A Free-Market Approach to Health Care Reform

No doubt about it, America needs health care reform.  The Cato Institute proposes a uniquely American solution to improving health care quality and affordability: freedom.

What Is the Free-Market Approach to Health Care Reform?

President Obama is right when he says that the U.S. health care system needs reform. Although this country provides the finest care in the world, our health care system has serious problems.  It costs too much.  Too many people lack health insurance. And quality can be uneven.

But a government takeover of the health care system, as proposed by the president and some in Congress, would be a step in the wrong direction. Instead, we should pursue a uniquely American solution, one that builds on free markets, competition and choice.

1. Let individuals control their health care dollars, and free them to choose from a wide variety of health plans and providers.

2. Move away from a health care system dominated by employer-provided health insurance. Health insurance should be personal and portable, controlled by individuals themselves rather than government or an employer. Employment-based insurance hides much of the true cost of health care to consumers, thereby encouraging over-consumption. It also limits consumer choice, since employers get final say over what type of insurance a worker will receive. It means people who don’t receive insurance through work are put at a significant and costly disadvantage. And, of course, it means that if you lose your job, you are likely to end up uninsured as well.

3. Changing from employer to individual insurance requires changing the tax treatment of health insurance. The current system excludes the value of employer-provided insurance from a worker’s taxable income. However, a worker purchasing health insurance on their own must do so with after-tax dollars. This provides a significant tilt towards employer-provided insurance, which should be reversed. Workers should receive a standard deduction, a tax credit, or, better still, large Health Savings Accounts (HSAs) for the purchase of health insurance, regardless of whether they receive it through their job or purchase it on their own.

4. We need to increase competition among both insurers and health providers. People should be allowed to purchase health insurance across state lines. One study estimated that that adjustment alone could cover 17 million uninsured Americans without costing taxpayers a dime.

5. We also need to rethink medical licensing laws to encourage greater competition among providers. Nurse practitioners, physician assistants, midwives, and other non-physician practitioners should have far greater ability to treat patients. Doctors and other health professionals should be able to take their licenses from state to state. We should also be encouraging innovations in delivery such as medical clinics in retail outlets.

6. Congress should give Medicare enrollees a voucher, let them choose any health plan on the market, and let them keep the savings if they choose an economical plan. Medicare could even give larger vouchers to the poor and sick to ensure they could afford coverage.

7. The expansion of “health status insurance” would protect many of those with preexisting conditions. States may also wish to experiment with high risk pools to ensure coverage for those with high cost medical conditions.

via The Cato Institute.

Hat-tip to Jill Arizona


  1. Could someone explain to me why the idea of buying health care across state lines will do anything? All it will do is make it so healthcare costs the same around the country. Places have higher costs of healthcare and places have lower. If you let everyone go to the lower costing states the rates will go up.

    This is just basic economics and then people leave the big states so the cost there goes down. So in the end you hurt people in rural low cost healthcare areas. I do not understand how is this helpful. Insurance companies would just charge an national rate for healthcare and screw everyone even more.

  2. Giving people the freedom to choose is just that, freedom. With other insurance polocies, life, home, etc. I am free to find that best policy that fits the needs of my family and (most importantly) at the best price I can find. When shopping for other types of policies, I have been able to get a better rate by telling these companies that their competition has them beat on price. Many times, these companies have “redone” their own quote and lowered the price to EARN my business. That is why it is called a free-market. The best product/service at the best price always gets my biz. With health insurance, my hands are tied.

  3. Right but you failed to address what I am saying, this will just make the rates go higher in the states where it is cheaper. So there is no real benefit to this. It sounds nice to talk about freedom but in reality nothing will be helped by this.

  4. Other provision that should be included are:
    1. Medical providers should be required to post their fee structure so that customers (patients) can intelligently shop around.

    2. Cost shifting (e.g., charging the privately insured more to make up for lower Medicare/Medicaid reimbursements or to pay for the uninsured) should be prohibited.

    3. Tort reform.

  5. Ken, what do you mean by Tort reform? It’s a term that gets tossed around but few spell out what they think it means.

    One more thing, how would you do away with “cost shifting?”

  6. “One more thing,how would you do away with “cost shifting?” ”
    Single Payer, but that may be too simple.
    Also it has some bad side effects, a few thousand of my party’s best friends may loose their 24 miilion dollar per year jobs.

  7. It’s very simple. If we want to bring down healthcare costs while maintaining quality the answer is to get rid of the insurance companies which inflate the costs and add no quality of care.

  8. Horst, so you want to trust the government with that much power over your life?

    Why do you call yourself a Republican?

    Why not HSAs and catastrophic insurance?

    Why not choose what you need as a policy instead of having the government mandate what insurance should cover?

  9. All your talk about freedom of choice in health care is wonderful, except that you leave out my freedom. Not to carry health insurence. Under the proposed plan, if I do not carry insurence with the approved coverage, I will be fined. Where does that leave us, the Chosen Uninsured? I have never been refused any medical treatment, Have paid cash for all of my medical bills, and am very healthy.
    (i believe that preventive medicine is better, my opinion)
    Yes, I have had a “catostrophic” injury, was hospitalized for 2 months in traction, paralyzed from the waist down, and yet…. here I am, bill paid for, and still on this earth, without insurence.(at the time I had insurence, that refused my claim due to “act of God”(A sneeze) not being covered)
    I believe that it is time for all of America to come to the decision to become responsible for themselves and stop expecting the government, insurence compsny’s, law suits ect… to cover them for thier acts and become a perponant of preventive care.
    I have always found that most doctors will take cash.. most hospitals will take payments… most medical work can be found at a cheeper rate. Those are the ones I work with.
    Let’s take care of ourselves… and stop expecting others to take care of us PLEASE

  10. Boomer Girl,
    I cant let you off without a reply. First please note that my remark above, #6, was an answer to someone else’s question.

    Todd, #7, is much more succinct as he hit the nail on the head stating that we need to get rid of the private health insurance companies if we want to reduce health care costs. They are spending right now millions to scare the American public into a frenzy.
    You been to one of those town hall meetings, have you forgotten?

    Obama may, might, could, possibly perhaps, eventually pay for abortions, oh my gawd, for gay same sex married couples, even illigals.

    Oh no, we better stick with the private health insurance companies who take good care of their CEO’s paying them 24 million dollars salaries out of our premiums first and kicking us clients off when they find that as children we had a pre-condition while falling off a tricycle at the age of 5 and forgot to list it.

    As far as I claiming to be a Republican, it says so on my voter card, you can also google me.

    Carolyn is correct with the opt out provision, problem is she does belong to the very few who have enough self-disciplin to function that way.

    Most everone else would become “The Uninsured Driver” of the health care wagon and we all would then have to pick up his/her costs, and that is exactly what Ken #5 was touching on.

  11. Have any of you ever “shopped around” for a doctor, dentist or chiropractor? I have, and I usually get a much better deal. Also there is usually a cash price that is much different than the insurance price. Try it sometime, you’d be amazed.

  12. Pappa,
    I give credit when credit is due. You nailed this one. My sincere Congratulation!

    Notwithstanding that you went way outside of conventional medical care. Dental Stuff and Chiropractice is usually outside the scope of health care. Your observation is dead on target.

    I mean there is no State in the Nation that sports more middle aged men than Arizona with missing front teeth. I guess that is a badge of honor for walking away from red neck bar fights and Tea Party Participants.

    Now back to the substance of real health care, my wife and I have travelled to Europa for a particular medical procedure a few years ago because she felt uncomfortable with the practices in the “Country with the most and best advances of medical treatment”, and to our surprise the procedure that was estimated 10K here for an “in and out” patient was handled for less than 6K in Europa and that included first class round trip for 2 on Lufthansa and 21 days mandatory stay in the hospital for recovery plus rent-a-car expenses.
    So much for how we get screwed by the so called “best medical system in the world”.

    Only problem is, aside from you, Carolyn us and pehaps someone else, this option is out of reach. We (I mean our contemporaries) are not astute enough.
    If we would only find one more eligible participant we could get together for a game of “Texas Hold ’em” right here in Arizona.

  13. Sorry, I didn’t check this yesterday so no one will probably see this.

    Tort reform — can be limits on punitive damages, mandatory arbitration, etc.

    Cost shifting — define and outlaw. E.g., if a medical supplier charges Medicare $80 and the privately insured $120 for the same procedure, cost shifting is assumed. Some small differential (say, 10%) could be allowed as the maximum differential to account for higher or lower administrative costs involved in managing Medicare’s or the insurance companies’ paperwork. Discounts could also be allowed for prompt payment. Explicit taxes on medical services could be charged to cover indigent care. At least we would know what that was costing us.

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