Current Events Health Insurance Public Policy

The Republican Response: The Healthcare Economist’s Take

Yesterday I game my evaluation of President Obama’s State of the Union Address.  Today, I analyze the Republican Response.

All Americans agree, we need a health care system that is affordable, accessible, and high quality.  Cheap and high quality, who wouldn’t agree with that proposition?  Figuring out how to get there is the problem.

But most Americans do not want to turn over the best medical care system in the world to the federal government.  Republicans in Congress have offered legislation to reform healthcare, without shifting Medicaid costs to the states, without cutting Medicare, and without raising your taxes.  Republicans don’t want to turn over your medical care to the federal government, except in the cases of Medicare and Medicaid.  The Republican message is philosophically incoherent: we don’t like big government healthcare programs except for one really big, really underfunded healthcare program called Medicare.  This sounds like Bill Clinton in 1994, “I’m not going to let the government mess with your Medicare.”

We will do that by implementing common sense reforms, like letting families and businesses buy health insurance policies across state lines, and ending frivolous lawsuits against doctors and hospitals that drive up the cost of your healthcare.  These policies will do little to significantly change the healthcare system.   The reason Republicans propose allowing people to buy policies across state lines is to allow individuals to buy less regulated insurance products from other states.  If this happens, healthy individuals will buy less expensive products from less regulated states and only sicker individuals will be left to purchase health insurance in the more regulated states.  This will drive premiums up significantly for the sickest people, but decrease premiums for healthy individuals.  This phenomenon is known as adverse selection.  In addition, malpractice reform can help cut costs.  There is evidence that the current malpractice system doesn’t work well. However, malpractice costs are a tiny fraction of overall healthcare costs.  Limiting the malpractice liability of physicians could decrease cost by incentivizing physicians to decrease the use of defensive medicine.  If these caps are implemented, however, patients who are severely injured through a physician’s negligent behavior will not be able to receive the full compensation they are due.

This foreign terror suspect was given the same legal rights as a U.S. citizen, and immediately stopped providing critical intelligence.  As Senator-elect Scott Brown says, we should be spending taxpayer dollars to defeat terrorists, not to protect them.  As a nation that believes in the civil rights of all individuals, it is important to give even accused terrorists the right to due process.


  1. Agreed that the adverse selection problem of purchasing across state lines is a complex one, and those who advocate for simply “opening up the state borders” simply do not understand the complexity of the issue.

    I always wondered though if it would be possible to have federally-chartered healthcare plans that can be purchased by anyone in any state, similar to how there are state chartered and nationally chartered banks. Make simple rules that all nationally-mandated healthcare bills must abide by to make it a fair playing field regardless of state laws, and let the markets improve the system. Thoughts?

  2. Jason,

    Take a read of my solution ‘of sorts’ – I won’t plug my blog, but its on the submitted website for this post.


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