to ask “How much does that test cost here versus another clinic?” This in turn would incentivize places like Wal-Mart having to employ nurse practitioners at their pharmacy who can provide health care at reasonable prices. Additionally, it would also spur innovation in medical techniques and pharmaceuticals that make people healthier at lower costs.

Such programs would only be available to the bottom 20 percent of the income distribution, with a phase out of the benefit as income rose. And eliminating the tax deductibility of employer-based insurance or allowing a deduction for private insurance premiums would prompt a move to individual health insurance policies rather than employer-provided insurance. The result would end the fear of losing insurance due to unemployment.

Of course, transitioning to this kind of program would take time, as people have come to expect Medicare benefits and made life decisions based on them. But ultimately, a system of private health insurance would allow for more extensive health insurance for those at the bottom of the income distribution — and result in less expensive health care for all.

Gary Wolfram is professor of economics and public policy at Hillsdale College.

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