There are many reasons to oppose government-run health care, but we only really need the first one; the government will run it.

What is the problem with our health care system? It’s not quality – we have the best people, equipment, and facilities in the world. It’s not capacity – we have enough providers, equipment, laboratories, and treatment facilities to care for everyone. It’s not distribution – there are clinics and physicians spread across every nook and cranny of the country.

The problem with our health care system is economic inefficiency – cost escalation in health care has outpaced other sectors of the economy. Health care and health insurance are two of the most regulated economic sectors; if government interference was the answer, we would not have the problem. Economic inefficiency in health care starts with the dis-empowerment of the consumer in medical choice. We consumers (patients) have very little effective say over what care we receive and what we will pay.

Effectively, a person only decides when to consume – i.e. when to seek medical attention for an illness or injury. From then on, we are pretty much at the mercy of what the providers prescribe, and what 3rd parties - insurers and the government – have decided we can receive and at what cost. Most of us do not even know what our treatments cost, only the amount of our insurance co-pays. We can not make rational economic decisions when we are separated from transactions.

The way to fix an economic efficiency problem is to increase choice and competition; add in the component of direct payment for services, and you have a Libertarian health care alternative to government run health care – Medical Choice.

We already pay for many types of health care services directly – optometry, dentistry, chiropractic, many pharmacy products and services, routine office visits, for example. The simple act of paying the entire amount of a service, rather than a tiny co-pay portion, make consumers and providers focus on benefits and costs of health care services, just as they do any other purchase decision.

Where choice and competition exits and consumers pay directly for the health care services they receive, costs do not escalate; in many cases, they have gone down. Who could have imagined $4 prescription drugs five years ago? Or $29 eyeglasses? Who could have predicted how inexpensive laser eye surgery has become? Free market capitalists, that’s who. These examples do not come from the world of over-regulated, third-party-pay medicine; they were produced by consumer choice, provider competition, and direct payment. Medical Choice works.

The enabling mechanism for Medical Choice is already in place – untaxed personal Health Savings Account, or HSA. HSA’s have been around for a couple of years now, but less than 3% of us can utilize them due to government restrictions and regulations. Uncapped personal HSA makes Medical Choice a practical market alternative to government health care.

Instead of others choosing and purchasing your health care plan for you, your employer or government plan would fund your personal HSA with untaxed dollars. You would then purchase your own private insurance and pay directly for health care expenses. You would also make personal contributions to your HSA, and your HSA could receive gifts from any legitimate source – family members, charities, estates, etc.

Insurance claims would not be paid to providers, but would deposited into your HSA, and you would then pay your provider directly. There would be no cap on the size of your HSA, only a requirement that it be used to pay legitimate medical expenses for you or someone you designate – including charities that provide needed care for those unable to afford it on their own.

What does this accomplish? It eliminates 3rd party payments to providers. Studies show that up to 30% of health care costs are administrative costs, most of which are associated with billing 3rd parties for services, whether the government (Medicare, Medicaid) or private insurers. Many providers currently give deep discounts for patients who pay cash; under Medical Choice everyone would pay cash, and the overhead cost of dealing with 3rd party payment is eliminated.

In a service industry, the only ways to eliminate cost are to pay people less, or pay less people. Single-payer proposals target skilled physicians and nurses; Medical Choice targets billing clerks.

And as health care providers compete for your business, we could reasonably expect them to reduce their prices and fees and to increase the quality of service and care. When economic efficiency is the problem, free markets are the answer. There is no evidence to suggest that government-run plans reduce real costs in the system. Medicare pays only 80% of the cost of care; the balance is shifted to private payers. That does not reduce cost, it merely drives up the price of private insurance.

Medical Choice also decouples insurance from employment. If you are dissatisfied with the insurance your company provides for you today, what are your options? Quit your job or decline coverage. If you are on Medicare or Medicaid, you have even less recourse. With Medical Choice, you can change insurance companies. This completely chances their incentives – insurers must please consumers, not their employers or a government agency.

Your personal HSA would be an asset you own; it would be eligible to be passed to heirs of your estate, would be portable, and would not have time limits like Flexible Spending Accounts (FSA) do. You would decide what mix of insurance, savings, and direct expense works best for you and your family, just as you do with your automobile expenses. As you age and your circumstances change, you would adjust your HSA to serve your needs. You decide, not someone else.

While Medical Choice alone is an improvement over our current system, it would be even more effective if coupled with medical insurance reform. Government regulation of insurance inhibits innovation and flexibility and drives up the cost of medical insurance. De-regulating insurers - allowing insurers to respond to market demands for a wider array of products - is what will make insurance affordable and accessible.

That will be the subject of next week’s post.