The Incentives Are Wrong

In The Atlantic David Goldhill says there are things in the American health care system that need fixing.

I’m a Democrat, and have long been concerned about America’s lack of a health safety net. But based on my own work experience, I also believe that unless we fix the problems at the foundation of our health system—largely problems of incentives—our reforms won’t do much good, and may do harm. To achieve maximum coverage at acceptable cost with acceptable quality, health care will need to become subject to the same forces that have boosted efficiency and value throughout the economy. We will need to reduce, rather than expand, the role of insurance; focus the government’s role exclusively on things that only government can do (protect the poor, cover us against true catastrophe, enforce safety standards, and ensure provider competition); overcome our addiction to Ponzi-scheme financing, hidden subsidies, manipulated prices, and undisclosed results; and rely more on ourselves, the consumers, as the ultimate guarantors of good service, reasonable prices, and sensible trade-offs between health-care spending and spending on all the other good things money can buy.

I pretty much agree with all that except the bit about reducing the role of insurance. I think the role of insurance needs to be changed. And that may mean an increase or a reduction.

So what reforms would I like to see?

1. Sever health insurance from employment. A few things have to be done to accomplish this.
   a. The Health Care Deduction goes to the individual.
   b. A national market for insurance (see below)

2. Allow Medical Savings Accounts (MSAs) to roll over so dollars can be accumulated. Over time most lower cost procedures (under $10K or $20K) will come under consumer pressure because insurance doesn't kick in until your MSA is spent.

3. Catastrophic insurance coverage only. No coverage for minor or regular procedures. Those are handled by MSAs.

4. Limit damage awards to identifiable costs. Lost work. Reduced capacity for work. Medicines. "Pain and suffering" awards should be limited to a small amount.

There may be some other things. I'm open to suggestions.