Thursday, March 04, 2010


President Obama's proposed health insurance reform doesn't impress economist Arnold Kling:
For health care and health insurance, what we need isn't central planning but more market innovation. Indeed, a truly radical idea for reform would be a free market in health care. That would mean undoing federal and state rules and regulations that are the cause of many problems we face today. Among them:

Ban on interstate sale of insurance: The inability of consumers to purchase health insurance from a state other than their state of residence creates a Balkanized health insurance system. Allowing interstate commerce to take place regarding health insurance would help unleash the forces of competition.

Distorting tax subsidies: Rather than subsidizing employer-provided health insurance, our tax code ought to be neutral with respect to where people obtain their health insurance. Decoupling insurance from employment would make the costs of health insurance more transparent and would spur competition and innovation.

Subsidies and mandates: Our current system of subsidies for employer-provided comprehensive coverage and state mandates for individual insurance have suppressed the development of innovative policies that provide true health insurance. In a free market, we would see a variety of insurance products emerge, including long-term protection against the cost of a major illness.

There are good reasons to question how our health care system works today in terms of the incentives given to doctors and the way health care is fragmented. But no central planner knows how to deliver high-quality health care at the lowest cost.

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