The debate over health care reform
The debate over health care reform, though at times uninformed and uncivilized, has again focused attention on the longstanding issue of government’s proper role in a (predominantly) market economy. It is not my intent to address this issue per se except to admit without apology that I am a firm believer in and strong proponent of private markets. With participants acting in accordance with their own self-interest (not to be equated with greed, please) and with no coordinating mechanism except prices, markets are extraordinary at allocating resources to their most socially productive and valued uses. Of course, this itself would be impossible without government at least providing a legal infrastructure that defines and protects private property rights, enforces contracts, and offers recourse to those victimized by the unscrupulous and fraudulent.
When the issue is narrowed to the proper role of government in the provision of health care, however, serious complications arise that the market, without broader government involvement, cannot resolve. First and foremost, if access to adequate and affordable health care is defined to be a basic human right, the market by its very nature cannot be expected to deliver it. Markets provide goods and services to consumers not because consumers have a right to them but because consumers are willing and able to pay for them. Further, a willingness to pay in the absence of an ability to pay garners the consumer nothing. Practically, then, any claim that access to adequate and affordable health care can be ensured for all without an expanded government role in the health care market is simply not to be believed.
So now the crucial question becomes “How should the government expand its role, not only to guarantee access and affordability, but also to improve the efficiency of health care delivery and to reduce the rate of health care inflation?”. The simplest, most effective, and most palatable way is through the often maligned and feared public option. Claims that such an option will destroy the private insurance market because it will tilt the playing field away from private insurers are simply overblown and inconsistent with most empirical estimates. Having an affordable public option will force private insurers to exact efficiencies from their operations and processes that they have heretofore ignored largely because of the market power they and large hospitals possess. The only other viable alternative in the absence of an affordable public option is a heavily regulated private health insurance market modeled after the Switzerland system. This model does not seem to fit very well with United States tradition and culture nor do I think does it create enough room for creative and entrepreneurial solutions to a number of health care problems.