Top Three Health Care Policy Proposals

Release Date
March 22, 2011

Topic

Healthcare
Description

One year after the passage of major health care legislation, Harvard economist Jeff Miron says more reform is still needed. Dr. Miron gives his top 3 policy proposals for fixing the U.S. health care system: 1) Throw away the notion that health care is a right; 2) Repeal Obamacare; and 3) Phase out Medicare.

Top 3 Health Care Policy Proposals
Now, you may have heard the claim that ObamaCare is going to reduce the deficit. That is complete and utter fantasy.
My name is Jeff Miron, and I’m Director of Undergraduate Studies in the Department of Economics at Harvard University. I’d like to talk about how we can fix the U.S. health care system.
First and most important, we have to throw away the notion that health care is a right. If we take that approach, we are led inevitably to thinking that we give everybody whatever health care they want, state of the art, as expensive as possible, under all circumstances, without people having to pay for it. Under that kind of a system, everybody demands tons and tons of health care all the time, and the problem gets worse every year because new medicines become available, new procedures and new kinds of diagnostic tests, and so on. The technological progress means we could always be spending more and more year after year. So if we treat health care as a right, we utterly bankrupt the health care system and the U.S. economy. We have to recognize that we face tradeoffs, that health care is a good like other goods, and we have to get people to consider costs and benefits in deciding how much health care to purchase.
The second thing we have to do to start fixing the health care system is to repeal ObamaCare. The U.S. is in a situation where we can’t even come close to affording the health care policies we had before ObamaCare, namely Medicare and Medicaid, so adding a new proposal is completely insane until we figure out how to deal with the ones we’ve already got. Now, you may have heard the claim that ObamaCare is going to reduce the deficit. That is complete and utter fantasy.
One part of ObamaCare goes in the direction of reducing the deficit: cuts in Medicare. And a different part of ObamaCare, much higher taxes, also goes in the direction of reducing the deficit. But the key part, the part that gives more health insurance to more people, that’s the part that everybody wants to focus on, and that the president and Democrats want to take credit for, that, of course, increases the deficit. So the expansion of health insurance does not reduce the deficit. It’s only because the bill overall included lots of tax increases and different cuts that one can even pretend that one can make the claim that we reduce the deficit via ObamaCare.
Now, in fact, when you look at the estimates more carefully, even that claim is not convincing. It’s likely that the overall bill is going to lead to much less in tax revenues than expected, much higher expenditure than expected, and so on. But in any case, thinking that expanding coverage reduces the deficit is just completely insane.
The third thing we have to do to fix the U.S. health care system is go much further than repealing ObamaCare and gradually phase out Medicare as well. Medicare means lots and lots of people—a huge fraction of the population given the number of elderly—faces relatively low prices out of pocket for all sorts of medical care. That means that the elderly, as we already discussed, consume way too much. They don’t pay attention to the cost and benefits when deciding whether to have new procedures, lots of diagnostic tests, fancy surgery, and so on. That means we’re always going to be spending more and more and distorting the allocation of resources and the efficiency of the health care system.
We can also go even further by fixing other preexisting policies that distort people’s decisions in the health care market. There’s an enormous amount of regulation in the health insurance industry, mainly at the state level. None of that makes any sense. There’s an enormous amount of barriers to entry preventing people from practicing medicine who are imminently qualified to practice medicine, or be nurses, or make medical devices, and so on. None of that makes any sense. That raises costs, makes medical care more expensive, and makes it less efficient for everyone to be able to get good quality medical care at reasonable prices.
If we got rid of the vast majority of government regulation that currently intervenes in the health care market, we would have much less expensive health care, good access for almost everyone except the very, very poor. And that’s something that should be treated by perhaps Medicaid, but that is the only intervention for which there’s a reasonable justification. Everything else is doing far more harm than good.