Yes, Mr. President: A Free Market Can Fix Health Care

Cato Policy Analysis Series, No. 650

16 Pages Posted: 30 Jan 2010 Last revised: 10 Feb 2013

Date Written: October 21, 2009

Abstract

In March 2009, President Barack Obama said, "If there is a way of getting this done where we're driving down costs and people are getting health insurance at an affordable rate, and have choice of doctor, have flexibility in terms of their plans, and we could do that entirely through the market, I'd be happy to do it that way." This paper explains how letting workers control their health care dollars and tearing down regulatory barriers to competition would control costs, expand choice, improve health care quality, and make health coverage more secure.

First, Congress should give Medicare enrollees a voucher and the freedom to choose any health plan on the market. Vouchers would be means-tested, would contain Medicare spending, and are the only way to protect seniors from government rationing.

Second, to give workers control over their health care dollars, Congress should reform the tax treatment of health care with "large" health savings accounts. Large HSAs would reduce the number of uninsured Americans, would free workers to purchase secure health coverage from any source, and would effectively give workers a $9.7 trillion tax cut without increasing the federal budget deficit. Third, Congress should break up state monopolies on insurance and clinician licensing. Allowing consumers to purchase health insurance licensed by other states could cover one-third of the uninsured without any new taxes or government subsidies.

Finally, Congress should reform Medicaid and the State Children's Health Insurance Program the way it reformed welfare in 1996. Block-granting those programs would reduce the deficit and encourage states to target resources to the truly needy. The great advantage of a free market is that innovation and more prudent decision-making means that fewer patients will fall through the cracks.

Keywords: U.S. healthcare system, Obamacare, Affordable Care Act, ACA, Barack Obama, free market, Medicare, health care reform, health insurance, individual mandate, HSA, health savings account, Medicaid

JEL Classification: H10, I11, I13, I18

Suggested Citation

Cannon, Michael F., Yes, Mr. President: A Free Market Can Fix Health Care (October 21, 2009). Cato Policy Analysis Series, No. 650. Available at SSRN: https://ssrn.com/abstract=1543936 or http://dx.doi.org/10.2139/ssrn.1543936

Michael F. Cannon (Contact Author)

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States
202-218-4632 (Phone)
202-842-3490 (Fax)

HOME PAGE: http://www.cato.org/people/cannon.html

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