A study of Milton Friedman's approach to healthcare
And a discussion about it.
We’ve been thinking about universal healthcare, but today I want to think about an alternative: putting all health costs on the market and letting supply and demand do its thing.
In this world, you and I would pay for our healthcare the way we pay for our groceries: a la carte! We would pay out of pocket for every medical expense we might incur except for the very big and unexpected expenses—like getting cancer. For that, we would have catastrophic insurance.
If we did this, the cost of nearly every medical expense would go down—because your birth control provider would be competing with other birth control providers, and your insulin provider would be competing with other insulin providers, and your ACL surgeon would be competing with other ACL surgeons.
That is the plan proposed by the economist Milton Friedman in his essay, “How to Cure Health Care,” and it’s the one we’ll be studying for today’s literary salon. The essay was initially published in 2001 and was recommended to me by the health economist and Wake Forest professor
, one of my peers in the Roots of Progress fellowship.Tina was kind enough to review my essay on Utah’s universal healthcare plan to make sure I was getting it right (healthcare not being my particular expertise), as well as to post her notes on why a universal healthcare plan might not be the best option for states, because when you have one party (the government) paying for all of our medical expenses, you eliminate the market. Here are her notes:
“The trouble when you switch to single payor is that we no longer have meaningful prices,” she said. “Why are prices important? Because prices help show how demand and supply are interacting. If there were truly meaningful prices in healthcare, like in laundry detergent, consumers would say ‘no’ to things that were not worth the money and providers wouldn’t charge too much. Perhaps the most important thing is not saying ‘no’ to the ACL surgery entirely but saying ‘yes’ to the cheapest one among the choices. This adds flexible discipline to the market through competition and the idea of losing business if you aren’t adding value to the system.”
That’s exactly what Friedman believes. Let’s study his plan.