Quick Fix for the Political Economy

The thorny problem of health care could be solved quickly and simply but we do not have the political will.

The quick fix for health care is to restore price and cost discipline to a market system. Sometime between 1960 and 1980, it went away.

Let's give everyone a Medical Savings Account together with insurance for catastrophic events (cancer, organ transplant, etc.) If one does not spend the MSA in a given year, one can carry it over to a payout at retirement. Employers can furnish these as a payroll benefit. An expenditure of the MSA can be to purchase a medical insurance policy of the consumer's choosing, much like automobile insurance. For those left with no coverage, let Medicaid administer a comparable plan wherein each individual gets an MSA of a standard amount. Govco will maintain clinics and hospital space for Medicaid patients. No longer will paying patients directly subsidize those that cannot pay, at least within the ledger of an individual clinic or hospital. This will force providers to offer services that are subject to market price discipline.



As much as everyone hates it, there has to be some way to ration health care. Presently, we ration food, public transportation and housing with market prices. Why is health care different? The evidence is clear that without price discipline imposed by the market, costs mushroom. Govco provides subsidies to the needy for food, public transportation and housing, but not in a way that the price structure is destroyed or the cost inflation is affected. Cost inflation for health and medical care has been unacceptably huge due to the government's role and employer-provided (and selected) health care.

We are not a centrally planned economy like the USSR in the '60s and '70s. Yet we have become that way in the health care industry because of government influence on prices.

It is true that technological advances in miniaturization, information processing, and scientific knowledge have increased the complexity and therefore cost of medical care. However, it is a common business phenomenon that science permits technologies that the market is not wholly willing to pay for. Example: The Saudis are willing to deploy water desalinization plants on a wide scale, but other than oil-rich middle eastern nations, the market has not seen fit to support desalinization as a means of meeting our water shortages.

Herewith, a simple example of lack of price discipline: knee pain can be treated with a $2 shot of cortizone or a $100 shot of lubricant enhancement for synovial fluid. If the insurance company is paying, why not choose the deluxe treatment?

There are countless instances of people whose avoidable behaviors make medical costs staggering. Is it morally defensible to give such individuals free rein to create these unnecessary costs? I believe it is not.

The United States has the highest per capita health care spending of the industrialized nations and yet we have crummy statistics on our national health. This means that our international competitiveness (income) is harmed by our excessive health care spending. Therefore, if the productive people in the US can only generate a declining national income going forward, at a minimum we will have less as a society to spend on indigent health care. I wish people could see the effect of this issue on our prospective national income, especially now at our moment of weakness when we have: a progressivly higher percentage of students without fundamental skills; burgeoning competitors that do have a well-educated and motivated labor force; a currency that is weak and promises to get weaker; a consumption-based economy based on dwindling consumer income; an imponderable situation in Afghanistan that has unfathomable spending attached; and declining ability of our nation to issue debt to pay for out-of-control spending.

As our national competitiveness and wealth decreases, Govco will have a smaller and smaller tax base. What a strange result that liberal spenders will have finally implemented a way to control government spending: reduce national income that can be taxed.