In Minnesota as well as in Washington, DC, there’s a push for a government takeover of health care. People who value freedom are right to warn of the horrors of single-payer systems in Britain, Canada and elsewhere. But they should also offer a positive prescription for change.
One prescription is the Cato Handbook for Policymakers, available at the Cato web site (www.cato.org). While the handbook covers ten broad areas of policy, five chapters focus on health care: Medicare, Medicaid and SCHIP, the tax treatment of health care, regulations on health care, and regulations on health insurance.
The most controversial chapter may be the one on regulations. It calls for state policymakers to eliminate laws and regulations that restrict the supply and drive up the costs of medical services. Examples include licensing requirements for physicians and scope-of-practice laws that limit, by law, what nurse practitioners can do. At the least, they say, states should recognize licenses granted by each other.
While the idea was first proposed by Milton Friedman, the Nobel-prize winning economist, in his 1962 book Capitalism and Freedom, it still strikes many people as ridiculous, akin to letting people die at the hands of quacks. Another argument against it is that the by their superior knowledge of the medical field, doctors have power over patients that must be counterbalanced by the state.
The Cato authors argue, however, that “producers have been the driving force or have subsequently captured most health care regulations, and have used them to protect themselves from market competition at the expense of consumers.” This is true in health care as much as it is in other fields.
Clayton Christensen, a professor at Harvard Business School, has argued that the best innovations within any industry allow services to be performed “in a more convenient, less-expensive setting” by people with less extensive—and cheaper—qualifications. In the field of health care, one recent innovation is the retail clinic. These businesses, offer a limited number of services, at a predictable and inexpensive price. They are placed in convenient locations such as grocery stores and pharmacies. (MinuteClinic, a national leader in the field, is based in Minneapolis.) These clinics make health care (again, on a limited basis) more affordable and accessible.
Who could be against increased affordability and access? People with an interest, financial or otherwise, in the regulatory model. So these clinics must fend off would-be regulators who wish to further limit the services they can provide or increase the number of physicians who must be involved in a clinic. A significant part of the retail clinic’s business model is to offer lower prices by using fewer doctors and more physicians assistants or nurse practitioners. Staffing-level regulations would in effect limit the limit the number of clinics to those preferred by politicians, not patients. Not coincidentally, they would benefit people employed elsewhere in the health care industry.
Restrictions on the supply of services abound in the health care sector. They include minimum-education requirements and certificate-of-need laws, under which politically-packed boards decide which communities “need” a hospital, surgery center, or even piece of medical hardware.
Even though supply restrictions increase costs by limiting competition among providers, they do little to improve patient safety. The Cato authors cite the group Public Citizen, which found in one report that two-thirds of the doctors who committed the most acts of malpractice received no discipline from regulatory boards.
If we eliminate political restrictions on the number of health care providers, will we have chaos and ignorance about provider quality? Hardly. “In the absence of licensing, private credentialing and the desire to protect brand names and reputations would do even more to safeguard patients from incompetent providers.”
The threat of legal action, meanwhile, can help discipline bad actors. Yet some commentators, especially conservative ones, have complained about the costs of the legal system. Capping punitive damages and limiting contingency fees are popular ideas in some circles. Yet the Cato authors say that imposing these measures through government, creates other problems, starting with the fact that people have different risk tolerances. What works for one person may not be best for another.
Better, they say, to allow tort reform on a case-by-case basis. “A more patient-friendly and liberty-enhancing approach” to state-wide caps “would allow patients and providers to write their own medical malpractice reforms into legally enforceable contracts.” So for example, patients who voluntarily agree to limits on when they sue and for how much, could be given lower rates by providers. The goal, as with retail clinics, is to increase access to care.
I’ve touched on only one of the four chapters dealing with health care policy. Read the others, and you’ll find not only plenty of reasons why increased government involvement in health care policy is bad, ways in which free markets and competition can go beyond the misguided goal of “universal coverage” to what’s really important, affordable health