Health Insurance Public Policy

The libertarian health care system

The poor can not afford health care. Health care costs rise above inflation year after year. Serious errors committed by hospitals and physicians are reported by the news media on a daily basis. How can we fix these problems? Can we rely on Uncle Sam to do what’s needed?

Will Wilkinson doubts that government intervention can solve the health care industry’s problems. Wilkinson is an analyst for the libertarian Cato Institute and in his “Health Care Fantasia” post on his blog, he aims for radical reform. His arguments are provocative to say the least.

Wilkinson advocates abolishing the FDA and stripping the AMA of its monopoly to certify all doctors. While I think this is extreme, we should reduce the stringency of FDA regulation. The FDA adds to the cost of drug development and increases the time between innovation and provision to the sick. Regarding, the AMA one thing one must keep in mind is that this is not an altruistic organization and mostly acts in the best interests of doctors. Reducing the AMA’s power would lead to more cost efficient provision of medical services. For instance, more procedures should be done by nurses and physicians assistants who earn less than doctors.

As expected, Wilkinson is a big fan of HSAs. He advocates that the US create a negative income tax (which I generally support) and the government would deposit a portion of the money into an HSA. I am not sure how this would lead to consumer driven insurance. If a poor person does not have enough money in the HSA for a procedure, will society deny them care? Politically this is infeasible. If we decided to put enough money aside for the poor in their HSA that they will not have to pay any money out of pocket, then this amounts to full insurance.

For uninsurable patients, Wilkinson advocates that the government provide a low quality alternative to private insurance which includes significant rationing. This is similar to what we have now with Medicaid, but instead of having the poor as its target population, it would focus on those with privately uninsurable conditions (the ‘health poor’). Compared to John Kerry’s proposal during his 2004 campaign was for the government to insure all citizens for catastrophic illness, Wilkinson’s proposal is less expensive, but also less favorable in terms of horizontal equity. Both the Wilkinson and Kerry systems for people with severe illnesses would include rationing decisions.