From Welfare Statism to Capitalism: Health Insurance, Health Care, Pharmaceuticals, Diagnostics and Medical Devices

#20 in a series of Think Right or Wrong, Not Left or Right: A 21st Century Citizen Guide (2nd Expanded Edition)

Note to readers: The serial continues with concrete suggestions for how to transition the health insurance, health care, pharmaceuticals, diagnostics and medical device complex from welfare statism to capitalism. Click here if you missed last weeks intro. With political parties in post-midterm flux, this is a good time to spread the “think right or wrong , not left or right” message by rating, reviewing, recommending and gifting the book. Happy Thanksgiving!

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7.1 Health Insurance

Health insurance primarily needs regulatory reform focused on the following areas:

1. Repeal federal and state level mandated coverage of conditions, treatments, and procedures.

As we’ve seen, federal and state level mandated coverage drives up prices because you have to pay to be covered for conditions, treatments, and procedures that don’t apply to you. Repeal will open the health insurance market to inexpensive, catastrophic health insurance options that will make health insurance accessible to the vast majority of people who can’t afford it today, or who spend huge sums on their policies. And it will allow health insurance tailored to specific conditions to emerge. Rather than trying to minimize serving people with severe or chronic illnesses (within the confines of current regulations) to avoid losing money, health insurance companies will embrace opportunities catering to this underserved group, often in cooperation with charitable organizations.

2. Repeal restrictions on selling health insurance across state lines.

Today’s limitations on selling health insurance across state lines has resulted in each state being its own limited marketplace. Repealing these restrictions will enable health insurance companies to create larger risk pools and greater economies of scale, driving down health insurance costs.

3. Decouple health insurance from employment.

Tying health insurance to employment reduces the control you have over planning your health coverage. Decoupling will give you control to shop around for health insurance independently of your employment. Health insurance will become like homeowner or auto insurance, both of which you buy independently of your employer.

Most of this can be implemented relatively quickly. A good way to begin to decouple health insurance from employment is to make personal health insurance tax deductible on a sliding scale over a few years. Initially, we will most likely see different scenarios play out, with many employers continuing the current practice of providing health insurance for competitive reasons, some providing financial benefits but leaving it to employees to shop for health insurance, and others pulling out completely. However, tax deductions shouldn’t be made permanent, as they distort people’s incentives to shop for cost-effective policies, and may delay the downward pressure on health insurance rates.

During a transition period we may also need to finance and manage risk pools for those with pre-existing conditions who cannot immediately find health insurance coverage, perhaps a temporary government-funded but privately-administered program. But this too should be phased out following a pre-determined schedule to ensure the complete transition from welfare statism to capitalism in this area. During the transition, as more people turn their attention to the health needs of the disadvantaged, those people will develop charity programs to provide care for the remaining few at risk of falling through the cracks.

Together, these and other reforms will enable a thriving, accessible, affordable health insurance marketplace for individuals and families with a wealth of choices for virtually all possible needs.

7.2 Healthcare

Just like health insurance, the healthcare sector requires regulatory reform aiming at respecting and protecting the individual rights of healthcare consumers and providers—patients, doctors, healthcare workers, and healthcare companies. Here are a few examples:

1. Repeal regulation prohibiting healthcare providers from competing on price.

Healthcare providers competing on price is one of the most powerful instruments for making your healthcare dollars go further. Repealing regulation prohibiting price competition will make shopping for routine and minor healthcare procedures just like shopping for other products and services: you compare the quality and price of different providers and make your decision based on what provides you with the best quality for your money. It will also attract new players to the healthcare marketplace who see opportunities where high prices are signs of large profits. They anticipate taking market share by lowering prices, reducing healthcare costs for you, the consumer.

2. Repeal regulations at all levels of government pertaining to the permitting, building, and managing hospitals and other medical facilities.

Permitting, building, and managing healthcare facilities is surrounded by a vast network of regulations, including but not limited to Certificates of Need (CONs), which limit the number and size of healthcare facilities in a particular area for fear of creating an oversupply. Repeal will increase the number of facilities and bring down costs through increased competition.

3. Repeal state and local government licensing requirements for healthcare providers.

Licensing is considered by many essential to the welfare statist healthcare safety net and talks about repeal is often met by fear and distrust. But repealing government licensing doesn’t mean that accreditation goes away. On the contrary, it creates a marketplace where doctors and other healthcare providers voluntarily seek out private accreditation that reflects their skills and enhances their reputation. Repealing licensing requirements will also improve mobility of healthcare professionals, as they may practice anywhere in the country, unrestricted by state specific licensing requirements. And it will facilitate the expansion of telehealth, where the provider may be anywhere in or outside the country.

4. Repeal privacy and medical records regulations.

Keeping control of your medical records is important. Repealing privacy and medical records regulations will allow for more efficient record keeping and enable you and healthcare providers to freely negotiate how your records are securely collected and stored without government interference.

To reiterate, regulatory repeal doesn’t negate the need for accreditation, privacy and other rules. But such rules and guidelines should be developed and enforced voluntarily by the stakeholders in the marketplace. As we outlined when covering safety nets, under capitalism independent, market-based associations and companies provide varied and innovative oversight that far surpasses what the government regulatory monopoly forces on us today. The drivers for quality are the competitive pressure of the marketplace and the need to build up and maintain a good reputation. As we’ve repeatedly pointed out, you don’t stay in business for long with less than a 4-star rating. Just as the information revolution has spawned a huge and constantly improving unregulated market for online ratings and reviews when it comes to such things as products, restaurants and drivers, in a capitalist social system independent, reputable associations, companies, and individuals meet the demand for quality watchdog and accreditation services either for free or for a fee.

In a free market, you can find safe, high-quality, economical healthcare, unlike in today’s welfare statist system.

7.3 Pharmaceuticals, Diagnostics and Medical Devices

The pharmaceutical, diagnostics, and medical device industries have brought us countless advances over the past 100 years improving both our quality and length of life. Headache pills, antibiotics, cancer drugs; tests to identify risk factors and tests to nip diseases in the bud; blood pressure measuring devices, ventilators, MRI and heart-lung machines. You get the point. The people working in these industries are true heroes of the modern world. But just as with the health insurance and healthcare sectors, they have been progressively more shackled by onerous welfare statist, rights-violating regulations. These regulations aim to keep us safe but result in slowing progress—less of the unimagined stuff—meaning that people continue to suffer and die unnecessarily. So paradoxically today’s system is not as safe as we’d like it to be.

What is needed to liberate these industries from welfare statist regulations? What does it take to unleash the unimagined advances in testing that will identify threats before they develop, in pharmaceuticals that will ease more pain and cure more diseases, and in medical devices that will get us in and out of the hospital in a shorter time? We should focus on two main areas:

1. Repeal FDA (Food & Drug Administration) and USDA (U.S. Department of Agriculture) regulations and let voluntary safety standards develop in the respective industries.

Successful diagnostics, pharmaceuticals, and medical devices depend on rigorous testing. As we mentioned in the previous section, under capitalism this emerges without rights-violating regulation because safety standards are critical for a company’s reputation and long-term survival. Over time those standards become more efficient and shorten the time to market for new products. This means that companies can develop more new stuff for the same amount of money, which means more, better, and cheaper life-enhancing and life-saving products for healthcare providers to choose from, which benefits all of us.

2. Expand patent protection.

Over the past decades, patent protection for new pharmaceuticals, diagnostic tests, and medical devices has deteriorated primarily because of pressure from welfare-statist health-care systems around the world to allow cheaper generic drugs, tests, and devices onto the market.

Intellectual property rights, to which patents belong, is a complicated and continuously evolving field. What inventions qualify for patent protection, and how long it should be granted for different types of products, is constantly being discussed in academic and judicial circles. But it is relatively uncontested that less patent protection means that companies have less time to get a return on their investment in research, development, production, sales and marketing. Which in turn means that they are less willing to take on risks to develop new products.

For example, for every successful drug a pharmaceutical company launches, many others fail during development and trial. Without enough patent protection for the drugs that do make it to market, the company will not have time to make enough money to cover the research and development costs for both the successful drug and the drugs that didn’t make it and at the same time finance future drugs. As a result, fewer drugs are developed to the detriment of all of us.

One solution is to expand patent protection and let health insurance companies and healthcare providers negotiate pricing with pharmaceutical companies without government involvement. Yes, some high-demand drugs will be very expensive immediately after launch, but charitable efforts both by the pharmaceutical companies themselves and other organizations will cushion the blow for those without the means to buy them. The true cost of keeping drug prices artificially low is that many new drugs simply never make it to market. We should instead focus on the immense benefits that will result from the expanded pipeline of new drugs, many of them in the unimagined category, easing pain and speeding up both treatment and cures of innumerable diseases.

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