Category | Op Ed

Free-market can fix health care

Published on August 25, 2009 by Justin Hayes

In the current health care debate, we hear many arguments against President Barack Obama’s health care plan. A better strategy for Obamacare opponents involves proposing alternatives to the President’s plan that the average person can understand.

In last week’s issue, fellow columnist Kevin Schmidt proposed some solutions to reducing health care costs and expanding coverage that did not involve a government takeover of the system. There are, however, three helpful analogies that confirm the need for free-market solutions to our health care woes.

Despite the doom and gloom about the health care system, there is one form of medical care that operates with great efficiency: cosmetic surgery. Although insurance companies do not cover most of these procedures, the market for plastic surgery is a shining example of the free-market at work. For years, cosmetic surgery was an option reserved for the very rich. Now, as technology has advanced, costs have come down and quality has risen, these procedures have become affordable to new groups of people.

This medical specialty is not riddled with as many regulations and mandates as other sectors of the health care industry. With no third-party payers involved in the transactions between patients and surgeons dictating who and where they can be treated, consumers must shop around for the best quality of service in their price range. This competition gives surgeons the incentive to innovate better and cheaper ways of providing this service to their patients.

In health care, you are dealing with the transactions of goods and services, just as in any other industry. Some on the left might try to tell you that access to health care is a fundamental human right, but this is inherently against the definition of inalienable, or natural, rights. One is not born with health care or health insurance. They are acquired through voluntary transactions made by the people who value these goods and services the most.

Health care must be treated like any other product or service in order to contain the escalating costs that deny access to care for many people. Take technology over the past decade. In the early to mid-1990s, the only people who had big screen televisions, car phones and computers were the very wealthy.

As the technology progressed, production became cheaper.  Competition provided the incentive for innovation, these products not only improved in quality, but they also fell in cost. Now, you can find a homeless person talking to his other homeless friend on a cell phone. If the government felt that we all had a right to car phones, we would probably still be talking on these outdated devices. Producers lose all incentive to innovate when the government takes away their profit motive.

Finally, it is important to understand how the health insurance industry operates compared to insurance for other sectors. If the auto insurance industry were as regulated and mandated as health insurance providers, it would cover regular fill ups of gasoline, oil changes, tire rotations and engine repairs, instead of just catastrophic damage.

Instead of shopping around for the best deals, consumers would just look at which companies or repair shops their insurance covered and send their cars to them, regardless of the price. This hindrance in competition would result in repair shops charging outrageous prices and never innovating better strategies of car maintenance.

Insurance was never meant to be a system that covers every single visit to the doctor. It was designed to keep people from going bankrupt in the case of catastrophic events. The evil Health Management Organizations (HMOs) that we hear about so often in the news helped lead to the current state of the system through its advocacy of third-party payers. They were not a product of the free-market, but a design put in place by government when it passed the HMO Act in 1973.

Between the growth of managed care, the introduction of Medicare and Medicaid, and the change in the tax code that encouraged employer-provided insurance, the health care system has definitely moved far away from free-market principles. If we can take these lessons from other sectors of our economy and apply them to our health care system, it is certain that we will see lower costs and more access to coverage.

Agree? Disagree? Call into The Gerb Report, Thursday nights from 7-9 p.m. on ksuradio.com at 678-797-2665.