User-driven health care

I've been listening to the proposals being dropped by President-Elect Obama around health care: improve health care IT, focus on preventative medicine, eliminate wasteful programs.

OK, fine, but these sure sound like band-aids on a huge problem. I didn't hear him actually say "we will guarantee health care to every man, woman and child in the USA without breaking the bank." Because that's what we need, and badly.

When I was on vacation this summer, the place where we were staying had a copy of Tim Harford's the Undercover Economist. I was intrigued by his discussions of health care. First of all, he says health insurance is intrinsically broken because it's like the used car market: the insurers can't get enough information about the insured's true health (although they try), and so they have to charge you (or your employer) assuming you're going to get sick. As a result, the healthy people bow out of the insurance market, and you're left with those who need it, and thus in a vicious circle the costs go up even more.

He also claims (and this makes sense) that single-payer insurance managed by the government is guaranteed to be costly and inefficient, because it is not market-driven. That doesn't mean we should just privatize insurance and let the poor sick shmucks die. But a true free market brings out the most efficient solution. So, through our taxes, the government should subsidize a market-based health program. A program like this that is actually in place and actually works incredible well is the one in Singapore. Singapore (it's a "fine" place :)), well, it's an odd place, but they have some of the best health care in the world with one of the lowest administration costs anywhere. See Bryan Caplan's discussion here.

Will we ever see something like this in the USA, where the individual's make their own choices for how they allocate their health care dollars? I doubt it, especially after hearing Obama's (pardon me) weak proposals. Why? Entrenched interests - in particular, insurance companies. A program like this eliminates the need for insurance. Poof. Gone.

So instead I suspect we'll see an ongoing snowballing mess of the existing situation with government money pouring into particular initiatives that may, or may not, help the problem, because they are in no way driven by a true market. Ugh.