Sunday, August 16, 2009

Healthcare Tradeoffs: We Don't Like the Ones the Market Makes

Moving past the hysteria about "death panels" and "pulling the plug on granny" to written columnists there are some serious conservative critiques of the proposed healthcare plan. My local newspaper ran one by John Stossel that perfectly reasonable point. Healthcare proposals are claiming to be able to do three incompatible things -- extend coverage to more people, control costs, and not interfere with people's freedom of choice. To achieve any two of these things, the third must give way. It's a fair point. I would like to have a serious discussion of how to find the appropriate balance. But the current atmosphere makes such a debate impossible.

Consider the hysterical screaming. Death panels will pull the plug on granny! A government bureaucract will come between you and your healthcare! (Anything that reduces freedom of choice is out). How are we going to pay for it all! Will this increase my taxes? (Costs must be contained). They're going to cut Medicare! The old, the sick and the handicapped will suffer most! (So much for excluding more people).

So what does Stossel propose? Well, other than saying that the market knows best, he is careful not to say. In an earlier column, Stossel warns of the monstrous despotism that will occur if the proposed bill pases. Evil government bureaucrats and social engineers make our medical decisions for us. Innovation will cease. Monstrous distortions will enter into the system. We will all end upon a Hayekian road to serfdom. Carefully ignored in the earlier column is that we already have such a system for everyone ever 65 -- it's called Medicare. If all these horrible things will come about under universal healthcare, shouldn't there be at least some sign of them under Medicare. Unfortunately for Stossel, he is able to point to only one -- it has cost a great deal more than originally anticipated.

In his current column, Stossel makes clear that current Medicare rates are unsustainable. Government will have to do one of three things -- cut Medicare spending, raise taxes, or start limiting what it will cover. Stossel takes great care not to say which one of these options he favors. But he makes clear that raising taxes will be disasterous and interfering with patient decisions will be despotic. Cutting payments he merely regards as politically unpalatable. This gives a hint of which approach he truly favors.

Ultimately, Stossel has only one answer to give -- let the market decide. Given his way, he would undoubtedly eliminate Medicare and Medicaid as unwarranted government interference with the free market. Lamenting American's failure to fear the threatened despotism, Stossel complains that he gets comments like, "I guess the 47 million people who don't have health care should just die, right, John?" Significantly, he does not answer that question. But from a strict free market perspective, the answer is yes. If you take a gamble not buying health insurance, you should face the consequences of losing it.

Stossel's proposal -- let the free market decide -- will undoubtedly give theoretically unlimited choices to consumers, restricted only by their ability to pay. It will definitely cut costs. But it will do so at the cost of excluding much greater numbers of people, including many otherwise uninsurable people now on Medicaid or Medicare. A whole lot more people will die. Many others will have chronic, painful conditions untreated. The free market, quite simply, will control costs by excluding more and more people, rather than by limiting choices. To someone like Stossel who regards preserving free market choices as the supreme good, this is acceptable. To most of us, it is not.

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