What if We Treated Other Purchases Like Health Care
Daniel Weintraub has a nice take on our health care system in a post recently in the Sacramento Bee.
Imagine for a moment that your employer was required by law to buy a plan to manage your nutrition needs - rather than simply paying you a wage, out of which you buy the food you want to eat.
Or suppose the government required your employer to pay for a housing plan, rather than paying you and letting you decide where and how to live.
Finally, consider what it would be like if the company you work for was mandated to design and finance a transportation plan for you, with a list of options for how you could get to work and back home each day.
Each of these scenarios brings a few things to mind.
First, you'd probably get paid a lot less than you do today, because your employer would be diverting much of your current wages to pay for these plans instead.
Second, you would have less choice than you do now, because your employer would have to standardize these food, housing and transportation plans to fit the needs of many workers.
Third, the service you would get from your local grocery store, landlord or automobile dealer would probably be worse, since your relationship with each of them would now be muddled through the entry of a third party, your employer. Your local grocer would have a greater incentive to try to satisfy his real customer - your boss, or worse, the food management company your boss chose - than to serve your needs.
Fourth, the costs of each of these goods would tend to rise over time - especially if you and your fellow employees were able to eat as much as you liked, or live in any size house or drive as far as you wanted within the choices provided. While large employers might be able to use their superior bargaining power to drive down costs a bit, their power in the marketplace would be outweighed by the increased cost of providing food, housing and transportation in quantities unlimited by the discipline that comes when a consumer pays for something out-of-pocket.
Finally, as the costs did start to rise, you would feel less secure about where your next meal was coming from, or whether you'd have a place to live tomorrow or a car to drive to work. With the management of these essential items in the hands of a third party, you'd feel vulnerable, worried about whether they might cut back on your choices or on the quality of the offerings in order to save money.
Beyond these arguments, there is the threat of using publicly funded health care as a Trojan Horse for complete government micromanagement of our lives.
Posted on February 27, 2006 at 09:25 PM | Permalink
While what you say is true - having a third party pay for the health care disincentivizes considered spending by the employee - it misses the primary point. That unlike houses or food many of us do not get to choose our health needs. So if left to the individual to procure, many of us would be uninsurable for any reasonable amount. There are solutions to this - e.g. government mandated healthcare need only cover X - but they are all politically untenable. So, if you want to write something interesting I would suggest not picking the trivial issue of pure efficiency.
Posted by: Clark | Feb 27, 2006 11:10:24 PM
It's way too bad that we as citizens of this country allow our tax system to drive so much of our lives.
This antiquated system needs to be dumped once and for all and forever!
Let those purchasing finance the nation.
Though I've even got some pretty darned good questions about some specific points of it, Once past the transistion, such seems to be a truly fair direction to go.
Posted by: TC | Feb 28, 2006 1:07:28 AM
What if we bought food like we would buy free market health care? I walk into the grocery store ravenously hungry and not making the most rational decisions due to hunger pains. I can’t comparison shop because I have to buy food right there or I’ll starve to death. To top it off I don’t know enough about nutrition to make the correct decision about what food I need. There are experts to help me but at the same time I’m trying to deal with my sudden hunger I’m also trying to make sure I don’t overpay for my professional help.
I don't know what the solution is, but the analogy arguments aren't that persuasive.
Posted by: Garble | Feb 28, 2006 4:27:57 AM
Following up on Garble's point, imagine a system where some people needed to eat a lot and some people didn't need to eat so much, so there were pools of insured to spread the risk of a sudden bout of hunger ... well, you get the point.
Posted by: honestpartisan | Feb 28, 2006 7:57:20 AM
Imagine a world where some surgeries and health care procedures are not covered by insurance, while others are. Which procedures would cost less over time, and which more? Well, it falls out pretty much how you'd expect (http://www.marginalrevolution.com/marginalrevolution/2004/11/seeing_is_belie.html ).
I was veryhappy to see South Carolina propose that MediCare would pay out a lump sum to people diagnosed with different needs. When my son was born, my wife wanted to go to a midwife-run birthing center. The health insurance company wanted her to go to the hospital. Hospital deliveries cost $10,000, but the insurance would have covered all of it. Midwife deliveries cost $3,000, but the insurance company would only pay $2,000. We still went to the midwives, but I sure would love to see what would happen to the costs of deliveries if insurance companies and MediCare said "if you get pregnant, you're given $X for pre-natal care, and $8,000 for the delivery." My guess? Every doctor in the area would find a way to lower the $10,000 pricetag to $8,000. And my wife and I would pocket $5,000. That is, until the price dropped again.
Say what you will about the high cost of health care and how an individual's bad luck determine his needs. If health care providers considered their patients as their customers, the high costs could evaporate very quickly.
Posted by: Max Lybbert | Feb 28, 2006 8:26:18 AM
>If health care providers considered their patients as their customers,
>the high costs could evaporate very quickly.
Well, maybe. Remember one of drivers of cost is regulation. In most states you can't buy a minimal health plan. In some states all plans must be "cadillac" plans. In no state can a man decline maternity or "women's health" coverage. Such a premium differential would be sexist and unequal. You can be sure the insurance company is going to charge you for the services you don't want or can't use no matter how much you protest. In a few states (Maine immediately comes to mind) an insurance company must cover the applicant even if they haven't yet paid a premium. Needless to say health insurance premiums there are 3-4x higher than in other states.
Posted by: Bob Smith | Feb 28, 2006 12:41:12 PM
Health Care is NOT like food or housing. That is the reason we have health **insurance**, much like we have fire/earthquake/flood/theft insurance.
Food and housing have steady and predictable costs.
A sensible (unlike the Sacramento Bee article) analysis of the health insurance problem is linked from Michale Gladwell's blog:
A very interesting read that raises all the points that Coyote has been making.
Posted by: Zoran Lazarevic | Feb 28, 2006 1:40:57 PM
I love the responses here... You have the typical liberal response by Garble reminding us how people are obviously too dumb to care for themselves, therefore the solution is of course taking money away from people and spending it as Garble and the other "enlightened" liberals see fit. Have fun in your socialistic little utopia. But let me spend my earned money wisely.
Posted by: Erik | Feb 28, 2006 6:36:37 PM
Oh and Zoran, the difference is that no one is forcing employers or taxpayers to pay for the publics' "fire/earthquake/flood/theft insurance". We buy those things for our own benefit based on our own choice. The point of this article is that health insurance like any other insurance or expense shouldn't be forced on every person. People should buy it if they find it to be something they want to spend their money on. All you universal health care proponents have a lot to think about. The government sucks at accomplishing things compared to the free market. For example have you visited your local DMV recently? I am just so excited for the doctors office to turn into the DMV once the liberals have their way and make it taxpayer funded!!! (note sarcasm)
Posted by: Erik | Feb 28, 2006 6:51:29 PM
Eric, You misread my comment and made some ignorant assumptions because of that. I’m not proposing anything. I’m sorry to say that I don’t have a workable real world solution to healthcare that would be acceptable by a plurality of interested parties. I’m just pointing out that buying healthcare has many challenges that buying food does not. Therefore the analogy isn’t very appropriate. Also, some people are forced to buy insurance. There are a number of states that require car insurance to operate you vehicle. For instance.
Posted by: Garble | Mar 1, 2006 12:36:10 PM
Garble, I would suggest that a market based system does a better job of being acceptable to a plurality of interested parties. Using food as an example, I can eat Thai food even if you hate it and much prefer Italian. But if there's only one provider of food, one of us is going to be upset.
Isn't the best way to satisfy a plurailty of parties by providing more options? Doesn't the market have a much better track record of providing choices over a "single-payer"?
Posted by: Mark | Mar 15, 2006 8:38:24 AM
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