The Way of the World

Something I have been thinking about is the effect of assuming that every state in the United States was its own country on health care. The equilibrium conclusion, not surprisingly, is not a “happy libertopia”.

There is every reason to believe that under such a system, every “country” would have adopted some form of state provision of health services (from the means of payment to the means of production), just like everywhere else in the world. I highly doubt that some pioneering “radical” state would institute my ideas for market-based medicine. It seems we have to live with the unhappy conclusion that health care is “too important to be left to markets”, which is — in and of itself — very confusing. But it isn’t just health care provision, having smaller “countries” with high levels of fiscal discretion would likely lead to heavy-handed welfare in other parts of health policy — much as it has in the rest of the world.

But, this remains a happier equilibrium to the one we have now (or are heading toward). In the US, we are conditioned to thinking only about the Federal government…and even then, simply about the president. We have a ridiculous amount of elections in the US, and that breeds corruption among the officials that aren’t highly scrutinized (99.9% of them). Under a system of much smaller governmental jurisdiction, it’s well-reasoned to assume that there would be less elections, and thus, a higher quality of politics. If you’re on the “loony fringe”, like me, you might even hope to see a state arise which instituted electoral reductionism.

So why is this a happier equilibrium for medicine? Because it allows for experimentation. The banner of “universal health care” is very highly misleading. Oftentimes, when people hear that “every industrialized country in the world has universal health care besides the US”, people envision that there is a single plan that the entire world has figured out, that the US has been to stubborn (stupid?) to get on board with. Of course, this is far from the truth. Universal health care systems vary wildly from country-to-country, even within Europe. Singapore even does it by mandating a 30% savings rate. The important part of this experimentation is that it provides a robust pool of data from which to pull ideas. Countries don’t change direction very quickly, but they do evolve — and looking at what other countries get “right” is an important tool in that evolutionary search function. It need not be blind — indeed, blind searching is not even an optimal strategy.

My (compromise) preference is turning routine medicine into retail medicine, while providing means-tested subsidies for health savings accounts for catastrophic insurance, and fully subsidizing the (non-reasonable) costs of long-term care. Would that get instituted in the United States? No. The polity is too far disconnected. When Barack Obama said that he welcomed bringing ideas to the table, ostensibly he meant ideas that fit within his priors, and his pre-conceived framework. But, could such a compromise happen in a small state in the American Union? The probability is much higher.

So, pragmatic right-wing liberals need to remember that the important point of “strong Federalism” is not that it will create more support for markets, but that (given the proper structure of low costs) it will allow for freedom of exit…and that is something that our current political climate is threatening to put to an end.


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