The main three problems with health care and health insurance are uncontrollable costs, lack of coverage, and fragmentation of the market.  The two key solutions are tax deductibility and federal regulation of commerce among the various states.

Costs are uncontrollable for several reasons: consumers are largely isolated from the cost of the health care products and services they use.  Deductibles place the entire burden of a cost on the consumer who has no ability to negotiate.  Co-pays are fixed and do not give consumers an incentive to look for cheaper policies, products, or services.  A growing number of consumers are also not insured through an employer and individually have no negotiating leverage.  When costs are not being controlled, the health care industry has perverse incentives to concentrate on more expensive products and services.

These problems can all be addressed by making consumers responsible for costs by removing employers as intermediaries and extending tax deductibility to individuals.  In addition, policies should make co-pays a percentage of the covered costs so consumers see directly what the products and services cost and will collectively shop for the most cost-effective alternatives.

Deductibility for individuals and customer cost-control also addresses the problem of lack of coverage: instead of forcing people to purchase something or face a punitive tax, it incentivizes them to buy insurance instead of paying taxes over that part of their income.  It works for home purchases, so it should work for insurance purchases by responsible, productive individuals.  (The same should be done for properly federally accredited education, by the way.)

By Bart Besseling

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