Gorman on Health Insurance

http://www.econlib.org/library/Columns/y2009/Gormanhealthinsurance.html


This piece offers tremendous insight into the price distortions prior govt interventions have had on health care costs. Conclusion follows:


"Eighty years after governments began seeking to determine the shape of U.S. health coverage, economists who study direct-purchase insurance have created a body of literature suggesting that market-oriented health care reform has far more promise than the decades-old plans that seek to impose the Blue Cross model on the entire population. In view of Medicare's insolvency, reform plans calling for further expansions of the Blue Cross single-price guaranteed-issue model, both via Medicare/Medicaid expansions and so-called "public" policies designed by government and sold through government run connectors, are unlikely to succeed in providing more medical care for more people at current expenditure levels.

Direct-purchase of health coverage, along with guaranteed renewability, flexible premiums, and high-risk pools, is a promising approach to reducing health care costs, increasing the value received for health care expenditures, and making more healthcare available for all. Given that roughly the same percentage of people has had health coverage for the last 20 years despite numerous expansions of government coverage programs and a massive increase in illegal immigration, the direct-purchase results also suggest that expecting everyone to have coverage is not a sensible policy goal.

Another danger, one too infrequently considered in the drive to lavish government funds and attention on extending the 70-year-old Blue Cross model to basically healthy people, is that insuring everyone is an unattainable goal. No one can make an adult alcoholic or drug abuser sign up for anything. If government gets out of the way, basically healthy people should be able to make their own health financing arrangements. Furthermore, the focus on universal coverage diverts attention from the radical reforms necessary to save Medicare and Medicaid, two government programs based on the Blue Cross model that are dysfunctional, insolvent, and already failing the frail and vulnerable people who depend on them."