Roy and Holtz-Eakin Respond

Hats off to these two guys for engaging the left on what is actually happening around the world. Their latest post summarizes the back and forth in the blogosphere about their endorsement of the Swiss heath care system, sparked by their original post and Avik Roy’s previous writings. This discussion, however, is hugely dominated by a fixation on how much of health care is “public” versus “private.”

Here is what all the commentators are missing: the public/private distinction doesn’t matter. All over the developed world the market for health insurance has been so completely suppressed that you can find a real price for health insurance almost nowhere. In the U.S., BlueCross and other private insurers administer Medicare. They also administer private health insurance. Earth to the left: BlueCross is not good when it is called “Medicare” and evil when it is called “private insurance.” BlueCross is just BlueCross.

On my critique, they write:

We agree with John’s view of the ideal system: universal health savings accounts combined with catastrophic coverage. He writes compellingly about South Africa’s system in this regard. Avik has written in the past about Singapore, which blows away Switzerland on cost-efficiency by instituting universal health savings accounts. But John is making a mistake if he holds out for universal HSAs, at the expense of more politically feasible, market-oriented reforms that expand coverage and reduce federal spending.

Like so many of our friends on the right this focuses on form at the expense of substance. What is needed is a real market for medical care and a real market for health insurance. Not only is this feasible, it is the only thing in the long run that will work.

Comments (8)

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  1. Ken says:

    Agree. You are spot on.

  2. Mulligan says:

    As usual. This is all limited by political interest. Obamacare should have started with fundamental reforms to the monstrosity that has evolved from our old democratic institutions.

  3. Devon Herrick says:

    On my critique, they write:

    We agree with John’s view of the ideal system: universal health savings accounts combined with catastrophic coverage.

    Ultimately the best system is…

    A Swiss-style system where everyone is provided an incentive to have health coverage (a mandate, a tax credit or any combination of the above).

    o The tax credit might even provide a default high-deductible plan, and require a compulsory contribution to an HSA, to pay for day-to-day medical services.

    o No first-dollar insurance coverage, but the HSA could be used like a first dollar plan.
    Providers would compete to attract customers — they might even band together to create networks (so long as price fixing was not occurring).

    o People would have some measure of protection against being dropped (guaranteed renewability).
    Enrollees could leave one insure and join another with a risk-adjusted premium.

    o Providers would be deregulated allowing innovations not allowed currently.

  4. Avik Roy says:

    All these things you suggest, John, would be great. And we should pursue reforms in this direction. But there is no advanced democracy in the world that has them, to John’s point, which should be at least one indication of their political feasibility.

  5. Angel says:

    I actually agree with Roy and Holtz-Eakin. You can’t expect a real price on health care and insurance when the patient simply could never afford a catastrophic medical expense. There are certain factors outside of economic models that cannot be given a price and expect that to be the sole solution to a complex and convoluted system. I do like factors of the Swiss system and the incorporation of universal HSA’s, however, these are just but pieces of the pie and the entire system won’t ever be completely fixed as long as we have special interests and human greed in the mix. People will find a way to shaft others.

  6. Gabriel Odom says:

    Angel, the argument that corruption exists is not sufficient to discount any option. Corruption exists because humans exist. No matter the system, someone will try to get a leg up on someone else. People will be shafted.
    This being said, an option that minimizes the possibility would be ideal, but we cannot devote more and more resources to the discovery of an “ideal” solution.

  7. Linda Gorman says:

    Golly, I wish someone would list those “more politically feasible, market-oriented reforms that expand coverage and reduce federal spending.”

    Medicare premiums support and Medicaid block grants would be a step in the right direction but they don’t seem to be political feasible. And absolutely nothing about ObamaCare, Medicaid, or Medicare is market-oriented.

    Managed competition of the sort that prevails in Switzerland, FEHBS, and the Rube-Goldberg OCare exchanges is not market-oriented. Medicaid managed care costs more than fee for service. Real mariet-oriented policies do not set prices, have bureaucracies telling suppliers what they must produce, and laws telling buyers what they must buy.

    Making coverage an object of federal policy is just nutty. The object should be to expand the cash market by getting government out of the way, with an eye towards freeing suppliers to deliver care in ways that people can afford. That would drastically reduce coverage requirements.

    Having a policy goal of reducing federal spending is just plain dangerous as it is cheaper to let people die than to treat them. Government has this figured out in Canada, the UK, and Europe. The American bureaucracy won’t be far behind.

    My friend’s Swiss mother was diagnosed with cancer. She was offered homoepathic therapy. Extract of mistletoe is a lot less expensive than chemo or radiation. And she’s sort of old. The old, we have been told, have a duty to die.

    Anyone read Logan’s Run lately?

  8. Patel says:

    There seems to be so much talk about lack of market competition in the health care for the past 100 years. I ask, why is it taking so long for us to come around with a market based solution?