Study their behaviors. Observe their territorial boundaries. Leave their habitat as you found it. Report any signs of intelligence.

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Friday, January 16, 2009

When Freedom Is Lost, It's Usually "For The Children"

Single-payer federal health insurance for all children?

1. Unconstitutional.  Nothing in Article I Section 8 gives the federal government any authority to do this.  The Constitution is hardly perfect, but it can't protect us from the politicians (or from the mob) unless we protect it from them.

2. Why stop there?  If you're going to socialize and nationalize health insurance for children, then why not also nutrition, shelter, education, transportation, energy, retirement, and employment?  Oh wait, we've already done that for retirement, Bush has started nationalizing education (No Child Left Behind) and housing (No Speculator Left Behind), Obama is about to nationalize energy, and the rest of the economy is being steadily nationalized through subsidies, mandates, and bailouts.

Here is my challenge to any brainy do-gooders with the urge to use government power -- i.e., handcuffs, jails, and guns -- to enforce a feel-good vision on the rest of society.  For any force-based intervention you propose, please 1) identify the market failure you're trying to correct, and 2) explain why it cannot be corrected at a more decentral level -- state, metro area, county, municipality, or neighborhood.

Health care is indeed subject to market failure:
However, health care is also subject to massive government failure such as
  • tax preferences that artificially bind health insurance to employment, hide costs from consumers, and encourage over-insurance,
  • price controls dictated by a bloated mandatory insurance program that (thanks to high senior voting propensity) is funded via inter-generational income transfers,
  • laws against interstate competition in health insurance,
  • rent-seeking through legislated preferences sought by unions and hospitals and insurers and pharmaceutical patent holders,
  • artificial barriers to entry via professional licensure and excessive safety/efficacy regulations, and
  • laws preventing insurers and consumers from agreeing on lower-cost lower-coverage insurance.
America's healthcare market has for so long been so distorted by government interventions that it's hard for most people to see how a free market in healthcare would work.  Piling on more government interventions is not a smart response to the situation.  Instead, we need to replace the federal government's centralized tangle of health care bureaucracy and regulation with a decentralized market-based system in which government intervention is restricted to just correcting market failure at the most local possible level.

The market failure of free-riding on healthcare charity -- i.e. of under-donating to the safety net because you worry others will under-donate -- can be corrected at the state level or lower.  There is no state in the union so poor that it cannot afford to finance health insurance vouchers for its poorest citizens if its voters don't think they would be charitable enough to the sick among them.

The remaining market failures -- adverse selection, moral hazard, and asymmetric information -- are all knowledge problems, and only require tax incentives to correct.  Adverse selection by insurees can be corrected by tax incentives for insurees to join age-based risk pools (instead of our current brain-dead system of pooling risk by employer).  Moral hazard to over-rely on the safety net can be corrected by tax penalties for those who under-insure themselves against health catastrophe.  Asymmetric information held by doctors and hospitals can be corrected by tax preferences for providers who practice transparency. All these tax incentives could probably be done at the state level (even with interstate insurance competition), but even if initially implemented at the federal level this policy regime would be much smarter than any "single-payer" mandate -- no matter how messianic the leader whose armed henchmen would be enforcing it.

For more on market-smart health care policy, see

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