I recently paid $2,500 for the privilege of laying unconscious on an operating table while a surgeon cut four holes in my abdomen.
An outrage, you say? Hardly. I was happy to do it.
I understand it’s not fashionable nowadays for people to use their own money to pay for health care. This includes the rich (definitely not me), the poor and everybody in between. We pay for care not with our own money but with health “insurance.” If we don’t, we pay a fine (oops, I mean a tax) or go to jail.
The problem with “health insurance” as it’s traditionally defined is that it has nothing to do with insurance and very little to do with health. Insurance is supposed to insure (get it?) against things that are catastrophic, unpredictable and outside the control of the insured. Health insurance as defined today is nothing like that.
What we call “health insurance” is really prepaid consumption of health care. We expect it to pay for mammograms, prostate exams, wellness checks, elective surgery, dental work, vaccinations and pretty much everything under the sun that can be plausibly argued as promoting good health. It’s insurance as a picnic basket of Good Things. Good Things are nice, but they’re not what insurance is for.
So since I have to have gimmicky health insurance anyway, I figured I could at least pick an option that let me spend more of my own money on health care, switching to someone else’s money only when something unusual happens. That’s why I chose a high-deductible policy with a Health Savings Account, or HSA.
High-deductible policies make sense for the huge majority of the population because it means that routine checkups, wellness exams, inoculations and so forth come out of your pocket first. As they should. When you’re spending your own money, you shop around, and medical care providers compete for your business.
The result is better quality and lower prices, just like anything else where markets are permitted to function.
An HSA is an account where you and possibly your employer put money aside pretax, which you can then use for health care expenses. This gives you at least some control over your health care dollars. This means you think about your money carefully and don’t go running to the emergency room to get “free” care every time you get a nosebleed.
The reason why health care costs are persistently uncontainable and threaten to bankrupt the country is not because the government isn’t doing enough, or because of evil insurance companies, or money-grubbing doctors. It’s because about two-thirds of every health care dollar is spent by someone other than the patient. This means minimal incentives to provide a better product at lower cost. How can we possibly talk about market failure in health care when most of it is paid for with someone else’s money?
The essence of true health care reform is this: giving people more personal control over their health care dollars. The solution to increase access to care is not some top-down mandate to purchase health insurance funded through still more third-party activity. This will make things worse. Instead, we need more freedom and more responsibility.
We need health care vouchers for the poor. We need to decouple health insurance from employment. We need to free medical entrepreneurs to discover how to deliver better health care at lower cost. We need to let buyers and sellers come together peaceably in the marketplace to determine what insurable health risks are and let patients purchase any policy that meets their needs.
Bottom line: We need more bottom-up ideas that empower patients and less top-down control that empowers bureaucrats. That’s because the best way to ultimately improve access to health care is to have it get better and cheaper every day. Markets are the only social institution that can accomplish that.
By the time you read this, I’ll be gall bladder-less. No big loss. I had too much gall anyway.
Barry Fagin is a senior fellow at the Independence Institute, a free market think tank in Denver. He can be reached at firstname.lastname@example.org.
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