So a proposal to force every American to buy health insurance has been getting some notice in the blogosphere. It started at the New America Foundation and has since gotten picked up by Matthew Yglesias, among others. The surprising thing is that Ronald Bailey wrote an article in Reason defending the proposal as a palatable compromise for libertarians, a way to stave off outright socialism. Interesting discussions have ensued, at Yglesias and at Hit and Run when it linked to Bailey’s piece.

I have several thoughts inspired by these discussions. Let’s start with my reaction to the proposal itself. I find Bailey’s arguments tempting, but unconvincing. Read on to find out why.

The basic problem with health care in this country is that much of the voting public has an unsatisfiable set of expectations. People want health care to be a commodity– provided efficiently, with high quality and lots of consumer choice. And they want it to be a welfare benefit– accessible to all at roughly the same price, with a guarantee that no one will be denied care because of inability to pay.

Until you resolve that contradiction, you’ll never get a reasonable health-insurance reform plan through Congress intact. Efficient provision of a commodity in a market requires the ability to exclude nonpayers. Efficient provision of insurance, in particular, requires letting insurers charge different prices for people at different levels of risk. The unwillingness of the voting populace to accept this reality will cause the best-laid plans of mice and policy wonks to gang aft agley.

In an ideal implementation of the NAF plan, the tax code would be simplified to remove the advantage large employers have in providing health insurance. This would mean most people would now buy insurance for themselves, a vast improvement on the current employer-dependent system. The mandatory basic coverage would be (as commentator “nvram” on Yglesias suggests) minimal, covering catastrophes only and bearing a high deductible. The few who could not afford even this little bit would get a relatively inexpensive, voucher-like subsidy.

In the real world, it is unlikely any of this will happen. The regulatory structure will probably be skewed to suit the interests of whichever large employers and HMO’s give the most money to the re-election campaigns of swing-vote congressmen. Pressure from a thousand interest groups will expand the scope of “basic” until it covers more than most low-income people, or middle-class people with pre-existing conditions, can afford. That will make the subsidies grow ever larger, or make the price controls on the insurers ever tighter, or both. So taxes will go up and insurance companies will go out of business.

Furthermore, if libertarians or semi-libertarians support this sort of plan, it will get pegged as a “free market” policy, and free-market advocates will get the blame when it fails. Think of what happened to other unfree pseudo-market schemes that got this false tag: energy in California, railroads in Britain. This will accelerate, not slow down, the march toward socialism. “We’ve tried free-market reform”, the usual batch of demagogues will cry, “and what did it get us?”

So the inevitability argument– that a large majority is going to demand some sort of universal-coverage plan anyway, and we’d best offer them something that isn’t Canadian collectivized health– doesn’t fly in my book. Arguing for what we know is right, namely total deregulation and unsubsidized personal responsibility, may or may not be successful, but it’s better than giving the game away and then getting blamed for the failure of what we know is wrong.

If the majority is just flat-out wrong (and it often is, and it sure is here), the least bad thing to do is to try and change the majority through persuasion and education. If you can’t sway the muddled masses, you can at least try to reach the saving remnant.

Accordingly, here are a couple of calm, non-doctrinaire, uncompromisingly libertarian articles that everyone interested in this issue should read.

Glen Whitman had an analysis of the (more conventional) Gephardt health care plan on Agoraphilia awhile back; go here and scroll down. A lot of what he says applies to the NAF plan as well. Whitman, like Bailey, is eager to decouple health insurance from employment. But he also discusses the fundamental problems in the political market for health care, and the reasons why there is no substitute for real freedom.

David Friedman’s
Should Medicine Be a Commodity? makes a thorough case for the affirmative. It’s pretty long and econo-geeky, but well worth the time and effort.

This entry was posted on Tuesday, August 12th, 2003 at 10:40 pm by Mystery Man and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.