QUESTION: Is government regulation in health care infeasible?
In our society, the government performs many functions. The government is our representative, an organization designed to protect us, so it makes sense for it to handle health care too, right? Unfortunately, this reasoning ignores basic economics and hides the fact that government regulation of health care is unfeasible.
Let's take a quick look at government functions and see what kind of history they really have. The post office is the largest government foray into the realm of private service; Postmaster General John Potter has predicted $238 billion losses over 10 years. McKinsey & Company, a consulting firm, found the business model to be so inefficient that it could never survive if UPS or FedEx were allowed to deliver letters. Public utility services function in a way that would be unacceptable in any other industry; electric companies have a history of brownouts during peak hours, despite seasonal and chronological predictability. Other companies know to expect heavy traffic and plan for it — consider Target and Walmart on Black Friday.
There are many government programs and mandates that create inefficiency. Why would health care fall into this category?
The first problem is that government is not sensitive to cost. If something cannot make enough money to support itself, its costs outweigh its benefits and it should be avoided. The government, however, has no qualms about mandating such activities, preventing insurance companies from denying people with pre-existing conditions and requiring employers to provide insurance. We end up paying for these services, even though the people using them are not willing to do so at the real price.
The government takes it a step further, requiring all individuals to buy insurance. Normally, an individual would be in the best position to decide if he or she needs insurance, but since companies have to give high-risk insurance below cost, they need low-risk people to balance. The government pretends insurance could have been provided at these costs all along, but reality tells otherwise.
Our representatives also tax “Cadillac” plans while ignoring the biggest step available to improving health care: removing the tax exemption for employer-sponsored insurance. This is the biggest government blunder in health care. The government makes the insurance your employer provides cost much less than others, which means companies sell to your employer, not you. This removes competition — a government specialty — and gives the companies no reason to help you; if you switch providers, your costs go way up.
The exemption also gives people incentive to cram as many things under the cover of “insurance” as possible to save money, even if it doesn’t make sense. Pregnancy and routine check-ups? Completely predictable and should not be handled by insurance. In fact, if our definition of insurance wasn't so warped, the desire to give everyone coverage would look very different.
I guess feasibility depends on your definition of “feasible.” If you simply mean health care will happen, then you are right — it is happening already. But I define it as contact with reality, accomplishing goals, and improving the way the system works. And in those areas, government action in health care falls woefully short.
Reach Ben at benjamin.j.morin@asu.edu
