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Saturday, October 01, 2005

Government in the health care business?

Managed care practices during the 1980’s and 90’s helped lower the cost of health care for most Americans. However, in recent years, costs have again begun to rise. My question is from both the liberty and efficiency points of view, is it a legitimate use of government coercion to lower the cost of health care?

From the perspective of efficiency, it is my belief that it is not legitimate for government to use its coercive power to lower the cost of health care. Efficiency is concerned with achieving the best possible use of a scarce resource. The free market under the price system allows people to value goods and services based on opportunity cost. In my opinion, the widespread implementation of insurance programs, both private and government funded, has added to the rising cost of health care by creating a “moral hazard”. This simply means that people over consume health care services because they face a lower perceived price due to insurance coverage. The very nature of “over consumption” indicated that the standards of efficiency are not being met. The success of managed care came largely at the expense of health care providers such as doctors and hospitals. It did nothing to curb the “moral hazard” problem. If government were to step in and artificially lower prices this would only exacerbate the “moral hazard” problem and lead to even more over consumption. In my opinion the most efficient thing to do would be to increase the financial responsibility of patients and allow the free market to operate.

From the liberty perspective, the intervention of government in health care would lead to fewer choices for patients. Artificially lowering prices on health care services would lead to the lowest common denominator of health care. We would have quantity, but not quality. Just like any other business, the health care business operates to earn a profit. They seek innovations and a high quality of care to earn a larger market share. If the government were to step in and lower prices, providers would face a lesser incentive to provide the highest quality of care and to create innovations, because no matter what they do they will only receive one price. Health care would be largely standardized. In essence, by setting a price government would be choosing the level of health care available to patients. If the government is choosing, then patients are not. The right to choose is central to individual liberty. Thus, in my opinion, the intervention of government in the health care industry would hinder individual liberty.

Hmmm. Trying to catch up with Canada or Great Brittian?


"In exchange for the cap on total Medicaid spending, the state was given unprecedented flexibility in managing a program that provides health care to nearly a quarter of the state's population.

Global commitment allows Vermont to set up a state-run managed care organization, a sort of hyper-HMO that would administer public health benefits to the poor, disabled, blind and working poor. Vermont's Medicaid system provides more benefits than most other states' programs, and it is the explosive growth in these services that is driving Douglas and lawmakers toward a radical solution."
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