A Consumer's Look at Health Care

My Cato Institute colleagues, Michael Tanner and Michael Cannon, have been doing an excellent job exposing the fallacies and misconceptions of Obama's proposal to further expand government intervention in the health-care sector. One of their challenges is explaining to people that many of the problems that currently exist are the fault of government.

For instance, I went for my annual checkup today (though "annual" is a slight exaggeration since I went 35 years without a checkup and this is just my second visit in the past 3.5 years). As I dealt with a blizzard of paperwork at the doctor's office, I realized that this was just the beginning of a tedious process. At some point in the next few weeks, I'll receive incomprehensible statements from my insurance company, followed by similarly indecipherable bills from the doctor. And since I also went down to the hall to a different office for my blood test, I suspect I'll have two statements and two bills - neither of which I'll have the energy to figure out (though I shouldn't complain too much since I once went to a local clinic after spraining my ankle playing basketball and somehow had to deal with three separate bills).

I'm guessing that this type of experience is one of the reasons why Americans express some degree of unhappiness with our current system - especially when they wind up having to write a check and suspect that their insurance company is squeezing them in some unknown way.

But how many people realize that this bureaucratic process is the result of government interference? For all intents and purposes, social engineering in the tax code created this mess. Specifically, most of us get some of our compensation in the form of health insurance policies from our employers. And because that type of income is exempt from taxation, this encourages so-called Cadillac health plans. This seems great, at least on the surface, but now let's consider the unintended consequences.

We have replaced (or at least agumented) insurance with pre-paid health care. Insurance is supposed to be for unforseen major expenses, such as a heart attack. But our gold-plated health plans now mean we use insurance for routine medical costs. This means, of course, we have the paperwork issues discussed above, but that's just a small part of the problem. Even more problematic, our pre-paid health care system is somewhat akin to going to an all-you-can-eat restaurant. We have an incentive to over-consume since we've already paid. Except this analogy is insufficient. When we go to all-you-can-eat restaurants, at least we know we're paying a certain amount of money for an unlimited amount of food. Many Americans, by contrast, have no idea how much of their compensation is being diverted to purchase health plans. Last but not least, we need to consider how this messed-up approach causes inefficiency and higher costs. We consumers don't feel any need to be careful shoppers since we perceive that our health care is being paid by someone else. Should we be surprised, then, that normal market forces don't seem to be working? (though it is worth noting that costs keep falling and quality keeps rising in the few areas - such as laser-eye surgery and cosmetic surgery - that are not covered by insurance)

Imagine if auto insurance worked this way? Or homeowner's insurance? Would it make sense to file insurance forms to get an oil change? Or to buy a new couch? That sounds crazy. The system would be needlessly bureaucratic, and costs would rise because we would act like we were spending other people's money. But that's what would probably happen if government intervened in the same way it does in the health-care sector.

So what does all of this mean? We have a problem caused by government (this little rant of mine doesn't even touch on other problems caused by government, such as Medicare and Medicaid). People are unhappy because they have to deal with the unintended consequences of the government intervention. Clever politicians then say the only way to make people happy is to have even more government. I'd like to try to explain why this makes sense, but I have to fill out some forms.