A crazy, yet comprehensive solution to high healthcare costs, involving less government in the aggregate


1. Reduce the period for which patents for drugs and medical equipment are granted. There will then be fewer expensive treatments coming to market, and their price will be falling quicker. This is much neater than regulation or voluntary agreements, and it more or less leads to the same outcome. The crucial difference is that it involves less 'government' and more 'freedom', so people on the right shouldn't have any objections.

2. Do what Milton Friedman advocated and abolish occupational licensing for medical personnel. If you can't stand that much less government, relax rather than completely abolish.

3. Use the savings generated to publicly fund 100% insurance for the poor, and taper that off as you go up the income/wealth scale. On top of that, create a fund to provide public co-funding of treatment in 'catastrophic' cases, defining catastrophic as treatment that a patient can't possibly afford by a mile. Insurers then don't have to worry about extreme cases and premia can come down, while those that rationally choose to utility-maximize by not insuring will now face a somewhat lower-stakes gamble: if they fall ill they will suffer a massive blow to their finances, but no-one will be dying in the streets. (if you don't see the relevance of protecting insurers from catastrophic scenarios, remember how Kenneth Arrow back in the day couldn't find any insurer who would assume unlimited liability - he wrote about this in his classic paper on healthcare)

There, I solved US healthcare in a blog post written on my mobile phone.

And for those of you philosophically inclined, note how point 1 in particular demonstates how utterly silly it is to bring in 'freedom' and 'markets v government' ideology to a debate involving reform at the margin.

0 comments: