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Some Thoughts on Healthcare

Here are two interesting articles about health care. As you know, health care, and more specifically health insurance, has been in the news of late. After all, the topic was one of President Obama’s key selling points when he ran for president. Now, the issue of rapidly-rising health care costs is drawing national attention.

INO.com News – Senator: Use of faulty insurance data ‘pervasive’

(AP:WASHINGTON) Congressional investigators said Wednesday two-thirds of the U.S. health insurance industry used a faulty database that overcharged patients for seeing doctors outside their insurance network, costing Americans billions of dollars in inflated medical bills.

The next story is interesting for a number of reasons. First, I love Milton Friedman. Not only was he a great economic thinker, but he loved freedom and wrote at length about it in several books (Capitalism and Freedom and Free to Choose, which I’m currently reading). Second, what he writes is usually very interesting and well-thought out. Thirdly, this one is truer today than it was when it was written.

I found the essay below at A Disgruntled Republican.

Hoover Institution – Hoover Digest – How to Cure Health Care

The revival of the company store for medicine has less to do with logic than pure chance. It is a wonderful example of how one bad government policy leads to another. During World War II, the government financed much wartime spending by printing money while, at the same time, imposing wage and price controls. The resulting repressed inflation produced shortages of many goods and services, including labor. Firms competing to acquire labor at government-controlled wages started to offer medical care as a fringe benefit. That benefit proved particularly attractive to workers and spread rapidly.

Initially, employers did not report the value of the fringe benefit to the Internal Revenue Service as part of their workers’ wages. It took some time before the IRS realized what was going on. When it did, it issued regulations requiring employers to include the value of medical care as part of reported employees’ wages. By this time, workers had become accustomed to the tax exemption of that particular fringe benefit and made a big fuss. Congress responded by legislating that medical care provided by employers should be tax-exempt.

Interesting! Make sure you read the entire piece. You may not agree, especially at first, with the policy outcome, but it’s hard to argue against the merits of the logic Friedman used to arrive at his conclusions.

I’ve often wondered why it was so that health insurance — if not fully-mandated by the government — seemed to be a birthright, when all it is is insurance. Nobody makes you get car insurance (if you meet certain requirements, you don’t have to pay) or earthquake insurance (though the “Big One” is sure to come), yet health insurance is almost (not yet, at least) unavoidable. It should be like in the old days:

You insured what you couldn’t afford to pay out of pocket (like cancer treatment, but not a doctor visit). The “third-party” payer (the insurance company) has us all by the (pick a sensitive part of your body) and has very powerful lobbyists.

As Friedman says in the article, nobody can spend YOUR money as wisely as YOU. In effect, you are paying the insurance company to do your bidding for you, the doctors hate the insurance company, you hate both, and your insurance company really only works for itself. Follow the money…

Guess where it’s going?

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