How to make health insurance more competitive

The efficient, effective way to produce and distribute a commodity is through the market. Health care is a commodity.

In an open health care market, people would pay for their own health care. They’d exercise discretion in using health care. Care providers would have to compete for business. This would alleviate the fundamental problem of our current health care system, which is its continuously escalating cost.

Health care is a necessity. So are food, clothing and shelter.

We let the food, clothing and shelter markets operate with minimum regulation and harness the incentives that markets generate to produce food, clothing and shelter with higher quality and in more abundance at a lower cost than is possible under any other economic system at the same time as we provide welfare for those who have difficulty accessing these markets. We should do the same thing with respect to health care.

Health care insurance won’t disappear. Health care costs can be catastrophic, and the only reasonable response is insurance.

The personal health insurance market is anemic. The bulk of people have their health expenses paid by a government or employer provided plan. Insurance companies fear adverse selection and have little incentive to provide quality personal health insurance. Imagine the vibrant market that would spring up if every individual bought his own health insurance.

Insurance companies would have to improve their product or lose out. The policy type that would probably dominate would be one that covers catastrophic costs only.

Insurance companies want to keep down expenses so that they can lower their standard premiums and improve their competitive position. So there would be riskbased premiums.

That leaves people who can afford catastrophic care insurance but don’t insure. What happens when they need care for which they can’t pay?

Here’s a proposal. Pass legislation that requires everyone to carry some specified minimum amount of catastrophic health care insurance.

Then, if a person in crisis is brought into an emergency room, they’re treated, no questions asked. If they’re unable to pay the bill, they’re given a slap on the wrist, the expense is absorbed by the state, and they’re excused.

However, in the more usual case, where there’s time for deliberation and the diagnosis is for treatment that the person can’t afford, they’d be given a choice: Forego the treatment or accept treatment, let the government pay for the treatment, and go to prison for an appropriate number of years for stealing the fees from the government.

Mandatory health insurance would solve the insurance companies’ adverse selection problem. The concomitant to mandatory health insurance would be that insurance companies would be required to provide insurance to all highrisk cases with a maximum cap on rates.

The government should require everyone to have health insurance, provide welfare for those who can’t afford health care, and require insurance companies to cover all cases regardless of risk. (One other thing that the government should do is to insist on the creation, maintenance and use of a single, universal, comprehensive, integrated, electronic medical record system for the nation.) Otherwise, the government should get out of the health care business.

Phasing the government out of health care will take time. Commitments made should be honored. All those currently covered, whether working or retired, should continue to be covered. But for all new entrants into the job market, government provided health care should no longer be a possibility.

Health care and health are different things. Sure, we want good health care.

But what’s of vital interest to us is good health. When it comes to good health, health care is a minor contributor.

The most significant thing that we can do to promote good health is to practice preventative care — have an annual checkup, eat a nutritious diet, exercise, take care of our teeth, be conscientious about taking medicine, wash our hands, get inoculated, put on our seat belt and observe the speed limit when driving, not smoke, and not do drugs or drink to excess.

To encourage healthy behavior, an education program is necessary. An essential ingredient of such an education program would be riskbased health care insurance premium pricing.

The second major factor in promoting good health is public health initiatives, such as pure water, clean air, and sewage disposal. Here the government has a clear role. And with each improvement in this area, the need for health care will decline, which will result in an overall reduced health care cost.