Obamacare Can't Be 'Fixed'

Larry Elder
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Posted: Mar 09, 2017 12:01 AM
Obamacare Can't Be 'Fixed'

The moment Republicans bought into the notion that Obamacare must not just be repealed but "replaced," Democrats won. Democrats argue that health care is a "right." Republicans claim they disagree, that nowhere in the Constitution does the federal government guarantee health care treatment or health care insurance. But Republicans' behavior suggests otherwise.

President Donald Trump, for example, says that in replacing Obamacare no one should be worse off; that insurance companies cannot decline those with pre-existing medical conditions; that insurance carriers must allow parents to keep their "children" on their insurance plans until the age of 26; and that insurance companies cannot drop people under any circumstances. Polls show that these are the most popular features of Obamacare. But forcing an insurance company to cover people with pre-existing conditions completely destroys the concept of insurance. Insurance is about pooling groups of people whose premiums cover unknown risks, not known ones.

The "replacement" plan runs head-on against two principles of economics. Competition makes products and services better, cheaper and more accessible. And there's no such thing as a free lunch.

Health care -- just like cars, sweaters and smartphones -- is a commodity. But health care is one of our most regulated industries, a far cry from a free-market-based system.

Start with the supply of doctors. Because of regulations, the supply of doctors has been artificially limited. Economist Milton Friedman once compared the American Medical Association to a medieval guild that shuts out would-be practitioners and artificially protects the wages of doctors. In a piece called "American Medical Association: The Strongest Trade Union in the U.S.A.," Mark Perry, a professor of economics and finance at the University of Michigan and an American Enterprise Institute scholar, writes:

"Between about 1970 and 1984, there was a significant increase in medical school graduates that pushed the number of new physicians from 4 per 100,000 Americans in 1970 to almost 7 per 100,000 by 1984. Since 1984, the number of medical school graduates has been relatively flat ... while the population has continued to grow, causing the number of new physicians per 100,000 population to decline to only 5.3 per 100,000 by 2008, the same ratio as back in 1974. Over the last few years the number of medical school graduates has increased slightly, and the ratio of graduates per 100,000 increased to 5.56 last year, the highest in a decade."

What's wrong with this picture? An aging population, in need of more doctors, on a per capita basis, has fewer of them. Economics 101, supply and demand and plain common sense tell us the opposite should be happening.

This is the argument Republicans should be making. The true replacement plan should be loosening regulations that prevent would-be doctors from entering the field, and prevent less-schooled and less-credentialed paraprofessionals from doing things that only licensed doctors can now do.

We train battlefield medics in Iraq and Afghanistan to deal with battlefield trauma, saving countless lives. The Oscar-nominated film "Hacksaw Ridge" depicted the true story of a medic with aspirations of becoming a doctor, whom the army trained to treat battlefield injuries. But that man, had he returned stateside and tried to set up a practice to treat victims of urban gun violence, would have been guilty of practicing medicine without a license.

There are many examples. In some states midwives cannot legally deliver babies, despite ample evidence that they possess the experience and ability. In his joint address to Congress, Trump criticized the lengthy and expensive process of getting a drug approved by the FDA. In some cases, drugs that could help people do not become available even when risks are known and desperate patients would be willing to assume these risks.

We strangle the health care and insurance industries with regulations, licensure requirements and barriers to entry that artificially increase the cost of health care. We prevent people from buying health care across state lines.

We advise developing countries to follow the well-worn path to prosperity -- free markets, free trade, rule of law and property rights. Yet when it comes to nearly one-seventh of our economy -- health care -- we ignore our own advice. For health care, we don't write ourselves the proper prescription.

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