How To Fix America's Health Care System

Problems with health care in America are not failures of voluntary market exchange; they are failures of government interference with voluntary market exchange. To fix the problems, eliminate government interference with voluntary exchange in health care markets.

1.    Eliminate involvement of employers in health care altogether; do this simply by removing from federal and state tax codes all tax implications of health care goods and services, for both businesses and individuals. Remove all tax deductions, tax credits, and tax preferences of any kind that involve health care services or health insurance premiums; remove all interactions between health care and the tax code.

2.    Eliminate supply-side restrictions on health care.

a.    Rely entirely on private voluntary exchange on the supply side of health care markets.

b.    Eliminate barriers to entry for hospitals, clinics, dental schools, nurse training schools, and medical schools, including "certificates of need," and government imposed restrictions on health care training organizations.

c.    Eliminate municipal, tax financed, government-subsidized, tax advantaged hospitals and clinics.

d.    Allow consumers to decide what levels of health care training are sufficient for their health care needs.

                                 i.         Eliminate legal restrictions on health care providers at all levels.

                               ii.         Eliminate government licensure requirements for all levels of health care providers

                             iii.         Promote private certification, like we see for Certified Public Accountants (CPA), Certified Financial Planners (CFP), and Civil Engineering Certification (CEC). Neither federal nor state governments would play a role in certification.

e.    Rely on wide-spread information dissemination about individual health care providers, hospitals, and clinics — similar to nutritional content on food packages, Yelp for restaurant reviews, and Consumer Reports for goods and services.

f.     Eliminate 3^rd party payer models that have removed price competition from health care.

g.    Eliminate Medicare, Medicaid, Veterans Administration hospitals, and all other health care programs run by government.

3.    Eliminate state boundaries for health insurance; allow nationwide competition for whatever health care insurance markets emerge. Eliminate restrictions of any kind on pricing and characteristics of health insurance products.

4.    Give low-income individuals and families means-tested health care vouchers to purchase routine health care, similar to the SNAP program. Pay for vouchers from general tax revenue.

5.    Eliminate patents for pharmaceuticals. Rely on academic research to develop new drugs, as we largely already do. Academic research is highly motivated by institutional prestige, not sales of drugs. We have no evidence whatsoever that eliminating patents on drugs would reduce research and production for new efficacious drugs in America, notwithstanding loud protests to the contrary from the rent-seeking big pharma corporations.

     Implementing the 5-point plan outlined above will lead to the following benefits for people in America:

A.  Creation of market prices in health care. As noted by professor Alex Tabarrok, of George Mason University, a market price is "a signal wrapped up in an incentive" for both producers and consumers. Without market prices, producers and consumers have no way to maximize economic efficiency.

B.   Reduction in the cost of health care across the board, due to increased supply and reduced demand for health care services.

C.   Increased supply of health care services, due to removing supply-side restrictions put in place by government operatives who have catered to rent-seeking health care providers.

D.  Greatly reduced wait times in doctors’ offices and hospital emergency rooms, as health care providers begin competing on price and quality of service.

E.   Much greater diversification of health care delivery models, such as online diagnosis and service, walk in lab testing, online diagnosis services, quick-service health care clinics, and other business models that no one has yet even imagined (http://reason.com/archives/2014/09/30/supply-side-health-care-reform ).

F.    Greatly reduced cost for routine health care services that providers with much less training than an MD can provide with great competence.

G.  Lowest feasible cost for health care services across the full range of health care services.

H.  The absence of government and its operatives from health care markets, thereby improving economic efficiency and equity across the board.

I.     Elimination of the deadweight costs created by subsidies, price controls, and supply-side restrictions. A greater number of people will receive a greater quantity of health care with a higher quality and benefit to individuals, at the lowest possible cost.

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