Free-Market Health Care?
By Arnold Kling
Could we have free-market health care? I suggest that it requires two reforms.
On the demand side, I propose event reimbursement in health insurance instead of procedure reimbursement. On the supply side, I propose reputation systems instead of credential-based regulation.
…Event reimbursement insurance would give you a lump sum if you become injured or seriously ill. The lump sums might be in multiples of $5000. You might get $5000 for a broken wrist that requires surgery, $25,000 if you are diagnosed with stage one breast cancer, etc. The insurance contract would spell out which events result in which dollar amounts.
…The fact that procedure-reimbursement insurance breaks down in the private market is not an indictment of the private market. It is an indictment of procedure reimbursement. Event reimbursement would solve the pre-existing condition problem that plagues the current system
Concerning credentials and regulation,
In most industries, government does not get involved in defining work rules. If a company decides to have a financial analyst do computer programming or a computer programmer do financial analysis, that is none of the government’s business. In the medical industry, however, the government does dictate such work rules.
…these regulations ride in under the banner of “consumer protection.”
The free market principle is that as consumers we should protect ourselves. The key to protecting ourselves in a deregulated environment for medical care would be reputation systems.
For Discussion. What would be some of the challenges with implementing either event-reimbursement health insurance or reputation systems in place of regulation of medical practice?