PERVERSE INCENTIVES AND DISTORTING CHOICES
September 1, 2005
Doctors abide by the "Do No Harm," principle: Before you treat a patient, you must make sure you are not causing the patient any harm. This principle should be applied to public policy, says John C. Goodman, president of the National Center for Policy Analysis (NCPA).
Examining the health care system, the NCPA found that government policy causes many of the problems people want to be solved, by forcing them behave in perverse ways. These distortionary government policies could be reformed to:
- Be neutral between the choice of being insured privately or publicly or depending on the health care safety net.
- Provide a level playing field in the employment market so that a there is a choice between employer-purchased and individually-purchased health insurance.
- Remain neutral between self-insurance obtained through a health savings account and insurance obtained through premiums paid to an insurance company.
- Remain neutral in the market for risk.
Policy neutrality could mean a better, more attractive health care system, says Goodman:
- It would have universal coverage and money would follow the individual according to his choices; if you wanted to be the private market, the money would go there, and the same for the safety-net market.
- People wouldn't be trapped in public programs and they could transfer risk to other parties at real market prices.
- The role of insurer wouldn't be forced on employers and a level playing field would be created so that health insurance could be determined by the marketplace, not by tax law.
Even though this would not be a perfect system, it would be better than what we have now, says Goodman.
Source: John C. Goodman, "Perverse Incentives and Distorting Choices," Reforming the Health Care System debate, Miller College of Business, Ball State University, Heartland Institute, March 18, 2005.
Browse more articles on Health Issues