John Mackey, co-founder and CEO of Whole Foods, has suggested 8 reforms to health care.
- Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.
- Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.
- Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.
- Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.
- Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor’s visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?
- Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.
- Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren’t covered by Medicare, Medicaid or the State Children’s Health Insurance Program.
Like Dave Schuler, I don’t think this will solve all of our problems (for example, it wouldn’t address the problem of the uninsured). But a number of these reforms would promote competition. Competition in the allocation of resources is good. Consider the other end of the spectrum: monopoly. Monopolies have no redeeming features (from a social perspective). They raise prices, reduce output, limit innovation, and impose an economic inefficiency (the deadweight loss). As such, moving away from the less competitive end of the spectrum to the other end is usually a good thing.[1]
All countries with socialized medicine ration health care by forcing their citizens to wait in lines to receive scarce treatments.
This is a bit annoying. I’ve heard it on some of the radio talk shows, and the problem is that its just not reasonable to point to a European system and say, “Ewww, they ration.” We ration all scarce resources. All of them. Most are rationed via the market mechanism. Yes, the market mechanism is a rationing mechanism. A decentralized mechanism that does an amazing job (although it isn’t perfect, see the footnote below). So when somebody takes on a sneering tone with rationing being socialism they are just flat out wrong.
Now, that being said, we would like a mechanism that does the best job possible at rationing resources. Some think the government can do it. Others disagree and think where ever possible the market should do it. Given that a pure market solution would likely leave many without access to care and that most people don’t see this as a desirable outcome, a hybrid system is probably the best solution. One that utilizes market based allocation of resources when possible, but with government intervention to make sure that people have access to care.
And having said that, it should also be pointed out that several European systems do just this. For example, France, Switzerland and the Netherlands have systems that include market based mechanisms. In fact, it appears that the Netherlands may be close to having a sustainable system when looking at costs.
Price competition under the new system has increased significantly and at least 20 percent of Dutch consumers have switched insurers.222 When the system was initiated, the Dutch government predicted premiums would cost €1,106 on average. However, competition has forced the average premium down to €1,028,…
Hospitals are beginning to compete by expanding services such as neurosurgery and radiation therapy.229 Although some experts have expressed concern that smaller hospitals offering these services may not have sufficient utilization rates to ensure quality and efficacy, the expanded availability of services will likely increase access to care and reduce queues.230
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The new system may even be having a positive impact on health care costs. Since the new system took effect, health care costs have been growing at an annual rate of just 3 percent, compared to more than 4.5 percent in the year before the reforms.231
Given that France, Switzerland, and the Netherlands are all doing better than the U.S. when it comes to cost of health care it would be a good idea to look closely at these systems in these countries and see if we can implement such systems here, or some of their ideas.
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[1]What can throw a wrench into the works is that we rarely have all the conditions for “prefect” competition. Asymmetries in information, externalities (which we have in health care), and public goods, are problems where the first best solutions are often not attainable. This would create a necessary condition for some sort of intervention into the market, speaking from a purely theoretical perspective.
