The Healthcare Issue – How To Move A Failed System Towards Liberty

The healthcare issue has been coming up a lot recently. The nomination of Kevin Zeese by the LPMD sparked a controversy over Zeese’s views on socialist healthcare. Tim West, over on Liberty For Sale, has seen firsthand the sad state of our healthcare system and offered some initial opinions on it.

While I still hold my own ideals regarding healthcare, it’s becoming more and more obvious to me that the LP needs a coherent plan for healthcare that we can offer up in the short term, that’s more libertarian than the current system yet clearly addresses the worries of the uninsured.

Tim West had the following to offer up on his own site:

We got a bill from the people that did my MRI scans on my brainium , of which there were 2 – one on 3/07, shortly after I woke up when I was still in ICU pre op, the other on 3/22 post op. It says I owe them $1667.40. I went and looked up online my claim information from my insurance company, which showed that both claims by the MRI company had been approved, and that my responsibility for each MRI was $167.40. :D Notice a extra “6” in the figure from the MRI place? They simply added a extra 6 and sent out the bill to me, even though my insurance had already approved and paid the bills. This is fraud.

This stuff is commonplace, and multiply this by about 30,000 a day, and you can see how screwed up one tiny aspect of our current system is. The reality is that every single bit player in the health care industry has set up a adversarial relationship with every other part. The doctors are always scared the patients are going to sue them, and frequently they do, because the legal system only works for the lawyers. The insurance companies are the middle men. Because they frequently dont pay all the bill, the providers jack up their cost sometime double of what they really are becuase they know that the insurance will then pay half that new amount. It’s a shell game. Medicare does this as well.

Some facts from my favorite source of facts, The Grandfathers Economic Report ( please note I have been given permission by Mr. Hodges to quote and use his material as long as a link is given and he is credited)

Note the U.S. spent 14.2% of its economy on healthcare at the date of this chart. The above update reports 2003 spending significantly higher, at 15.3% of GDP. Spending much more than nations covering all citizens via national health insurance.

April 15, 2005 — The New York Times (Paul Krugman): “In 2002, the latest year for which comparable data are available, the United States spent $5,267 on health care for each man, woman and child in the population. Of this, $2,364, or 45 percent, was government spending, mainly on Medicare and Medicaid. Canada spent $2,931 per person, of which $2,048 came from the government. France spent $2,736 per person, of which $2,080 was government spending. Amazing, isn’t it? U.S. health care is so expensive that our government spends more on health care than the governments of other advanced countries, even though the private sector pays a far higher share of the bills than anywhere else.”

Some of this is misleading, because the taxes required to pay for the universal health care are higher than ours – but they cover ALL their people, and the difference is usually not that much. At my workplace, it costs an additional $400.00 a month to pay for a family policy. The costs go up about 8 to 9 % a year. So when you factor all that in, I’m not sure the “private” insurance companies are really providing cheaper health care, at least not to the extent everyone thinks they are. Would a government run system be better? Probably not. BUT THE SYSTEM WE HAVE NOW HAS ALL THE COST & PROBLEMS OF A SINGLE PAYER SYSTEM WITH NONE OF THE BENEFITS, SUCH AS COVERING EVERY PERSON. It’s just as complex, just as costly if not more so, and the only ones getting rich are the lawyers. That’s the reality of it – and libertarians lose credibility with voters when ideology trumps reality. The reality is our “private” health care system has around many of the problems of a government paid system with none of the benefits. What we have now is socialized medicine with insurance companies taking the place of government. It costs the company I work for a lot of money, and costs the employees a lot of money. I don’t really see what the difference is – either the insurance companies rape you or the government rapes you. Shouldn’t we care more about what will actually decrease the burden on the individual person rather than who’s on first?

I looked at those figures, and I did a little digging, and here’s a basic rough draft of an idea of mine that could please the socialists but still move America in a more libertarian direction with less government expenditures, lower taxes, yet enough coverage for everyone (Read on after the jump):

I think that the idea of national emergency procedure insurance isn’t a horrible one as far as socialism goes. Basically, everyone would be insured by the government for necessary procedures going over $1000 (or $2000, or $500, the line’s placement doesn’t so much matter so long as there IS a line). This plan would be free to everyone under 18 and over 70 or so, and to the disabled unable to work, and free to everyone else so long as they’re paying taxes (typically by working). Emergency insurance is nowhere near as costly as comprehensive insurance, and provides a solution to the worst problems inherent in the current system.

Everything else would be covered by the market, small injuries and checkups and the like. There’s no need for the government to pay for that, but it’s here, in the small stuff, that MSAs could play a huge role. The critics of MSAs argue that they would only help the rich, that the poor couldn’t put enough money into them to do any good. Well, if you only have to put a few thousand in in case you break a leg or something, it’s not that big of a problem, even if you’re poor.

Companies could also rework their medical benefits by putting, say, $1000 in their workers’ MSA every year or something. In fact, that would be preferable to the current system, because then it’s a fixed cost to the corporations instead of the current system. The current system, where employers offer health insurance to their workers, means that employers are an unnecessary third party and consequently end up paying more money than necessary for worker healthcare that’s not always necessary. Our tax system shouldn’t encourage the separation of consumer of goods and purchaser of goods. But if the companies put a fixed amount of cash in worker MSAs every year, they help provide for employee health while limiting costs much better and encouraging workers to be wiser consumers because that money is fully the worker’s now — he’s entitled to it whether he’s sick or whether he’s healthy. And since employer-funded MSAs don’t separate consumer and purchaser, I do think that companies should be able to deduct their MSA donations from their taxes.

Now, regarding Medicare and Medicaid: Medicare would be largely redundant, since the old and disabled would be automatically covered by the new system. The only gap left would be for small-scale healthcare (including medicine). There are about 30 million disabled people in America right now. We could organize their disabilities into categories of severity, where disabled people who can still work (the largest category) get $1000 of MSA money every year, the disabled who can work a little bit part-time get about $3000 of MSA money, and the fully disabled get $6,000 a year of MSA money. It sounds like a lot, but most of the 30 million disabled are also senior citizens. Since I’m not certain what the breakdown of disability categories is, we’ll assume as conservatively as possible and say that everyone’s fully disabled, in which case the cost is $180 billion to cover the disabled. (Really, it’d probably be like half of that.)

Senior citizens, on the other hand, are a different case. There’s 45 million senior citizens in the USA right now, and if we gave them $3000 a year of automatic free MSA money, that’d cost us $135 billion a year. Which is a huge sum, but less than the $260 billion we currently pay for Medicare and the $156 billion we pay for Medicaid. So instead of the $416 billion we pay annually to take care of senior citizens and the disabled, we’d be paying $336 billion (in reality, far less because we assumed high on the disabled). And we can trim that even more — not all seniors NEED this free money, in fact most of them don’t. Seniors would have to apply for MSA help, and would qualify on the basis of need. Basically, they’d have to have less than a certain amount in savings and MSAs, and have a regular need for an expensive drug. Looking at the amount of seniors under the poverty line, we see there’s only 3.3 million of them — so double that figure (again, being conservative) and if we only give THEM the senior MSA aid, it only costs $19.8 billion.

If we do this, Medicare and Medicaid can be scrapped, and that $416 billion a year that they consume would probably be under $150 billion a year instead. Not only that, but we could keep the amount of coverage at about the same level, and keep a free market in the principal segments of the healthcare industry. So long as this publicly-funded healthcare is privately delivered, the inefficiencies of socialism should only account for a fraction of a percent.

The only question left is the cost of the emergency healthcare insurance. It shouldn’t be terribly large — and it could be as large as $250-300 billion without costing us more than just the government-funded half of our current system, and that would work out to about the same cost as other industrialized countries with some sort of healthcare system in place.

Not a perfect system by any means, but I’d say that it would be better than the current one from a libertarian perspective and also from the perspective of the average voter. And, one day, after we’ve repealed taxes and regulations in the other parts of society that end up holding back the poor, elderly, disabled and the charities that help them, we can propose our ideal libertarian solution without having it sound unrealistic.

Thoughts? Clearly we can’t realistically keep advocating a fully privatized system as a practical solution for the short-term, so this moves us to the place where we can, say, twenty years from now.

25 Comments
  1. If it creates a government monopoly, especially a federal monopoly, in the provision of catastrophic care coverage, that is ceding a lot of power over a very important aspect of our lives to federal bureaucrats. If the idea is implemented in a way that preserves the limited competition we have, or better yet expands on it, then it would be a far cry better than Hillarycare and possibly an improvement over the current semisocialized system.

  2. Exactly, Tom. The idea that the current health care system is free market and thus a failure is wrong. I don’t even have to read the second half of this post. Anybody that is dumb enough to beleive that we should endorse socialism and chalk it up to “market failure” is frankly gullible or just a moron. Why can’t people get a brain and see that it is Liberty that we are supposed to be for? Why can’t people understand that the idea of advancing liberty by pushing for socialism isn’t going to be a constructive outlet. Fuck it, let’s give em socialism. Let’s make that our stand. Fuck the free market it’s a lame failure. Fuck common sense. Fuck principle. Now I truly undnernstand it. Libertarians are too fucking smart to fucking beleive what they preach consistently. Liberals are too fucking smart for everything and have just one more central plan – that they won’t be administering or writing the laws for – that will save the world. Why don’t libertarians come up with some since we’re

  3. So a private for profit insurance company monopoly is better? How?

    What difference does it make? You still are totally dependant on the insurance companies or the government. The problem is that YOU ARE DEPENDANT on someone else, not on
    what you are dependant to. So a individual being dependant on a for profit corporation is better than government? Shouldnt we focus on the fact that the person isnt free in any case?

    The LP has no workable realistic plan for health care in his country for dealing with either the short term or long term. The good news is that the Democrats and Republicans dont either. I submit that when someone has medical insurance, the ABSOLUTE BEST PLAN that your employer offers, and you still wind up in the poorhouse becuase you’ share of the cost exceeds your entire annual salary by 4X ( which is now zero becuase I cant work at all, cant drive, and cant use most of the left side of my body) then your “insurance” is nothing but a shell game.

    Thats not INSURANCE.

  4. You’re leaving out the chronically ill, whose medical costs can easily be five times the proposed MSA amount. Also you’re leaving out drug costs–again, especially for (but not only for) the chronically ill, those can run into several thousand dollars a year. You are also leaving out long term care–nursing homes and such–which are probably the biggest expense in health care. And MSA can encourage overspending (since if the dollars are not spent in the current year,they’re lost–not rolled over.)

    The most important feature of any successful health care plan is that providing health insurance be divorced from employment. It sucks up enormous profits and often keeps employees from leaving solely because they’re afraid of not getting adequate health insurance at whatever new job they end up in.

  5. The 1973 HMO Act gave life to an organization that was failing anyway. It required employers to cover employees with indemnity or comprehensive coverage. In 1995 the indemnity aspect of that policy was removed.

    That’s the crux of the problem and it was all created by government regulation.

    In 1996 I smacked up my leg while skiing. I was self-employed without insurance and the bill was about 20K when all was said and done. Surgery was on Thursday and I was back to work on Monday. Employees ought to be free to negotiate their coverage via contract, not Mitt Romney’s forced care.

    Only 3-5% of health care costs are from indigent situations, forcing citizens into health care and comparing it to auto insurance or appealing to a lesser cost will not solve the problem.

    Getting government out will.

  6. What do we have to do to make it easier to form our own insurance plans? I want the LP plan. I went to a supper club meeting and every guy there brought his own supplements. I want to be insured with healthy people!

    I think we need to de-regulate insurance companies and see if we can get some “boutique” insurance plans going. More choice. Plans for people who want catastrophic coverage. Plans for people who want co-insureds they know personally (so they can cut down on fraud), plans that fit. Sponsor a med-student plans. The market will design them and adopt them, and when the alternatives have formed, it’ll be easy to scrap the old ones. It should be legally possible to have a contract between patient and provider that can’t be negated by government.

    Most healthcare providers don’t have great admin skills. They hire someone. There has to be a place in the regulatory landscape for low-overhead providers so that half the cost is paperwork and lawyers.

  7. I don’t even have to read the second half of this post.

    Then you really have no place replying, do you? You made assumptions on what I was going to say, without actually reading it.

    I’m not saying our current system is free market; I’m not proposing any more socialism than we currently have (in fact I’m proposing a net loss of socialism). My plan would lower taxes and spending-what’s so unlibertarian about that, again?

  8. You’re leaving out the chronically ill, whose medical costs can easily be five times the proposed MSA amount. Also you’re leaving out drug costs–again, especially for (but not only for) the chronically ill, those can run into several thousand dollars a year. You are also leaving out long term care–nursing homes and such–which are probably the biggest expense in health care. And MSA can encourage overspending (since if the dollars are not spent in the current year,they’re lost–not rolled over.)

    Well, in my imagining the MSA money would roll over, so if you didn’t use any healthcare for a given year, you would still have the money in the MSA for the future, so there wouldn’t be overspending. The only overspending worry would be for those near death, in which case I think MSA money should be willable to other people’s MSAs. Also, MSA money would be able to be used on all aspects of healthcare-including medication.

  9. The chronically ill would be covered by the emergency coverage, I’d imagine-and even so, there’s still nothing stopping people from buying extra health insurance out of their MSAs.

  10. Stuart,

    Lots of meat on those bones. See what happens when you step, even a little bit, outside the LP comfort zone? :D

    my entire point was that our healthcare system is fucked up, but that the LP would knee jerk support it even though the insurance companies have largely tsken a government role, but they dont care about that – because it’s not actually government, right? Who needs a plan anyways? JUST ABOLISH IT ALL. :D

    I’ve now been attacked as unprincipled 12 times in the last 24 hours in the blog. :D by tinfoilers.

  11. So far there’s really only been one attack-the rest of it’s been constructive dialogue.

  12. As a country, we’re not even discussing the real problem.

    Healthcare costs are not too high, they simply reflect supply and demand.

    The problem is the people (i.e. consumers). We have become lazy, socially irresponsible and uninformed!

    The symptoms that are creating our massive needs for “healthcare” are primarily a direct result of our eating and lifestyle habits.

    Here’s a simple analogy. Visualize any recipe. If you add too much of one ingredient or not enough of an essential one, what happens? it doesn’t work!

    The body is basically a bag of chemical reactions. If the proper recipe isn’t maintained – weird shit happens (i.e. symptoms occur aka diseases).

    The world revolves around sales, not helping our fellow man. The truth has always existed. Whether one chooses to find it is his own destiny.

  13. Our eating and lifestyle habits are shared by the rest of the Western world, yet their healthcare costs are significantly lower than ours.

  14. Don’t you libs know that MORE, not less, goverment intervention is coming to health care. What happened in Taxachusettes is coming to your state soon. The American sheeple WANT gubmint to give them “free” health care. And they’re going to get it good and hard.

  15. Well, if you’re resigned to that, then why are you even here? We’re trying to stop it; if you’ve given up you can’t help us.

  16. RE: #13.

    My point is: Healthcare is not a necessary consumer item anymore than gold plated plumbing? People have become immune to common sense and the obvious. Anyone in a “health” related business is having a field day (good for them) on consumers stupidity, laziness and desperation.

    Guess what? That’s how every business makes money. The only difference is that a poor, uneducated decision related to you health “costs” a little more.

    Wake up America – It’s your life and your body – at the end of the day it’s still your responsibility, not the governement or anyone else’s.

    If your priorities dictate that spending your money on a gas guzzling SUV or a 50 inch TV is more important than getting educated on health – then that’s your decision.

    Quit bitchin’ and take your medicine!

  17. Phillip,

    So my brain cancer, which is going to most likely kill me dead, was caused by my own stupidity, lazyness, and desperation? REALLY?!?!

    I’m not going to spare any words with you : FUCK OFF, you simple minded mental pygmy. Sometimes illness just happens, and there’s not a damn thing the affected can do about it, OR COULD HAVE DONE ANYTHING TO PREVENT IT.

    You little goddamned weasel.

  18. Let me help. MSAs are now HSAs. The President has given 4 speeches on HSAs in the last 10 days. Mass. regulation has run all of the insurance companies out of their state leaving Blue Cross a giant Monopoly. The state insurance commissioner’s website lists the cost of a 25 year old in Boston at $608/month from Blue Cross. HSA insurance in the free and open market costs $60/month in Ames, IA for a 25 year old male. In other words, Blue Cross is charging 10 times more and Gov Mitt Romney (R-MA) and Ted Kennedy have teamed up and made it required that all citizens buy coverage.

    What is sad is all of the news coverage is calling Mitt Romney a great conservative and now he has ideas that the nation could use and we should make him president in ’08. It’s also sad our media is more controlled than NAZI Germany in 1942. I contacted the LP during the 2004 election and told them to change their website to reflect the fact that MSAs are now HSAs. They didn’t even bother to get current.

  19. Here is a proposed plank for the Vermont LP platform.

    8. HEALTH CARE: We believe health care decisions are between patient and doctor, not patient, doctor and legislature. We will enact a comprehensive health care reform including reductions of costly state-imposed insurance mandates, reduction of underpayment to providers for Medicaid patients, authorization of tax free health savings accounts, tax fairness for the self employed and those not covered by employer plans, elimination of mandated cost-shifting from young to old, allowance of presently forbidden healthy lifestyle insurance discounts, and conversion of Medicaid to a HSA based insurance plan. We will oppose government-run single payer health care, “regulated multi-payer” schemes that will lead to single-payer, price controls, global budgeting, mandates on employers to pay for coverage, and forced membership in purchasing alliances. We will fix the medical marijuana law to bring it inline with other states.

  20. Ron is correct that MSAs have been replaced by HSAs. The main difference is that money in the HSA at the end of the year can be rolled over to the next year.

    The Vermont platform calls for converting Medicaid patients to HSA accounts. This would save Vermont approximately $150 million and fix the estimated $220 million deficit in 2010 with VT Medicaid. The other benefits of switching to HSAs is that it makes the Medicaid recipient financially responsible for their medical care, and creates a system that lets Medicaid patients be weaned off the system so they can be self supportive.

  21. Healthcare involves multiple, major market failures. That doesn’t in itself warrant a socialised solution, but any semi-privatised (or fully-privatised) one needs to address them effectively else you end up with an expensive mess like the US has today.

    Emergency-and-chronic-only socialised coverage, which is basically what Stuart’s system would be, would leave the privatised side susceptible to the free-rider problem. People would tend to under-insure, knowing that if they got unlucky they could always let their condition deteriorate until it became an emergency or chronic. Like: if someone’s not insured against early-stage cancer and can’t afford to get it cleared up, how far would their condition have to deteriorate before they qualify for socially-funded treatment?

    Including chronic conditions in the socialised coverage (omitted in the posting but mentioned in #9) would add hugely to the bill. It’s probably necessary but what would sort of things would it actually leave?

  22. Reflecting on this, I think the choice is between maximising ideological correctness and minimising the burden on the individual.

    The ideologically correct solution is simple: no government intervention for anyone at any age. If you want to live a long and healthcare-intensive life, insure yourself accordingly. If you want healthy kids, get them insured (or if pre-natal scans show up problems, abort them). This is the system in many of the world’s poorest countries. It doesn’t work well for them, but hey maybe it would in US where insurance markets are better developed etc.

    OTOH minimising the total healthcare burden may actually require more socialised coverage than in Taxachusetts, not less. For practically all diseases prevention is far cheaper than cure, and early-stage treatment far cheaper than later-stage. So it’s probably most cost-effective to make check-ups free at the point of use (say an annual basis, to avoid abuse). Probably easiest to list what’s not covered…

  23. … for example, I think most libertarians would agree that cosmetic surgery shouldn’t be covered. Nor should injuries incurred during certain high-risk voluntary pastimes such as rock-climbing. Smoking? – well I guess there’d be differing views about that.

    My basic point is, a well-designed system of healthcare could be both more socialised and more libertarian (kinda the same way that a socialised defence policy can be a more effective way of defending liberties than relying on private armies and invasion insurance?).

    Politically, for libertarians to propose a more socialised healthcare system would come as a jolt to the main parties. And I’d expect libertarians to be better capable of designing a relatively sensible socialised healthcare system than either socialists who’d have too much faith in government per se or conservatives who’d fix it to favour vested commercial interests.

    Good luck, folks (from a libertarian-leaning European).

  24. Sorry Hardy, when you say, “The main difference (MSA VS HSA) is that money in the HSA at the end of the year can be rolled over to the next year.” That is wrong. Tax free MSAs rolled over from year to year tax free too. President Bush promised MSAs for all Americans and he delivered. Plus, HSAs are bigger, better and bolder. HSAs have larger annual deposits so basically the HSA is a bigger tax dodge than an MSA. Those over 55 years old may deposit more too. Of course the penalty on HSA funds not used for “Qualifying” medical expenses dropped to only 10%, which is smaller than the 15.3% FICA tax on earned income.

    Save premium, ELIMINATE taxes, build wealth, become informed and empowered. The best tax cut is NO TAXES and it’s TIME for your HSA. Stand Firm / Vote Republican / Vote Zandstra for US Senate (MI) (Zandstra will oppose Vermont law, or any state, taking away citizen’s rights in health care, it’s unconstitutional)