Why There's No Car Care Crisis
Our health care is in "crisis." We seem to have achieved the remarkable result of spending too much money while not ensuring access for enough people. Every politician says so, and most citizens agree. Indeed, no presidential candidate can be viewed as credible without proposing a health reform "plan."
Hillary Clinton has sworn to protect and uphold the Affordable Care Act against all right-wing conspirators; Bernie Sanders has long advocated a government-monopoly, single-payer system; and Republican contenders will continue to roll out plans to "repeal and replace Obamacare" that will immediately come under attack by conservatives and libertarians as "Obamacare-lite."
Let's put the crisis in perspective. According to actuaries at the federal government, spending on health care per person in 2014 was $9,176. Yet according to the American Automobile Association (AAA), the average cost of operating and maintaining an average sedan in 2014 was $8,876 — almost exactly the same as health spending. Of course, not everyone owns a car, but most of us do. According to IHS Automotive, an industry research firm, 253 million cars traveled America's roads last year. According to the Census Bureau, there were 239 million of us aged 18 through 84; that's slightly more than one car per person in prime driving years.
There are more similarities between health care and car ownership than you might think. We can go for many years with predictable spending on both cars and medical care until — out of the blue — something terrible happens. For that reason, we value insurance for both.
But there's a key difference as well. Car insurance, while not a trivial expense, is a relatively small share of the total cost of owning a car. According to the AAA, the average premium was $1,023, just under 12 percent of the total cost of ownership. Even excluding depreciation, insurance is just one-fifth of the total cost. In other words, we'"" do not expect auto insurers to pay claims for most of the cost of operating and maintaining a car.'
Health care is completely the opposite. Of that $9,176 per person, only $1,082 was directly out-of-pocket as opposed to third-party payments. And much of the political culture insists that even that is too much. The Commonwealth Fund, a respected policy research group, insists that households spending 10 percent or more of their income out-of-pocket on health care are "underinsured."
Insurance adds administrative costs and bureaucratic interference. Historically, much of the cost has been disguised by our employers' paying most of the premium — something they do because the government encourages it through tax breaks. Left to our own devices, we would never buy coverage for every single medical expense. The status quo leads to ever-increasing government control to ensure that our dollars go to insurers instead of doctors directly.
This is satirized in a six-minute YouTube video produced by the Independent Institute, in which a young woman, Alexis, falls in love with "Gov," a charming young man who has only her best interests at heart — really. Before you know it, he has forced her to buy overly expensive health insurance, which requires her to become dependent on "Gov" for a subsidy so she can afford it. Her access to health care gets more confusing and constrained, and ends with "Gov" forcing her into a diet of undressed green salad in the vain hope that this will eliminate her need to use the byzantine health system with which he has confounded her.
Obamacare was a significant tightening of "Gov"'s grip, but it won't be the last as long as we accept that insurance should control access to health care.
John R. Graham is a senior fellow at Independent Institute and a senior fellow at the National Center for Policy Analysis.