POLICY/INTERNATIONAL: A split in the libertarian right? (albeit a Canadian one)

Buried at the end of a rant about the evils of the Canadian system from our northern brethren’s version of Cato/PRI—the Fraser Institute—is their solution for what to do about it all.

Canada should adopt a system like Switzerland’s that offers universal compulsory private health insurance that includes drug coverage. That way we could have both the benefits of cost-efficiency and the broadest possible access to advanced medicines and medical care," Skinner concludes.

Err.. so some libertarians do think that we should have compulsory health insurance including drug coverage? That’s not very free market of them. No wonder David Gratzer and John Graham had to run away! After all, I need here to quote what Cato’s Michael Cannon wants, or at least doesn’t want, from comments he’s written just last month on THCB.

You’ve been kind enough to put me in the "sensible libertarian" category in the past, so on behalf of all of us: yes, abolish mandates, abolish community rating, and let people group and pool voluntarily. Per Pauly and Herring, you might be surprised how much pooling you get. But if you’re still unsatisfied, this Guide to Subsidies can help:

Voluntary subsidies via insurance: good.Involuntary subsidies via insurance: bad.Involuntary subsidies via cash: less bad.

Michael and I will agree to disagree on the merits of mandated/involuntary subsidies (or community rating)/taxes et al—and for that matter on the validity of Mark Pauly’s body of work. But I’m surprised to see that the Fraser guys are coming down on my side of the line.

2 replies »

  1. I did some research of the Swiss healthcare system and found some points worth comparing. I’ve taken some liberty of word compression from the original to preserve space and get to the point faster. I’ve posted the links to my information.
    Since the Revised Health Insurance Law came into force in January 1996, all Swiss residents must have basic health insurance. Insurers are obliged to accept all applicants, thereby avoiding cream-skimming. The insured may change insurer twice per year.
    There are 93 registered insurance funds offering compulsory basic insurance in 2002.
    This has dropped from 1,151 in 1945.
    All are run on a not-for-profit basis, though under the new CBSI law this is no longer a requirement. Insurers group together in Cantonal and Federal Associations to negotiate fees with service providers, represent the interests of members, compile statistics and so forth. This long-standing group negotiation is likened by many to a cartel.
    Basic Benefits Package: ‘Basic’ is a real misnomer here as it implies that significant elements of healthcare must be purchased in addition. This is not the case as the Swiss ‘basic’ package is a luxury one compared to a basic one in the US or Germany.
    As there is a statutory package, companies are not allowed to compete on the basis of benefits package. There is also little scope for competition based on quality of service. Instead, insurers compete on the basis of price – that is premiums and variable deductibles.
    While both of these forms of managed care can reduce hospitalization rates, unlike US HMOs they cannot negotiate on price with hospitals by establishing preferred provider contracts. Managers of public hospitals are prevented from creating such contracts in return for lower fees, as the authority to do so rests with cantonal parliaments, as they are so ‘heavily engaged in the financing of “their” hospitals’. The Revised Health Insurance Law specifies that cantons must
    cover 50% of hospital costs, and requests that cantons draw up lists of hospitals with which insurers must contract. Thus hospital sector competition is stifled.
    Switzerland spent 11.5% of Gross Domestic Product (GDP) on health in 2003, against the OECD average of 8.8%. Canada spent 9.9% while the U.S. spent 15.2%
    Percent GDP increases between 1980 and 2003 are 2.8 for Canada, 4.1 for Switzerland and 6.4 for the U.S.
    First would U.S. insurance companies allow the level of government control over their products as the Swiss do? We can see how the number of Swiss insurance companies has decreased dramatically since 1945. With healthcare there pretty much reduced to a comodity it appears not many insurers can compete on price, or at least want to. I think insurance mergers under any system now proposed in the U.S. would also see dramatic reductions – but to control market as I don’t believe the government will standardize policies as much as Switzerland. Ulimately U.S. citizens will eventually see less choice as fewer insurers provide coverage and insurers create their own cartel.
    I also see a trend to higher costs for healthcare the closer to a private system countries get. Less government control equals higher rates of increases and higher costs.
    What I didn’t find out is the relative affordability of healthcare in Switzerland compared to the U.S. One prediction I found estimates the U.S. share of healthcare to GDP could be 20% by 2015 (Siemans). Certainely not sustainable if other industries also want a share of the consumers income.
    I still think a government run single pay and public system balances the cost/access of healthcare to what citizens want to pay. As long as North Americans do not want to improve health through prevention but instead through intervention, costs will continue to rise.