Sunday, October 30, 2016

Improving Healthcare Markets

I'm looking for something I can't get
Broken hearts lie all around me
And I don't see an easy way
To get out of this
--Cutting Crew

Hans-Hermann Hoppe originally proposed these four steps to improve healthcare markets on the cusp of Obamacare approval. At that time, he noted that 'the US healthcare system is a mess.' Since then, it has predictably gotten messier, making his recommendations all the more contemporary.

1) Eliminate all licensing requirements for med schools, hospitals, and healthcare personnel. Licensing decreases healthcare supply and raises barriers to entry and entrepreneurial innovation. If buyers value licensing, then approaches will be developed voluntarily rather than forcibly. No mandatory licensing would also eliminate moral hazard among healthcare consumers and prod buyers to increase their search costs to make more discriminating healthcare choices.

2) Eliminate all government restrictions on production and sale of medicines and medical products. No more FDA. Costs and prices would fall, and more alternatives would enter the market. Sellers would be forced by consumers, rather than governments, to provide product information that buyers value.

3) Deregulate health insurance. Because many aspects of health are within an individual's control, they are uninsurable. Moreover, current laws force insurers to cover people who are poor insurance risks, which distorts the practice of risk pooling that makes insurance an economical endeavor. Deregulation means unrestricted freedom of contract--including capability of insurers to cross state lines for business--a practice that is currently forbidden by law.

4) Eliminate all government subsidies to the sick and unhealthy. ECON 101 tells us that subsidies create more of whatever behavior is being subsidized. Eliminating subsidies, including Medicare and Medicaid, would increase motivation to live healthy lives. It would also create markets for charitable giving and social entrepreneurship (e.g., friendly societies) that withered when voluntary cooperation was crowded out by government force.

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