What I Don’t Like About The US Health Care Setup

In the US, health care is generally paid for through companies, and these companies purchase plans which cover everything from minor to catastrophic.  This is due primarily to the fact that companies receive tax credits from the federal government for such insurance.  If I spend $10,000 on an employee’s health plan, that’s $10,000 in untaxed benefits (or at least benefits taxed at a lower rate), whereas if I just give my employee $10,000, 15% is coming out in payroll taxes and I may need to pay more for other taxes, meaning that I can only offer $8500 at the most.  So due to these bureaucrat-created incentives, companies offer health insurance and don’t give employees who decline the plan the equivalent in higher wages.

That is a setup I don’t like.  The way I figure it is exactly as Milton Friedman once said:  we don’t like company stores, so why should we like company health care?  And given the problem with third-party insurance (with some insurers not wanting to pay for certain claims or denying coverage after a certain point), locking people into such a scheme is an even worse idea.

Instead, I would prefer to see a major deregulation of bureaucratic influence on the health care sector.  The first thing I would like to see is to have tax rates be equal between individuals purchasing their own private health care versus companies providing health insurance.  After that, a deregulation of insurance would be a nice second step, allowing health insurance companies to operate outside of their home states.  That would increase competition and lower prices while improving service, as free markets tend to do.  My third step would be to decouple catastrophic insurance from run-of-the-mill stuff.  Insurance is supposed to smooth out the big risks, not pay for the little things.  If you paid full price for prescriptions* and routine doctor’s visits and kept catastrophic health insurance coverage for major diseases, the cost of insurance would be significantly lower and we would not see quite as many busy doctors, so that when you really do need to see a doctor, appointments become easier to get.  I would also like to see the FDA slowly phase in a “non-recommended drugs” plan, where companies creating new prescription drugs may opt to go through the FDA testing process and any drug which does not must bear a big, clear label stating so.  The FDA slows up the prescription drug market and drives up costs by a great deal by preventing the drug from reaching the market for years and sometimes making a mistake by taking a safe drug off of the market.  The FDA would still exist as a certifying body, but by relaxing the requirement for certification, people who are willing to bear a little more risk could save a good amount of money as prescription manufacturers wouldn’t have quite as high fixed costs and this would increase the number of manufacturers competing in the market.

The moral of the story is that the US health care system, although significantly better than a single-payer system, definitely has room for improvement.  But this improvement will come from less government interference, not more.

Advertisement