Combs Spouts Off

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Libertarian praise for Trump’s health care vision

Posted by Richard on January 30, 2019

The Independent Institute’s Dr. John C. Goodman has been called the father of Health Savings Accounts, and his two books and numerous articles and op-eds on health care make  a strong case for free-market reforms in health care and health insurance. In a new Forbes column, he notes that “the most serious problems in the health care marketplace are almost always the result of ill-conceived public policies” and has high praise for the Trump administration’s health care reform proposals:

For most of the past half century, health economics has been dominated by the idea that private sector medicine has numerous flaws – flaws that must be corrected by government.

Fortunately, the conversation is about to change.

The Trump administration has produced an astonishingly bold document:  Reforming America’s Healthcare System Through Choice and Competition.This is the first time any administration has explicitly acknowledged that the most serious problems in health economics arise not because of market failure, but because of government failure. It is also the first time the federal government has committed to the idea of liberating the medical marketplace. In many ways the document builds on and extends ideas I first discussed in Regulation of Medical Care (Cato) almost four decades ago and that Gerald Musgrave and I discussed in Patient Power (Cato) almost three decades ago.

Although cooperation from Congress and state governments is necessary and desirable, the Trump administration is accomplishing a lot through executive authority alone. I described some of the most important of these changes in a recent post.

The introductory letter from the cabinet secretaries is at the link Goodman provides, along with a link to the entire 120-page PDF. I’ve only read the introduction and dipped into a couple of topics that caught my interest, in particular “Governments and Market Failure in Healthcare,” which begins as follows (emphasis added):

It is a common refrain that healthcare is “unique,” and in some ways, it is. But “unique” is frequently used to imply that free-market principles that govern other major sectors of the economy cannot be applied to healthcare. The reasons given for the uniqueness of healthcare vary, but some of the most common are: the difficulties involved in shopping for services, the expertise gap between patients and healthcare professionals (asymmetric information), economies of scale intrinsic to the sector, and the predominant reliance on third-party payers. The merit of these commonly cited reasons for why healthcare is unique is considered below.

Notably, government policies promote some of these features, particularly third-party payment. While some of these features do limit the application of free-market principles, the common claim that the healthcare sector as a whole cannot function under free-market principles is not true. Notably, government policies promote many factors that prevent the free-market from operating. Specifically, government has encouraged excessive third-party payment, created counterproductive barriers to entry, incentivized opaque pricing practices, skewed innovation activity, and placed restrictions on the reimbursement policies of government programs. Overall, these practices have resulted in less choice, less competition, and sub-optimally functioning markets that deliver higher prices and lower quality.

Sounds pretty good to me.

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