Milton Friedman on healthcare-not what you may expect

[cyberianpan]

Milton Friedman(RIP) is known for being a champion of the free market - but people often forget that he was a liberal humanist - with progressive social views (drugs legalization, gay rights , eliminating military conscription etc)

In this typically thoughtful review article from 2001 he surveys the US Healthcare scene. His primary diagnosis is : lots of money spent for quite poor return. He muses that a totally free market option might be desirable - but notes it isn't achievable. Most importantly he seeks to make a large distinction between:

Health insurance: should be for catastrophic, major events (e.g. cancer)
Health care: regular health care, occasional GP trips etc

As he rightly points out the conflating of the two of those is most unhelpful: insurance should be for the unlikely, not day to day costs.

His end proposal is

• Universal "catastrophic" health insurance
• Healthcare savings accounts

The healthcare savings accounts could have money put in by the employer - and unspent money could be withdraw at year end (subject to normal income tax)

The Public Interest.com

A more radical reform would, first, end both Medicare and Medicaid, at least for new entrants, and replace them by providing every family in the United States with catastrophic insurance - i.e., a major medical policy with a high deductible. Second, it would end tax exemption of employer-provided medical care. And third, it would remove the restrictive regulations that are now imposed on medical insurance - hard to justify with universal catastrophic insurance.

This reform would solve the problem of the currently medically uninsured, eliminate most of the bureaucratic structure, free medical practitioners from an increasingly heavy burden of paperwork and regulation, and lead many employers and employees to convert employer-provided medical care into a higher cash wage. The taxpayer would save money because total government costs would plummet. The family would be relieved of one of its major concerns - the possibility of being impoverished by a major medical catastrophe - and most could readily finance the remaining medical costs. Families would once again have an incentive to monitor the providers of medical care and to establish the kind of personal relations with them that were once customary. The demonstrated efficiency of private enterprise would have a chance to improve the quality and lower the cost of medical care. The first question asked of a patient entering a hospital might once again become "What's wrong?" and not "What's your insurance?"

While so radical a reform is almost surely not politically feasible at the moment, it may become so as dissatisfaction with the current arrangements continue to grow. And again, it gives a standard - if less than an ideal one - against which to judge incremental changes.

I think the above is interesting and should inform healthcare debates both here & in the USA, the full article is well worth reading also

cYp

[Cassandra Syndrome]

He is not champion of the free market. He was a Neo Liberalist and a Chicago School economist.

"Neo Liberalism is statist, totalitarian and anti capitalist" Murray Rothbard 1971.

[goosebump]

Makes a lot of sense.

They actually have Healthcare Savings Accounts in the US, but they aren't obligatory.

The problem is that the Health Care debate is so mired in slogans, localism and popular wisdom that its difficult to see how it will ever elevate to a place where real reform is actually possible.

[Cassandra Syndrome]

I'm glad he's dead. Just my 2 cents.

Sums it up. Him and Keynes ruined the planet.

[cyberianpan]

Makes a lot of sense.

They actually have Healthcare Savings Accounts in the US, but they aren't obligatory.

The problem is that the Health Care debate is so mired in slogans, localism and popular wisdom that its difficult to see how it will ever elevate to a place where real reform is actually possible.

It does make sense as it would allow personal choice to create efficiencies in the healthcare market

Though it would remain up to insurers to create efficiencies in the "catastrophe" market.

cYp

[Libero]

cYp: can you show us where in that article Friedman explains what sort of medical problems count as catastrophes?

In a way, we already have a system in Dublin that somewhat mirrors what Friedman is getting at.
For those with savings or who can afford private health insurance, private hospitals are the go-to place for anything short of a major acute medical problem. (If you haven't tried the public-sector alternative, the Mater Emergency Department will give you a 14-hour tutorial, and still stick you with the ED charge.)
But if someone has a major problem like cardiac failure or serious trauma from a road traffic accident, then the public hospital is the only place open 24/7 and equipped for nearly anything. And we all have a form of catastrophe insurance (state provision) to cover that.

[cyberianpan]

cYp: can you show us where in that article Friedman explains what sort of medical problems count as catastrophes?

In a way, we already have a system in Dublin that somewhat mirrors what Friedman is getting at.
For those with savings or who can afford private health insurance, private hospitals are the go-to place for anything short of a major acute medical problem. (If you haven't tried the public-sector alternative, the Mater Emergency Department will give you a 14-hour tutorial, and still stick you with the ED charge.)
But if someone has a major problem like cardiac failure or serious trauma from a road traffic accident, then the public hospital is the only place open 24/7 and equipped for nearly anything. And we all have a form of catastrophe insurance (state provision) to cover that.

By catastrophe he means major/unlikely, and his is a very broad definition, consider the contrast here:

We generally rely on insurance to protect us against events that are highly unlikely to occur but involve large losses if they do occur - major catastrophes, not minor regularly recurring expenses. We insure our houses against loss from fire, not against the cost of having to cut the lawn. We insure our cars against liability to others or major damage, not against having to pay for gasoline. Yet in medicine, it has become common to rely on insurance to pay for regular medical examinations and often for prescriptions.

To my mind that would include cancer, sudden onset of cardiac problems etc - all non "day to day" style expenses

cYp

[ivnryn]

cYp: can you show us where in that article Friedman explains what sort of medical problems count as catastrophes?

It would be a large excess (or deductible as he calls it). The catastrophic insurance would cover everything after, say, the first EUR 5000 per year, or something like that.

Ofc, if the government gets to set that threshold, there would be an incentive to reduce it year on year. This would convert the system to a universal health system and away from a catastrophic protection system.

People would also be able to get insurance with a lower deductible, but they would have to pay more. In effect, the additional insurance would pay your bills up to EUR 5000 per year, and then the rest would be covered by the other system.

Also, there should be a separation between an insurance system and a subsidy. Often health insurance systems are designed so that they act like subsidies. It would be better to handle the subsidy separately.

[bayern]

History has proven his economic ideology has been a complete failure. He is utterly discredited. Implementing such policies causes a rupturing of societys social fabric ie Northern England and Scotland became complete industrial wastelands from neo-liberal policies.

[Libero]

By catastrophe he means major/unlikely, and his is a very broad definition, consider the contrast here:



To my mind that would include cancer, sudden onset of cardiac problems etc - all non "day to day" style expenses

cYp

There's a fairly obvious problem with that point of view: some of us suffer very much from chronic conditions that probably wouldn't qualify as sudeen unexpected catastrophes.

If those conditions aren't covered by the universal 'catastrophe insurance', who pays the significant, ongoing costs?

It seems to me that Friedman's answer is "you do, from your healthcare savings account".

Try explaining that to someone with an expensive chronic condition and low-to-average earnings.