Is healthcare a human right? That’s a question I frequently wrestle with. My brain tells me no. It says that each and every man is responsible for paying for any good or service he wishes to attain. If he is not able to, his fellow-man should not be forced to provide for him.
My heart, however, hates and detests suffering. It screams that everyone deserves access to health care. Is it expensive? Sure, but don’t we owe access to basic health care at a bare minimum?
For libertarians, health care arguments are about delivery, not principle. We believe that through charity and voluntary, community programs, we can make sure that each individual has access to care. We’re often branded as uncaring because we don’t want the government to force an individual to pay for another’s health care. It’s not that we don’t care, we just know the government doesn’t do as good of job at providing access to health care as can be done on an individual to individual basis.
My brain is usually the victor in these battles, but my heart has been getting the better of me lately. It has consistently begged the question, “What if my sweet grandma was in dire need of access to healthcare? Wouldn’t I want to know she would be able to obtain health care through a government guarantee (no matter how flimsy), rather than praying that others would chip in to cover her medical costs if necessary?”
Needless to say, I’m siding with the heart right now. However, no one can honestly say that Obamacare, Medicaid, or Medicare are the most efficient ways of delivering healthcare. I think that’s something we can all agree on. Healthcare.gov is an absolute mess, third-party payment systems are an inefficient, cost increasing nightmare, and the absence of market forces in our health care system is astonishing.
What I’m going to propose is a solution to tame the two most important factors in our healthcare system; Access and Cost. The problem with the health insurance market is three-fold; lack of competition, lack of transparency, and the peculiar economics of the health insurance industry. Health insurance is one of those odd markets where marginal cost is often greater than marginal revenue. But what does that mean?
Every additional customer that an insurance company takes on is not guaranteed to be profitable. And why is that?
Well, because no two individuals have the same health care expenses. One customer’s premiums might be more than enough to make a profit over the life of the policy, while another customer may cost the insurance company $3 million within a matter of months.
Now, you might be saying, “Well duh? Isn’t that the purpose of insurance? The insurance company takes on risk in exchange for premiums right?”
Their goal is actually to build the least risky customer base. They want healthy individuals. Obamacare forces them to take all customers regardless of risk, unless they opt out of offering health insurance and just become investment management companies. The more customers each insurance company takes on, the more money they receive, but their pool of clients becomes more risky and possibly more expensive.
In the auto insurance market, insurance companies have a pretty solid idea of what their worst case scenario is for each additionally insured customer. The more customers an auto insurer has, the better the rates they can offer; or the more risky customers they can add because worst case scenario would be that they’re buying a couple of new cars and paying $250,000 in medical bills.
A health insurance company has difficulty making an assessment for their worst case scenario. Individuals with chronic diseases or conditions that require ongoing care aren’t using their insurance as it was intended.
Insurance was designed to protect you from an unpredictable event, not as a subsidy for ongoing care. Right now individuals with private insurance who use their insurance as it was intended, are subsidizing the perpetual users. It’s time to differentiate between who needs health insurance and who needs a subsidy to pay for health care.
If we made such a distinction healthy individuals would be able to obtain coverage at a much lower cost and insurance companies would be able to more accurately assess risk. Right now, each new policyholder represents an avalanche of potential costs. No wonder they’re hesitant to add new customers. Additional revenue to the insurance company from newly insured policyholders is oftentimes less than the additional expense of adding them as a customer. That’s what I mean by marginal revenue being less than marginal cost. The health insurance market incentivizes small pools of healthy individuals. It’s time to let the health insurance market operate as it was intended to.
Let’s look at a car company. A car company has fixed and variable costs. They have fixed plant and people costs and variable costs for supplies. As long as the cost of supplies for each additional car they sell is less than the cost to sell an additional car, they’re going to produce as many as possible. The health insurance market simply operates under a different economic reality. Their variable costs make up the majority of their expenses.
Unfortunately, this is the nature of the beast. Obamacare guaranteed insurance companies millions of new clients, but in exchange they had to agree to certain stipulations. The result? A drastic increase in risk and potential expenses. The health insurance market isn’t necessarily a market failure, but there are different economic factors at play.
So if something as essential to a person’s life as health care can’t be accessed? What should we do? And what is politically and legislatively possible?
Libertarians don’t want to prevent care for those in need, but anyone remotely familiar with the U.S. budget situation can tell you it’s impossible to offer a universal, single payer health care plan without exacerbating our fiscal situation or drastically restricting available health care treatment to all. Don’t forget the ever rising cost of health insurance and delivering care. Last year alone 2 million Americans had to file for bankruptcy due to medical bills. Clearly something has to be done and Obamacare is a terrible solution. It fixes neither the root cause nor the symptoms.
I believe libertarians need to be pragmatic and accept that government is in control of the health care industry. Unless we provide policy reforms and operate within the framework of legislation, we’re screwed in the short run. Personally, I’m not a big fan of waiting until the entire government collapses. Government will do whatever it can to ensure its survival.
How about instead of waiting for utopia we implement some policies that are attainable and increase liberty for all? The voluntaryist dream, where if someone is in need of health care, but unable to pay, friends and family volunteer to help pay for treatment, is so far removed from reality its not even worth discussing in my opinion.
The reality is this:
1) Certain individuals lost the genetic lottery and are burdened with chronic illness requiring ongoing care. Insurance for these individuals isn’t really insurance. Its not protection from an unpredictable event, its a subsidy for affordable care.
2) Its too late to ask a bunch of seniors, incapable of working, to pay for their own care when they paid into the system with the expectation that they’d receive healthcare at the end of their lives.
3) Healthy individuals need access to preventative care and coverage when a catastrophic event happens (like an auto accident). They may occasionally need access to ongoing treatment, and possibly a subsidy if they develop a condition, but for the most part their use of health care services are either minor or catastrophic in nature.
4) Children under the age of 18 should be guaranteed access to care. They are minors and they can’t help that they were born into a family who may or may not be able to pay for their health care.
5) There are members of our society who are incapable of even earning a living, let alone being able to make rational decisions about health insurance coverage. These individuals are usually known as the mentally ill and are hard core unemployed.
So how do we craft our policies around these realities as a libertarian?
Our solutions must involve as little force as possible. We must offer individuals choices so that mandates are off of the table.
Here’s the bill I would offer: The American Health Care Reform Act
Amendment 1) All individuals, excluding individuals under the age of 18 (see Amendment 4 for more on that), will have the choice to obtain health insurance or not. Those who wish to opt out of obtaining insurance, but use health care services and cannot pay for the cost of said services either upfront or through a hospital repayment plan, will be subjected to a 50% flat tax rate (no deductions) the following year or years until their debt has been repaid through taxation in the form of wage garnishment.
Health care providers will be required to provide care to any individual admitted through an emergency room and treat that individual until they are in a stable condition. At that point the uninsured individual will have the option to continue receiving care from the provider until they are eligible for release. Any uninsured individual, who uses health care services, will be required to pay 150% of the cost incurred during their stay.
If the uninsured individual in question becomes unemployed for a period of 12 months following the incurred and outstanding costs, they will have the option of accepting a penalty on top of their outstanding debt or working in a new civil service program that will be outlined in a future blog post as part of this series (see Government Restructuring).
The health care provider will invoice the government for all services performed and have the option of taking repayment in the form of a tax credit for 150% of the cost of treating the individual or monetary reimbursement at cost + 10% which would be payable in the following calendar year via Congressional appropriation.
Employer provided health care plans will be taxed as income. Individually obtained health care plans will be completely tax deductible. Employers who offer a health insurance contribution toward their employees (in the form of a monthly stipend) will receive a tax credit for 125% of the value of the contribution.
Amendment 2) A complete deregulation of the health insurance industry. Allow insurance companies to offer whatever type of coverage they want, to whoever they want, in whatever state they want, for whatever price they want. We’ve already spent all this money on a semi-functioning health insurance marketplace website. Let’s finish the damn thing and get it operational. Require every insurer in America to list their policies and pricing in the marketplace. If they don’t want to, don’t license them as health insurance providers in the United States.
I predict the insurance market would respond to demand and insurers would begin offering HSA plans with comprehensive catastrophic coverage at an extremely reasonable price.
-Health savings account funds are investable and gains are exempt from taxation upon use
-All contributions to HSAs are tax free and uncapped
-Remaining HSA funds may be passed onto heirs tax free
Because we have removed individuals in need of a subsidy due to ongoing care (See Amendment 3 for more on that), I expect HSA plans with catastrophic coverage will become the standard. I also expect the cost of such policies to drop and or catastrophic coverage to increase.
I estimate that under this legislation the cost of an HSA + Catastrophic Plan would be close to this:
-$85/mo for a healthy individual aged 18-26
-$500/800 per month 58-65
-Medicare for those above 65
Obviously individuals with families would pay more, but I doubt policies would be drastically more expensive because the insurers are only paying for catastrophic events and minor preventative care.
Amendment 3) A federal public health fund will be established through Congressional appropriation. In addition, the new fund will receive annual contributions through the taxes collected via the new 50% flat tax placed on uninsured users of health care services.
Individuals who are eligible to receive subsidies are those with diagnosed chronic diseases, conditions requiring ongoing care (including the mentally ill), and those eligible under their state’s Medicaid requirements. Medicaid will be ended and folded into this new federal public health fund. Individuals who meet state Medicaid requirements will be issued a government HSA with a credit card to pay for preventative care. Card limits will be limited to $200. Any limit increase request must be accompanied with a notarized diagnosis and prescription from a licensed physician.
All physicians and health care providers in the US will required to list their pricing in this new online marketplace (imagine an Ebay or Amazon for medical goods and services). If a physician or provider does not wish to participate in the marketplace, they will not be licensed as a physician or health care provider in the United States.
Subsidies will range from 1-100% of the cost of care depending upon income and HSA funds available. All subsides will be based off the price of the lowest provider in the pricing marketplace.
Amendment 4) I propose splitting Medicare into two different funds. Medicare Y and Medicare S.
–Medicare Y will be immediately available to every individual under the age of 18. For these individuals it will be operate as a single payer health care system. Biological or adoptive parents of enrollees will be subject to a 10% flat income tax (no deductions) in addition to their current tax liabilities. This tax applies to the biological and adoptive parents regardless of their tax bracket, even those who do not pay federal income taxes. If they are unemployed they can postpone repayment until employment is attained or work in the new civil service program (see Government Restructuring).
–Medicare S will be available to every individual over the age of 65. Enrollment will not be allowed until all funds from existing HSA account(s) are depleted. Current enrollees and those age 45 and above will be exempt from the HSA requirement. Those 44 and below be subject to the depletion requirement.
The annual budget increase for Medicare Y and S will be restricted based on the medical pricing index, which is derived from the data obtained through the new medical goods and services pricing marketplace and demographic composition factors.
I’m sure there are missing elements to this bill, but I think its a good starting point to start moving the US health care conversation in the right direct. We have the power to create an efficient and accessible health care system that will quiet both my brain and my heart.
I believe a bill with these reforms is both politically attainable and in alignment with libertarian principles. Is it a statist solution? Yes.
If that makes you irate, tough.
I won’t sit around and wait for government judgement day. I think there’s a better chance of Allah escorting me into my promised harem of virgins than the US government allowing itself to collapse.
I stand with Rothbard when he said, “ I see no other conceivable strategy for the achievement of liberty than political action. Education in liberty is of course vital, but it is not enough; action must also be taken to roll back the State.”
The Libertarian Policy Series will focus on solution oriented policy proposals in order to maximize liberty and begin rolling back the power of the state. I look forward to your comments and thanks for taking time out of your day to read such a long post.