Why Medicare and health care should be deregulated

by David Allen, MD

Should health care be controlled or provided by the government?

I believe that years of answering ‘yes’ to this question has been at the root of most of the problems in the American health care system. Let’s explore a few of these ‘yes’ answers:

Health care for the elderly must be provided by the government. By creating Medicare, the US government has massively and deleteriously affected medicine. The immediate effect on the health care system was marked medical inflation. In addition, spending on health care as a percentage of GDP rose dramatically after Medicare was introduced, from 6% to 16%.

As the money poured in and doctors and hospitals found better and better ways to spend the money, times (for doctors, hospitals, and the elderly) were good. Then, as Medicare administrators and politicians realized how much money was being spent, the inevitable regulations followed. It is only natural that those who control the purse strings will eventually want to control how the money is being spent. These regulations (which affect doctors, hospitals, ERs, private and public clinics) are now so numerous that no single individual, unless he is an idiot savant, knows them all.

By controlling the money, Medicare effectively controls the majority of US hospitals. To boot, Medicare has effectively destroyed the private insurance market for the elderly.

Numerous regulations are required to control medicine. This idea is at the root of all sorts of horrible administrators who don’t do things themselves but somehow decide how things can and should be done by others or who are experts but still don’t want to allow individuals (patients and doctors) to make their own decisions. Thus JCAHO and local governments regulate hospitals, states regulate health insurance companies (markedly driving up the costs of insurance by reducing competition and mandating certain types of coverage) and the FDA tells doctors and patients which medicines they should be allowed to use. But this is all, in fact, useless.

It is not regulations that provide good medicine (and medicines) but the profit motive of physicians, drug companies, and hospitals. All of these entities recognized that they tend to do well when their patients/customers do well. (Capitalism naturally creates this win-win scenario by outlawing fraud or theft.) In fact, these regulations and controls really are ‘worse than useless’, since they tend to stifle innovation and hamper the efficient delivery of health care to individuals.

Health care is so expensive for the poor that it must be provided by the government. First of all, as noted above, the reason health care is so expensive is because of government intrusion. The government makes health insurance more expensive, mandates certain types of health insurance coverage, eliminates a huge potential market of private payers (the elderly) and over regulates the market at multiple levels.

This essentially guarantees that a large number of poorer individuals will have a difficult time paying for it, and/or will choose not to pay for it. This problem of choosing not to buy insurance is worsened by each person’s knowledge that he/she will be treated, no matter what, in an actual emergency. In addition, there is Medicaid, which can be obtained AFTER you are hospitalized and can be used to help pay for part of that hospitalization.

Let’s face it, if the government were not so involved people would have a much easier time paying for their insurance and wouldn’t need the further ‘help’ of the government to buy more. Finally, under a better system, those few who were too poor to pay for health insurance would have to rely upon the charity of doctors, hospitals, or actual charities (churches or larger organized charities) to provide for their care.

The bottom line is, years of regarding medicine as too important to leave to the free market has, in fact, undermined the free market’s ability to provide health care. If we want to fix the system, we should be unraveling these root causes. Deregulate medicine at every level, slowly phase out Medicare and Medicaid and end the control of states over health insurance companies.

David Allen is a neurologist.

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