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From one of my favorite thinkers, Yaron Brook:

Today, what we have is not a system grounded in American individualism, but a collectivist system that aims to relieve the individual of the “burden” of paying for his own health care by coercively imposing its costs on his neighbors. For every dollar’s worth of hospital care a patient consumes, that patient pays only about 3 cents out-of-pocket; the rest is paid by third-party coverage. And for the health care system as a whole, patients pay only about 14%.

The result of shifting the responsibility for health care costs away from the individuals who accrue them was an explosion in spending.

I get the impression that American healthcare is generally seen as a market system by the electorate and the only alternative as more government control. Of course, factually this is untrue as the government is responsible from between 45 and 50% of healthcare spending in the US, making it the single largest ensurer of Americans. On top of this, an endless array of regulations make the American system not only tapped by government, but dominated by it.

Additionally, of the insurance that is (essentially) private, third parties (i.e. employers) pay for six times as much as individuals. And the obvious reason for that the way the tax structure is convoluted to subsidize employee based insurance by not taxing it as income. According to Paul Krugman and Robin Wells, “the value of the tax subsidy for employer-based insurance is estimated at around $150 billion a year.”

I surmise the basic fallacy behind this system is the desire for a free lunch–voters want heathcare, especially if they can get it at someone else’s expense.

But the wasteful incentives this way of thinking creates not only is inefficient, but eventually passes even higher costs on to consumers. Remember that when people bear less cost for a maneuver, they have no encouragement to try and control its costs. The consequence is that spending goes nuts.

For the sake of achieving greater frugality and more efficiently rewarding good and bad providers, it would be wise to give the individual a greater place in healthcare. This would not happen by government mandate or subsidy, but rather an equalizing of the playing field between individual and employer healthcare, as well as a downsizing of government’s roll in the industry.

For that reason, the medical reforms of Ron Paul, John McCain, and Rudy Giuliani tend to be superior to that of other candidates.

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The The Collectivist Incentive and Rising Cost of Healthcare by New School Politics, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.