Economist Channel

My colleague Scott Atlas has a superb oped in today's (October 4) Wall Street Journal. Instead of just arguing about health insurance and how we, via the government, will subsidize and pay for health care demand, let's fix the equally catastrophically broken health supply system.

"Republicans have now failed twice to repeal and replace ObamaCare. But their whole focus has been wrong. The debate centered, like ObamaCare, on the number of people with health insurance. A more direct path to broadening access would be to reduce the cost of care. This means creating market conditions long proven to bring down prices while improving quality—empowering consumers to seek value, increasing the supply of care, and stimulating competition."

This is the kind of out of the box, out of the usual left-right mudslinging idea that might someday spark a bipartisan reform, if our legislators could someday get past scoring symbolic points and sit down to actually fix something. (I have written similar ideas, but nowhere near as clearly, or as based in lots of fact-based scholarship and detail as Scott has.)


Scott starts with the sensible idea that we need to expand people spending their own money, via high deductible catastrophic plans, and vastly expanded HSAs. True, and well documented, but just spending your own money doesn't really help as long as supply is so constrained. In the joke version, it's like spending your own money to find a cab to LaGuardia in the rain at 5:00 PM on friday pre-Uber. Supply is constrained, and competition is stifled, so the government can enforce cross subsidies, and just paying out of pocket is not really going to help until supply competition is unleashed.

Scott gets there quickly. To the view that we need more regulations forcing hospitals to post prices -- sort of like the funny prices you see posted in hotel rooms on occasion, and likely just as effective -- Scott answers the fact, obvious to us, but new to Washington,

The most compelling motivation for doctors and hospitals to post rates would be knowing that they are competing for price-conscious patients empowered with control of their own money.  

Accent on the competing. If they don't someone else can and will. Specifically,

... work strategically to increase the supply of medical services to stimulate competition. In large part, this means deregulation. Lawmakers should remove outmoded scope-of-practice limits on qualified nurse practitioners and physician assistants. ... 

Medical credentialing should be simplified, and the licensing boards should institute reciprocal (national) licensing for doctors to help telemedicine proliferate across state lines. Medical school graduation numbers have stagnated for almost 40 years.

I might add, H1B visa for any qualified doctor or nurse who wants to immigrate.  Holding back immigrant supply to keep up American wages sounds nice, until you realize who is paying those wages -- all of us.

Archaic barriers to medical technology also impede competition and raise prices. ...certificate-of-need requirements, which require health-care providers to get permission from the state to add medical technology like MRI scanners,...are still in place in 34 states, Puerto Rico and the District of Columbia. 

introduce the right incentives into the tax code. Today employees aren’t taxed on the value of their health benefits—and there is no limit to that exclusion.
Similarly, ObamaCare’s premium subsidies and the tax credits proposed by Republicans artificially prop up high insurance premiums for bloated coverage that minimizes out-of-pocket payments. 

As the last paragraph emphasizes, this is bipartisan. The same Democrats who realize that occupational licensing and zoning density restrictions are really hurting real estate and labor markets, adding to inequality, can realize the same thing of all our restrictions on the supply of health care. 

Scott's book is an excellent longer treatment of these themes, well documented with many more ideas. And best of all, it's available for free from Hoover, though you really should go out and buy one.