Our Health Care Dilemma

Ed Hubbard

In today’s Wall Street Journal, columnist Holman W. Jenkins, Jr., provides this interesting analysis (Conservatives and the Mandate)  of the root problem with our health care system.  Distilled to its essence, the problem with Obamacare (and Romneycare, and Schwarzeneggercare), it that they perpetuate and worsen an already existing distortion of the market for health care.  Ladies and Gentlemen, I hate to tell you this, but there has been no free market for health care in a very long time, and we will have to accept a lot more personal responsibility in our lives if we want to re-establish a free market in that industry.

Since the end of World War II, when unions negotiated for insurance coverage in lieu of wage increases, the provision of health care in this country increasingly has come to be managed by middlemen:  private for-profit insurance companies; private non-profit insurance companies; federal and state government agencies; and local public hospital systems.  Moreover, most privately-employed full time workers have another middleman, their employer, involved in the process of selecting the insurance coverage, negotiating its price, and collecting and paying the premiums.  Most doctor-patient relationships, including the cost and scope of care, are initiated and managed, directly or indirectly, by one of these middlemen.  Relatively few individuals (if any) today “choose” their doctors and can negotiate the cost and scope of their care.

In the meantime, the premiums paid by employers and employees are no longer dictated by the actuarial pricing of the risk of illness, disease or injury, because coverage is so broad that it covers basic medical services for which there is no fortuitous risk involved.  This means that increasingly the cost we pay for coverage has little or no relation to the individual needs of each person, but rather is based on the cost of sustaining the insurance coverage for everyone enrolled in a specific plan, or for everyone covered by a carrier or government program.

In turn, the decisions of the middlemen dictate how much health care is provided, to whom it is provided, when it is provided and where it is provided.  These decisions affect the decisions of doctors in the treatment of patients, and distort the allocation of medical resources in every community.

The only major benefit of the private insurance market to the overall free-market economy is that the premium funds are re-invested in the private economy.  But, if you think you are paying premiums to buy a free-market relationship with your doctor, you’re simply wrong.

What Obamacare and its state counterparts do is not a fix to these problems, so that the same quality and amount of medical care is accessible to everyone, and that you regain control of your doctor-patient relationship.  Instead, these programs further institutionalize the role and power of middlemen, and raise their decisions from contractual dictates to legal mandates.  Meanwhile, the program is designed, over time, to reduce the incentive to purchase private insurance, which eventually will reduce the primary economic benefit of such a product—the re-investment of premiums into the private economy.  Eventually, Obamacare will lead to a pure transfer payment entitlement funded with tax dollars and public debt.

The only way to fix this mess in the long term is to restructure the health care industry into a free-market system where most of the economic and medical decisions are kept at the level of the doctor-patient relationship, and the middlemen’s role is greatly reduced.  This can be done by creating three delivery systems:

  • A private insurance system that only provides coverage for major medical issues—major illnesses, diseases or injuries—and that requires high deductibles or health savings accounts, and personal responsibility, for the payment of all other health care;
  • Local hospital and clinic systems paid for with local tax dollars, and administered by local governments, for the indigent (and the continuation of a similar federal program for veterans); and
  • A means-tested voucher system to fund the payment of private insurance premiums for insurance coverage for the elderly, paid for from the Medicare tax.

Although these changes sound like common-sense, conservative approaches to fixing the system, I have been amazed by the reaction of many conservatives to these ideas when you discuss them privately.  Over the years, as I’ve tried to discuss our current predicament and these types of policy changes with people around the dinner table or in relaxed conversations, their eyes glaze over.  More importantly, I have discovered another phenomenon during such discussions:  many spouses and single parents, who control family finances and handle the doctor appointments (and, in my anecdotal experience from these conversations, these spouses and single parents are women, regardless of whether both spouses in a marriage work outside the home), hate the idea of losing the simplicity derived from the involvement of middlemen, and they especially hate the idea of losing the convenience of co-pays.  They may complain about a specific bad experience with an insurance company over a coverage issue; but the idea of a return of more control over medical decisions and payments to families, and the resulting increase in personal responsibility over such transactions, is simply an anathema to many of these spouses.

Now add to this pre-disposition against assuming more responsibility over the doctor-patient relationship, the recent flap over Obama’s mandate for church-related hospital and charities to provide services and prescriptions, or insurance coverage for such services and prescriptions, which violate the tenets of the religious institutions that manage such hospitals and charities, and you see that this issue is more politically volatile and complex than we conservatives often think.  Yes, conservatives and many independents viscerally recoil at the notion of government having and exercising the power to mandate us to do anything, and especially when such power is used to interfere with the decisions and doctrines of a church (and most believe that such government action is unconstitutional).  On the other hand, even many conservatives are much more ambivalent about middlemen in their medical decisions, including government, when they are forced to consider the alternative.  So, when these people hear that access to contraceptives could be denied to some women, and that the alternative to mandates that are designed to require such access is responsibility they don’t want, their reaction to the issue is not predictably supportive of the religious liberty of the church.

Where does all of this lead to?  As I’ve said so often that I’m beginning to feel like a broken record, it leads to the hardest question we Americans have to face this fall, and for many years to come:  are we willing to take back the personal responsibilities that the maintenance of liberty and a society of free people requires?  If not, then electing Republicans to Washington this fall will not matter in the long-run, because the trajectory of public policy will continue in a leftward direction toward a European system with the trade-offs between social programs and national defense that Europeans have made, and with the acceptance of increasing public and private debts to finance such a system—until it inevitably collapses, internally or externally.

If electing Republicans this fall is to mean real change, we will have to look in the mirror and accept the personal responsibilities such changes will demand of us.


  1. Simple Simon says

    I could not help but notice an ad for AARP Health Insurance immediately below your tome.

    Isn’t life a hoot?