NCPA - National Center for Policy Analysis

Market Solutions to Health Reform

March 11, 2011

Government has become increasingly active in regulating and financing health care over the last 40 years -- increasing health care spending from 25 percent to more than 50 percent of overall spending. This increased intervention has led to higher, not lower, health care costs.  The tendency to underestimate the costs of government intervention introduces a serious problem for advocates of more government control of health care, says D. Eric Schansberg, a professor of economics at Indiana University Southeast.

So, what would it look like to have less government involvement in health care?  Schansberg recommends, among other things:

  • End, or at least reduce, the subsidy for health insurance obtained by workers through their employers.
  • Eliminate payroll taxes on health savings account (HSA) contributions, allow HSAs to be used to pay insurance premiums and allow contributions to HSAs after age 65.
  • Dramatically reduce insurance regulation.
  • And repeal or replace labor regulations that unduly restrict the provision of health care services by trained medical personnel who are not doctors.

It is increasingly obvious that government solutions to health care are not effective.  People often find market outcomes appealing.  Proponents of free markets in health care should work to make the most persuasive case for real reform and to achieve incremental reforms where possible, says Schansberg.

Source: D. Eric Schansberg, "Envisioning a Free Market in Health Care," Cato Journal, Winter 2011.

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