Avik Roy on Making the U.S. Health Care System Work for All Americans
We spend more than enough to cover everyone. But we don’t spend it on the right things.
FREOPP President Avik Roy joined The Roth Effect podcast with Carol Roth to discuss what drives the high cost of U.S. health care and how we can work to bring costs down for all Americans.
One of the biggest misconceptions about the American health care system, Roy notes, is that the government spends very little on health care compared to other countries. In reality, “Prior to the onset of [the Affordable Care Act] five years ago, American government entities spent more per capita on health care than almost every other country in the world — save countries like Norway and Luxembourg — about $4,200 per person,” Roy says. At that time, 50 million people still went uninsured, despite the government’s heavy subsidization of health care. Nearly 30 million remain uninsured today.
This shows that the problem in the U.S. is not that we aren’t spending enough money on health care, but that we’re spending it unwisely. “We actually spend enough in America to help everyone who’s struggling to afford health insurance afford it, what we don’t do is spend it on the right people and in the right ways,” Roy argues.
It’s these inefficiencies in the system that have led to the high prices we see today. Nearly every American with health insurance gets some form of government subsidy, regardless of need. For example, through the tax break on employer-sponsored health benefits and through the taxpayer-funded Medicare program, subsidies that should be reserved for the poor, sick, and vulnerable are often spent on the wealthy.
To learn more about FREOPP’s plan to reform employer-sponsored health insurance, click here.
To learn more about FREOPP’s plan to reform Medicare, click here.
There will always be a role for the government to help pay for health care, particularly for low-income individuals, but our system should be one that provides a strong safety net for vulnerable populations while allowing the market to drive down costs overall.
To achieve this, Roy outlines four main principles for reform, citing FREOPP’s comprehensive health care reform plan, Affordable Healthcare for Every Generation. These principles include:
1. Health care and health insurance should be affordable for every generation – Not only is it important that we provide affordable care for every American living today, but that we have a fiscally sustainable system for the generations to come.
2. Personalized health insurance – All Americans should have the freedom to choose among a wide variety of private plans that suit their specific needs.
3. Fairness to taxpayers – To make our system fiscally sustainable for future generations, we must phase out taxpayer-funded subsidies for those who can easily afford coverage on their own.
4. Innovation and competition for patients – Enabling competition and curtailing the power of health care monopolies will lower patients’ costs and increase innovation in patient care.
To hear Roy and Roth discuss much more, including how to bring down the high cost of prescription drugs and how to break up the monopolies that plague our health care system, listen to the podcast on Ricochet here and read an excerpt from the interview below:
Carol Roth: You know, it’s interesting Avik, when I talk to people about capitalism, one of the areas that people like to point to is health care and how screwed up everything from pharmaceuticals to insurance is. I will contend that we have nothing that looks like a free market capitalistic system. But since you are the expert, do you believe that we have a free market for health care in the United States?
Avik Roy: Well, we don’t today. With the rare exception of certain areas like Lasik surgery and cosmetic surgery — things that basically aren’t covered by insurance or by government programs. If you free the system from insurance, then all of a sudden, everything that you see in the rest of the economy appears in health care. So, take Lasik surgery. This is a widely cited example. The quality of Lasik surgery, the technology behind it improves every year, and yet the price of Lasik surgery goes down every year just like it does for your smartphone or your laptop or anything else.
The question that is almost never asked when people debate health care, is why is that? Why is it that we don’t see that in health care more commonly the way we do in the rest of the economy? And it comes down to the over-prominent role of health insurance that’s driven by federal policy and federal intervention that has distorted the way we pay for health care. A Stanford economist named Ken Arrow who won the Nobel Prize wrote a famous essay more than 50 years ago now in which he argued that health care was special, that health care defies the laws of economics in that there are things that are fundamental about health care that isn’t true in the rest of the economy.
For example, when you’re unconscious, you can’t shop for health care. . . . but you can shop for insurance in theory, when you are conscious, so that when something catastrophic happens, you have the right kind of coverage where that insurance company has negotiated a good deal with a hospital and emergency room. Just like we do for car insurance, where we shop around to make sure that if our car gets totaled or stolen, that car insurance pays for it. We don’t expect car insurance to pay for our oil changes, or gas, right? We expect car insurance to pay for really catastrophic bills. And if we had a health insurance system like that, it’d work a lot better and a lot more rationally.
