Friday, January 9, 2009

what do education and health care have in common?

Education and health care:

a.) are vitally important services to individuals and within the economy (micro and macro)
b.) are provided in a manner and at levels that many people find deeply unsatisfying
c.) receive complaints about cost, quality, and choice
d.) are run by the government or the product of tremendous govt involvement
e.) are the subject of reform efforts which bolster/extend the status quo and efforts which seek to radically/progressively change that status quo
f.) have had govt involvement for so long that people cannot imagine provision without the government and are prone to believe the stories of interest groups wanting to protect their stake in the status quo

I've written about health care and health insurance at some length (although probably not as much as education). Along these lines, here are some excerpts from an interview by Marvin Olasky with Regina Herzlinger in World...

As an intro, Olasky opens with a summary of the comparison I made above:

We decide which goods and services to purchase from an amazing array offered to us in many areas of our lives. But, for most Americans, two of the most critical areas are exceptions to our national emphasis on consumer choice. One is education, with its public-school system maintained by union power. The other is health care, run by what Regina Herzlinger calls an "iron triangle" of third-party institutions—Congress, health insurers, and hospitals—that stand in the way of consumer-driven health care.

Olasky gets Helzinger to speak to the usual array of issues and then offers this useful description of the biggest problem: govt's subsidy of health insurance. (She advocates that the subsidy be extended to individuals-- politically possible [given the ignorance which abounds on this topic], but a mixed bag in terms of effectiveness.)

Q: How can Congress make consumer-driven health care happen—and do you think Congress will?

A simple tax law change will do the job. Right now I permit my employer to take money that would otherwise be my salary and to use it to buy my health insurance. Yet I would not want my bosses to buy my food, clothes, or housing. They simply cannot obtain what I consider value for the money and will likely simplify their lives by offering me a narrow range of choices....

I permit my employer to buy my health insurance only because she can use my pre-tax salary—but if I bought health insurance myself, I could use only after-tax salary. A tax shelter for the purchase of health insurance would dramatically transform this situation and enable consumer-driven health care.


At January 9, 2009 at 9:48 AM , Blogger Chris said...

I have often thought that employers should not be in the health care provision business, no matter how well it may benefit their employees. Let people buy their own health insurance I say, and watch the competition begin.

So how do we get that ball rolling?
Or is that the 'million-dollar question'?

At January 9, 2009 at 10:27 AM , Blogger Eric Schansberg said...

In a perfect world, most of the problem goes away by getting rid of the subsidy for purchasing health care-- and getting rid of various govt intrusions into health care.

On the former: Practically, it would be difficult to take away from a subsidy enjoyed by so many people. (See also: the home mortgage interest subsidy.) So, the second-best is to subsidize everyone and let the market continue to take us toward catastrophic coverage (as fuller coverage becomes more and more expensive).

At January 9, 2009 at 11:19 AM , Blogger Chris said...

So moving towards Health Savings Accounts (vs. full coverage) could be on par with privatizing some or part of Soc Security to get gov't out of those businesses?

At January 9, 2009 at 12:55 PM , Blogger Eric Schansberg said...

different (HSA's still involve govt involvement vs. privatization of SS), but a similar angle (further along the market-based vs. govt spectrum)


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