First, Do No Harm:

Why American Health Care Policy is Failing, and How to Fix It

By Randall J. Pozdena, Ph.D.
  • Monday, March 1, 2004

Executive Summary

From an economist's point of view, health care policy in America today is in a completely predictable cost, service and access death spiral.

Ultimately this is not surprising: careful study and analysis of the health care marketplace played virtually no part in the evolution of existing policy. Rather, the current U.S. system evolved out of a series of poorly informed attempts to pander to certain constituencies and mimic policies of other countries — without fully understanding the weaknesses of those policies.

Today, also, massive confusion characterizes the reigning public policy consensus. This study dissects and refutes eight major myths:

• That the main health policy problem is too little health insurance,
• That expanded health insurance coverage benefits the poor,
• That extensive regulation is needed to control problems in the health care market,
• That we would be better off with single-payer insurance,
• That the aging of America justifies increased government involvement,
• That prescription drug prices are the cause of health care cost inflation,
• That drug company profits are too high, and
• That drug companies spend too much on marketing.

In essence, existing policy has for decades failed to recognize that the person who generally best understands the need and value of medical care is the individual — or in the case of a child, the parent — who is seeking it.

The result is a long-term trend in America that has dissipated the potential advantages of private, competitive markets. Instead of harnessing the consumer's powerful ability to contain costs and control quality, policy makers have chosen to minimize the role of the consumer. Instead of harnessing the private market, they have implemented a series of heavy-handed and ill-considered governmental interventions in healthcare markets.

Yet every form of rationing and managed care is doomed to fail as ways to control costs because — by their inherent nature — they stand in the way of consumer sovereignty. Interestingly, after 110 years, even the grand-daddy of socialized health care systems, the German system founded by Bismarck, has recognized that the solution to runaway health care costs lies with limiting over-insurance and reasserting the involvement of the private sector.

The reassertion of consumer sovereignty in health care is the only feasible means of containing health care costs while assuring that the consumers obtain the health care services they need. Both Singapore and Switzerland have successful models that well deserve serious study.

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