The Everyday Economist

One of my biggest pet peeves is when individuals call the U.S. health care system a free market system. Thus it was refreshing to read this in the LA Times:

Though many Americans may not realize it, government is already the dominant player in healthcare, with federal and state expenditures accounting for 47% of the projected $2.3 trillion the nation will spend this year. Indeed, many private insurers follow the lead of the biggest government program, Medicare, in setting coverage policies.

Even if nothing changes, government will pick up more than half the nation’s healthcare tab by 2017. Universal coverage proposals from the leading Democratic presidential candidates would advance that tipping point to 2011, according to a recent analysis by the consulting firm PricewaterhouseCoopers.

HT: Cato@Liberty

Ronald Bailey looks at the CED report on health care:

“The U.S. employer-based health-insurance system is failing,” declares a new report by the Committee for Economic Development (CED). The CED is a Washington, D.C.-based policy think tank comprised of business and education leaders. And it is right: Employer-based health-insurance is indeed failing.

Between 2000 and 2007, the percentage of firms offering health insurance benefits fell from 69 percent to 60 percent. The percentage of people under age 65 with employer provided insurance dropped by 68 to 63 percent. In absolute numbers, those covered by job-based insurance fell from 179.4 million to 177.2 million.

Their solution? “Market-based universal health insurance.”

I have a major problem with the set-up and the funding. For example, Bailey correctly points out the undesirability of the CED’s proposed government-issued health insurance credit. The credit would be funded by a new payroll or environmental tax. Of course, these taxes are regressive and thus hurt those that they are designed to help.

Overall, I am not sold on this idea or any others that call for wide-sweeping changes. While it is clearly preferable to one large government bureaucracy, there are many changes that we could make within the system to make health insurance more affordable, such as increasing competition in the insurance market by allowing individuals to purchase policies across state lines. I think that it would be greatly preferable to start with modest reforms that free the market for health insurance from the various distortions with which it is currently plagued before trying ambitious new programs.