> Anybody can cherry pick a counterexample. Anybody can speculatively extrapolate it out to a convenient conclusion.
And anybody can do what you are doing. You have an obvious bias against free markets. That's fine. However, I will argue that, if you live in the US, almost everything around you is the product of free market forces to a large extent. Perfect free markets don't exist. That's a given. Please don't point out that this or that market isn't perfectly free. I get it.
Here's the difference with our views.
My view is centered around the idea that government should be limited to a very small area of responsibility and influence in our lives. I won't get into the details. Suffice it to say it would be a small fraction of what it is today, in rough strokes perhaps reducing it by 50 to 75% --gradually, over a period of 25 to 50 years.
Your view, if I read between the lines, feels like it is almost diametrically opposite mine. You don't have anything in your HN profile so I can't even attempt to understand where you might be coming from. For all I know you work for the government and are actually being paid by the current ACA/Obamacare "machine" in some form. I don't know.
I, well, I've been an entrepreneur since forever and fully understand what it means to live a life where you make sound fiscal, social, educational and personal decisions based on the idea that you --not the government-- should be responsible the well-being of your family and community. That's my frame of reference, not sure what yours might be.
Going back to the size of government, I would, for example, push to de-militarize our country over, say, 25 to 50 years and encourage others to do the same. We could and should take the lead in making this a better world. The military alone accounted for 25% of our federal budget. We don't need them. I know many think we do. We don't. The world needs to make supporting massive military forces a thing of history.
I would also eject government from most areas affecting our lives. Take the Department of Education as an example. The US keeps testing significantly sub-par when it compared to other less developed countries. Yet we spend more than almost anyone per pupil and we have a massive DoE. I don't think they are effective. Gone.
Anyhow, you can continue along these lines and remove government from all of these areas. Gradually. Over twenty-five to fifty years.
Are regulations required? Are they important? Yes. Of course. In certain areas and with moderation. That's a different topic. No, I am not advocating a wild-west guns-a-blazing free market. Controls are almost required in certain areas. This would be a very important function of a limited government.
When it comes to healthcare the free market approach would create efficient markets quickly due to competition. If I could go to Nevada and get heart surgery for less, with excellent quality and even a free slot machine in my room during recovery, hey, that's fantastic. California would have to find ways to compete. And they would. Technologies would be developed in order to make the medical business more efficient at all levels. Within a span of ten to twenty-five years the medical industry would be transformed into an incredibly efficient machine providing above-par services for everyone. No tax dollars or government involvement would be required outside of putting in place sensible and limited regulation in order to help, not hinder, the development of a useful free market.
Corner cases will exist. In other words, the good, the bad and the ugly exist in all markets. Free or government originated and controlled. That's human nature. Neither school of thought can guarantee that bad things will not happen. Stories abound about people in highly socialized medical systems having to wait months or years for treatment. The free market equivalent might be not having enough money or insurance to pay for something or horrible cases of medial malpractice.
How do we deal with the cost of ownership situation? I'd say much like we do with auto insurance. You own it. It's yours. It does not live and die with your employer. You get to insure yourself for anything you want and for as much as you want. I barely saw the inside of a doctor's office during my 20's. My guess is I would have been receptive to the idea of a low cost catastrophic health insurance policy with a relatively high deductible. If my auto insurance guy had said something like "Martin, for another $50 per month we can offer you catastrophic health insurance with a $10,000 deductible" my guess is I would have gone for it without much thought.
Should medical insurance be mandated? Yes and no. It would be really easy to setup a situation where, for example, if you want to drive a car you have to also have health insurance coverage. This is just an example I am pulling out of my hat and it is not well thought out. The intent here is to say that, yes, I understand that an idea market would benefit from wide-spread market participation. In this hypothetical nearly everyone 16 and over would purchase health insurance to some extent or another. That would take care of a huge percentage of the US population.
You would personally be responsible for the cost of your health care. In other words, if you go to a hospital and don't have insurance you have to pay the bills yourself. This is no different from going to the dealer with a car that broke down and no extended service warranty. This would setup a situation whereby everyone in the US would buy medical insurance, just like they buy car, homeowners and renters insurance. You know how they offer you insurance for your new TV or refrigerator at the appliance store. Well, al lot of people buy it.
If you were free to shop for health insurance from any provider I can easily see companies competing for your business everywhere. I could, for example, see State Farm and Alstate offering people various health insurance policies along with their homeowners or auto policies.
What to do about the really poor who can't afford any of it. We help them, of course. The details are not important here. We help them. Period. If you can't possibly pay for your insurance we, as a society, have a mechanism through which you will have it. This is where the idea deviates from the auto insurance model.
What to do about the whole pre-existing condition situation. Well, your insurance policy has an "uninsured motorists" element? Perhaps every insurance policy would have a nominal "pre-existing conditions" fee that we collectively contribute towards dealing with these costs. This would be the socially responsible way to deal with situations where you have someone who might require half a million dollars of annual healthcare bills per year due to their unique situation.
Oh, yes, all healthcare insurance should be 100% tax deductible.
All of this would work and evolve very well with minimal government intervention. Laws and regulations would be passed in order to serve the free market and reduce government involvement to a minimum, not hinder it.
The beauty of taking such approaches is that --due to the lack of set-in-stone laws-- we can always let observe them for a while and THEN decide whether they are working or not. The problem with passing legislation like the ACA/Obamacare is that you have 40,000 pages of legislation and rules that is convoluted, unmanageable and incomprehensible to such an extent that no citizen can even begin to comprehend it. And, to make things worst, we don't have the freedom to move away from it and modify it in an evolutionary and dynamic way. It is set in stone and it takes a tremendous amount of work to change it's path. I mean, they can't even get a medium complexity website to work correctly on launch. That should tell the entire story.
The most fundamental issue here is that it is nearly impossible to have dozens or hundreds of people to create legislation that is, for lack of a better term, perfect. It takes years, decades to painfully evolve these things. This is where free markets have an overwhelming advantage because they can evolve as fast as humanly possible. The power of entrepreneurship and free markets has been massively demonstrated by the explosion of this little thing we call the Internet.
Anyhow, we'll probably disagree. And that's OK. To each his own.
So where are the 12 countries of comparable levels of economic development that are operating with 1/2 to 1/10 the administrative overhead of the social systems? If it's so easy to support your argument with evidence, why are you arguing with philosophical generalities instead?
I understand how the free market is supposed to work and why it usually does work. I'm still a huge fan, contrary to what you read between the lines (I agree with you on deregulating education, for instance). More on that later. But something is amiss in the US health care market. The socialists are beating us. By a lot. Not overall -- I do not believe their higher taxes provide a better net return for someone like me, not by a long shot, and so I do not plan to move -- but it is possible to section out health care for purposes of comparison, and our system has a 2-3x worse value proposition along that dimension. We agree about the general principle that markets tend to have better self-corrective properties than rulebooks. Where we disagree is that I think healthcare is an exception. A glaring exception that we have invested trillions of dollars into trying to fit with our free-market-is-better worldview and still find that it's an exception.
What we already pay for medicare and medicaid would provide universal coverage if our system were as efficient as Canada's or the UK's (in terms of percent PPP adjusted GDP/capita spent on health care), so this isn't even a philosophical question about how much we want to spend on government-mandated charity. It's a question of getting value for the money we are already spending. You could postulate that the medicare/medicaid administration is spending money inefficiently, but two facts suggest otherwise. First, the overhead of medicare/medicaid administration is ~4% (vs 12-30% for private insurance), so the money isn't disappearing into the bureaucracy itself. Second, medicare/medicaid drive a harder bargain than almost any other insurance plan (ask your doctor next time you visit, the administrators do not like dealing with medicare/medicaid), so it's difficult to argue that medicare/medicaid are responsible for our inefficient health industry
We have two options:
1) Keep spending 20% of our GDP on health care (vs our neighbors at 10%) while we try different permutations of rules and hope to land on one that fixes the free-market feedback mechanisms and kicks it into gear.
2) Cut our losses and copy/paste the well-tested solution, using other countries as a template until we have health care at 10%GDP rather than 20%GDP.
Option #1 has been in the whack-a-mole stage for decades (the feedback mechanisms are broken by default, more on that later) and shows no concrete or theoretical signs of letting up. I'm for option #2. The experiment has been run, the results are in. Healing the feedback mechanisms in the health care market was a harder problem than it appeared. Saying that the next set of regulations or deregulations will make our health care market do a U-turn seems crazy to me, like saying that communism is the way of the future in 1990 while the USSR is busy collapsing. This time it's our turn to cut our losses, thankfully in a less traumatic manner.
> I can't even attempt to understand where you might be coming from.
MSCS student, ex-libertarian. I took a health care policy class in undergrad to satisfy a requirement and it changed my worldview. I had heard that the US health care market was inefficient, so I thought it would be a good place to look for opportunity. I thought that maybe I could use my data-fu to help make it better and possibly turn a profit while I was at it. The health care policy class seemed like a good place to get a 1000-ft overview of the industry.
As I learned more about the specifics of the health care market, I realized that the problems weren't due to a strange historical trajectory, barriers to entry, obsolete/misguided regulation, failure to adapt, monopoly/lock-in, or any of the challenges I was familiar with from the software world. Not fundamentally, at least. The usual problems have analogs in other countries, yet they're doing just fine compared to us. The "traditional problems" explain waste on the order of billions while the efficiency gap that needs to be explained is on the order of trillions (per year). I have already listed the explanations that I think best account for the gap, but to make a long story short: the health care market is the perfect storm of factors that frustrate the free-market optimization process.
> When it comes to healthcare the free market approach would create efficient markets quickly due to competition.
So why has this failed to happen? Our current system does not suffer from monopoly or regulatory capture. You are free to shop around between insurance plans, yet they operate at 3x the overhead of medicare/medicaid and 2x the entire (not just insurance) administrative overhead of the UK's NHS. What do you plan to change and why do you think it will succeed where past efforts have failed? I have an explanation for the failure, and it is not one that deregulation will fix:
Customer feedback through buy/no buy decisions is broken in the health insurance industry. In other industries that also aren't plagued by monopoly, dissatisfied customers push back by not buying a product. In the health care industry, a strange situation arises where customers don't know that they've been duped. The bulk of costs are concentrated in a handful of customers (those that get cancer, get in a terrible car crash, etc) so if an insurance policy figures out a way to dump the expensive patients, 99% of customers never realize that the piece of mind they have bought is worthless and they never demand better. This isn't hypothetical, this is precisely what happens: by design, private insurance doesn't actually shield one from the cost of a debilitating injury or illness, leading to the statistic that 62% of personal bankruptcies in the US were caused by medical problems even though 78% of those people had insurance [1]. The insurance companies make sure each person has just enough "responsibility" so that they can dump their own responsibility if it ever actually comes due.
Innovation in the insurance industry happens largely by finding new, clever ways of fooling people into thinking they are covered for something that they are not.
> How do we deal with that situation? I'd say much like we do with auto insurance. You own it. It's yours. It does not live and die with your employer.
Paying for insurance through your employer is a legitimate market innovation that decreases statistical, legal, and bandwagon-effect risk. Your employer provides two services to you: they aggregate your bargaining power with the rest of their employees, driving a better deal, and they decorrelate you with the specifics of the plan because you will take what they give you (bypassing the bandwagon effect).
This isn't speculative, the market has already spoken, and declared that individual insurance is more expensive (if you think otherwise, go form an individual insurance company and sell it for less). As a libertarian, you, of all people, should respect this. The PPACA's exchanges attempt to mimic the beneficial effects of an employer without going through an actual employer. I suspect it will work at least a little bit, after adjusting for the fact that we have sealed some of the loopholes individual plans used to dump sick people, which will necessarily increase costs. But I don't think we'll see administrative overhead fall even to 2x what we see in a typical social system, because most of the market problems are still there, and a single-payer system is still the limiting case of addressing the problems in [2] individually.
> What to do about the really poor who can't afford any of it. We help them, of course. The details are not important here. We help them. Period. If you can't possibly pay for your insurance we, as a society, have a mechanism through which you will have it.
This creates a discontinuity in marginal incentives (or reduction in marginal incentives if you pro-rate between income brackets) that single-payer doesn't, in addition to retaining all the problems of small plans listed in [2].
> we can always let observe them for a while and THEN decide
The cost of continuing to experiment with the free-market solution is 45,000 deaths [3] and $1.3T every year ([4], assuming we could figure out how to emulate one of the ~16 single-payer systems ahead of us in health rankings [5] right now).
I would not call this "beautiful." Health care just isn't as compatible with the free market as the internet. We've tried extraordinarily hard to make it work but it hasn't happened yet. A better analogy for free market health care would be the Hurd, scaled to $2.7T/yr. It's a beautiful vision, but there are some major architectural and compatibility issues that have been proven to separate concept from reality, all while there's a perfectly serviceable Linux kernel available that is
* 2x as fast <--> costs 1/2 as much
* less buggy <--> USA is dead last in top 17 health rankings [5]
* more compatible <--> doesn't pay 2x for drugs because of size disparities when bargaining w/drug companies
* has a smaller memory footprint <--> observed lower administrative overhead in medicare vs private, universal vs private [6]
On an ipad so i can't even hope to author a lenghty reply.
>> I can't even attempt to understand where you might be coming from.
> MSCS student, ex-libertarian. I took a health care policy class in undergrad to satisfy a requirement and it changed my worldview.
Ah. OK. I get it now.
To be clear. I am not attacking you personally but rather making a comment on the frame of reference from which you are basing your views.
First. Academia is chock full of socialist extremists. Not sure how well you are/where able to see through this if present and filter it out.
Second. Don't think for a minute that a class such as that actually reflects reality without getting out to the real world. In other words, trust but verify.
Finally. You are wrong about such things as medicare being wonderful. My wife is a doctor. I won't go into some of what I've learned other than to say that people are suffering horribly due to the failings of that system.
In looking at our system versus other you seem to be ignoring the effects our litigious society has on the cost of, well, everything. I won't go into what we are paying for malpractice insurance (without even the semblance of a negative mark on her entire professional history).
> First. Academia is chock full of socialist extremists. Not sure how well you are/where able to see through this if present and filter it out.
You are correct that the academic frame of reference played a large role in developing my worldview, but bias swings both ways. I think it's telling that I am able to back my arguments with specific measurements and comparisons while you resort to philosophical generalities.
Economic incentives in the software industry tend to match competence, effort, and risk-taking with just reward, at least to some degree. Developers tend towards libertarianism because they and their associates are able to make the market work for them. Favorable economic conditions shelter them from market failures (health care costs 2x as much? Eh, it was a benefit anyway, and a small fraction of a typical yearly salary in any case).
Unfortunately for academics, the good they produce is neither excludable nor easily measurable, leading to systemic undervaluation by the market (I'm not talking about CS research here so much as the hard sciences). They are more directly exposed to the market's hairy underbelly and tend to be more skeptical of the whole endeavor because in their day to day lives they and their associates have a much more difficult time coupling value creation to market-provided reward.
> Don't think for a minute that a class such as that actually reflects reality without getting out to the real world. In other words, trust but verify.
Don't think for a minute that the tech/startup scene (to include your employment experience and entrepreneurial activities) actually reflects the bulk of America or the world. Your real world experience is far too narrow to be relevant to the issue at hand. You cannot decide how to manage a forest by staring at a blade of grass. As an in-demand professional (married to another in-demand professional) your experiences are not only nonrepresentative but provably atypical. You need numbers, not self-gratifying philosophical principles to see past this bias.
> You are wrong about such things as medicare being wonderful.
I never said that. I think our hybrid system is a monstrosity.
What I did say was that medicare had low administrative overhead compared to private insurance plans, defined as E(1-cost/payout). In other words, private plans are provably failing to deliver on their promise of greater efficiency by a factor of 4 (and these are the efficient employer-aggregated plans). I also said medicare drove a hard bargain as compared to private plans, a claim which I can substantiate [1], in order to head off a potential attempt to shuffle the blame for the US's inflated costs onto medicare.
The hybrid system is a monstrosity, but I conclude that the private half is dragging down the public half, not vice-versa. My reasons:
* International comparisons (universal systems are beating us by a factor of 2 at cost metrics and matching our quality metrics even if you ignore the ~50M people our system dumps entirely)
* Explicit reasoning about why the health care market is a rat's nest of edge cases for the free market [3]
* Internal comparisons between medicare and private insurance (the 2 reasons I listed which you straw-manned into "medicare is wonderful")
> you seem to be ignoring the effects our litigious society has on the cost of, well, everything
Because malpractice insurance accounts for <2% health care expenditures [2] while the cost inflation (relative to socialized systems) that needs to be explained is on the order of 50%. I could not be bothered to mention these figures because I knew them to be small, while you apparently could not be bothered to even look them up, which unfortunately didn't stop you from trying to bluff me with certainty that the effects were large enough to play a causal role.
Doctors disproportionately care about litigious waste just like HNers disproportionately care about ACA exchange contracting waste. Both concerns hide the bigger picture. As bad as these two problems are, they are tiny compared to the macroeconomic problems. Billions vs trillions.
And anybody can do what you are doing. You have an obvious bias against free markets. That's fine. However, I will argue that, if you live in the US, almost everything around you is the product of free market forces to a large extent. Perfect free markets don't exist. That's a given. Please don't point out that this or that market isn't perfectly free. I get it.
Here's the difference with our views.
My view is centered around the idea that government should be limited to a very small area of responsibility and influence in our lives. I won't get into the details. Suffice it to say it would be a small fraction of what it is today, in rough strokes perhaps reducing it by 50 to 75% --gradually, over a period of 25 to 50 years.
Your view, if I read between the lines, feels like it is almost diametrically opposite mine. You don't have anything in your HN profile so I can't even attempt to understand where you might be coming from. For all I know you work for the government and are actually being paid by the current ACA/Obamacare "machine" in some form. I don't know.
I, well, I've been an entrepreneur since forever and fully understand what it means to live a life where you make sound fiscal, social, educational and personal decisions based on the idea that you --not the government-- should be responsible the well-being of your family and community. That's my frame of reference, not sure what yours might be.
Going back to the size of government, I would, for example, push to de-militarize our country over, say, 25 to 50 years and encourage others to do the same. We could and should take the lead in making this a better world. The military alone accounted for 25% of our federal budget. We don't need them. I know many think we do. We don't. The world needs to make supporting massive military forces a thing of history.
I would also eject government from most areas affecting our lives. Take the Department of Education as an example. The US keeps testing significantly sub-par when it compared to other less developed countries. Yet we spend more than almost anyone per pupil and we have a massive DoE. I don't think they are effective. Gone.
Anyhow, you can continue along these lines and remove government from all of these areas. Gradually. Over twenty-five to fifty years.
Are regulations required? Are they important? Yes. Of course. In certain areas and with moderation. That's a different topic. No, I am not advocating a wild-west guns-a-blazing free market. Controls are almost required in certain areas. This would be a very important function of a limited government.
When it comes to healthcare the free market approach would create efficient markets quickly due to competition. If I could go to Nevada and get heart surgery for less, with excellent quality and even a free slot machine in my room during recovery, hey, that's fantastic. California would have to find ways to compete. And they would. Technologies would be developed in order to make the medical business more efficient at all levels. Within a span of ten to twenty-five years the medical industry would be transformed into an incredibly efficient machine providing above-par services for everyone. No tax dollars or government involvement would be required outside of putting in place sensible and limited regulation in order to help, not hinder, the development of a useful free market.
Corner cases will exist. In other words, the good, the bad and the ugly exist in all markets. Free or government originated and controlled. That's human nature. Neither school of thought can guarantee that bad things will not happen. Stories abound about people in highly socialized medical systems having to wait months or years for treatment. The free market equivalent might be not having enough money or insurance to pay for something or horrible cases of medial malpractice.
How do we deal with the cost of ownership situation? I'd say much like we do with auto insurance. You own it. It's yours. It does not live and die with your employer. You get to insure yourself for anything you want and for as much as you want. I barely saw the inside of a doctor's office during my 20's. My guess is I would have been receptive to the idea of a low cost catastrophic health insurance policy with a relatively high deductible. If my auto insurance guy had said something like "Martin, for another $50 per month we can offer you catastrophic health insurance with a $10,000 deductible" my guess is I would have gone for it without much thought.
Should medical insurance be mandated? Yes and no. It would be really easy to setup a situation where, for example, if you want to drive a car you have to also have health insurance coverage. This is just an example I am pulling out of my hat and it is not well thought out. The intent here is to say that, yes, I understand that an idea market would benefit from wide-spread market participation. In this hypothetical nearly everyone 16 and over would purchase health insurance to some extent or another. That would take care of a huge percentage of the US population.
You would personally be responsible for the cost of your health care. In other words, if you go to a hospital and don't have insurance you have to pay the bills yourself. This is no different from going to the dealer with a car that broke down and no extended service warranty. This would setup a situation whereby everyone in the US would buy medical insurance, just like they buy car, homeowners and renters insurance. You know how they offer you insurance for your new TV or refrigerator at the appliance store. Well, al lot of people buy it.
If you were free to shop for health insurance from any provider I can easily see companies competing for your business everywhere. I could, for example, see State Farm and Alstate offering people various health insurance policies along with their homeowners or auto policies.
What to do about the really poor who can't afford any of it. We help them, of course. The details are not important here. We help them. Period. If you can't possibly pay for your insurance we, as a society, have a mechanism through which you will have it. This is where the idea deviates from the auto insurance model.
What to do about the whole pre-existing condition situation. Well, your insurance policy has an "uninsured motorists" element? Perhaps every insurance policy would have a nominal "pre-existing conditions" fee that we collectively contribute towards dealing with these costs. This would be the socially responsible way to deal with situations where you have someone who might require half a million dollars of annual healthcare bills per year due to their unique situation.
Oh, yes, all healthcare insurance should be 100% tax deductible.
All of this would work and evolve very well with minimal government intervention. Laws and regulations would be passed in order to serve the free market and reduce government involvement to a minimum, not hinder it.
The beauty of taking such approaches is that --due to the lack of set-in-stone laws-- we can always let observe them for a while and THEN decide whether they are working or not. The problem with passing legislation like the ACA/Obamacare is that you have 40,000 pages of legislation and rules that is convoluted, unmanageable and incomprehensible to such an extent that no citizen can even begin to comprehend it. And, to make things worst, we don't have the freedom to move away from it and modify it in an evolutionary and dynamic way. It is set in stone and it takes a tremendous amount of work to change it's path. I mean, they can't even get a medium complexity website to work correctly on launch. That should tell the entire story.
The most fundamental issue here is that it is nearly impossible to have dozens or hundreds of people to create legislation that is, for lack of a better term, perfect. It takes years, decades to painfully evolve these things. This is where free markets have an overwhelming advantage because they can evolve as fast as humanly possible. The power of entrepreneurship and free markets has been massively demonstrated by the explosion of this little thing we call the Internet.
Anyhow, we'll probably disagree. And that's OK. To each his own.