In general private enterprise does a lot better than the government. From what I understand, there is massive overspending on healthcare in the US, most likely due to how insurance works. The obvious way to fix this is to just tax healthcare.
Your insurance is often payed by your work (I’m not sure how often, though), so you have no option to change insurance companies. If they let you choose your healthcare, you pick the most valuable. If they don’t, they pick the cheapest. Neither results in the best deal. The only incentive is that you’ll prefer a job with better healthcare, so your company will try to find a provider that can give better deals. It’s kind of distant though. It’s not like government healthcare has very direct incentives, but I suspect that the value of the two are similar, as opposed to the private sector being substantially better.
In general private enterprise does a lot better than the government.
Does it? Thats a pretty broad statement, and even if it does in general that doesn’t mean it does in particular cases. The obvious counterexamples are natural monopolies, e.g. water, roads and I would argue healthcare.
It’s not like government healthcare has very direct incentives,
The main incentives are voter pressure for better healthcare and the cost of various infrastructure and treatments. As the public generally demands healthcare be at least as good as it has been before, if not better, there is an incentive to be efficient in allocating cost to healthcare.
Notice that the standard argument for water and roads doesn’t apply to healthcare.
Which arguments do you mean? The obvious ones to me are economies of scale, limited resources and price control which seems to apply.
Could you clarify, are you arguing free market is always superior to state action, or that it sometimes is and sometimes isn’t but healthcare isn’t one of the latter cases?
The examples FiftyTwo provided—clean water and roads—aren’t public goods either. In a sufficiently populated economy, they are rivalrous. They are usually classified as common goods, non-excludable and rivalrous.
Why are they regarded as non-excludable though? Both roads and clean water could be delivered as private goods. Toll roads demonstrate that roads can in fact be excludable. The Cochabamba water war would not have happened if clean water were non-excludable by its very nature. Non-excludability is not an intrinsic property of these goods. Providing these goods in a non-excludable manner is a social decision. We (or at least most of us) think it’s important enough that people not be denied access to (certain) roads and clean water on the basis of their economic status that we are willing to tolerate some inefficiency in their provision.
So whether or not a good is a public good is not a great basis for deciding how that good should be provided, because whether or not a good is a public (or common) good is often a consequence of decisions about how it should be provided [1]. The way healthcare is provided in the US right now, it is both excludable and rivalrous. If we lived in a country with government-funded universal health care, healthcare would be non-excludable but still rivalrous, just like roads in the US.
Appealing to the excludability of health care in the status quo in order to distinguish it from roads and water isn’t a great argument for treating health care differently. Of course, you may have independent reasons to think health care should be provided in an excludable manner while roads should be provided in a non-excludable manner. But the mere fact that these goods are actually provided in these ways is not an argument for the claim that they should be provided in these ways.
[1] There are certain public goods—pure public goods—which cannot possibly be provided in an excludable manner, at least not with currently available technology. Examples are streetlights and flood control. What I say here doesn’t apply to those goods, of course. But roads and clean water are not pure public goods.
so is your claim that all industries are natural monopolies?
Well, interestingly, that’s not all that far-fetched. Complicated features of production lead to non-convexity, which can break down proofs that the free market finds optimal solutions. To the extent that the real world is messy, there are lots of things out there that are qualitatively monoply-ish.
From what I understand, there is massive overspending on healthcare in the US,
A large part of the problem is that since private insurers don’t have that much political power, politicians can score points by passing laws requiring them to cover certain procedures, which may very well not be cost-effective.
The politicians presumably get a balancing disincentive when they have to pay for these medical procedures and hence raise taxes, increase deficit or redirect money from other projects (most likely those that have less public support, for better or worse).
In general private enterprise does a lot better than the government. From what I understand, there is massive overspending on healthcare in the US, most likely due to how insurance works. The obvious way to fix this is to just tax healthcare.
Your insurance is often payed by your work (I’m not sure how often, though), so you have no option to change insurance companies. If they let you choose your healthcare, you pick the most valuable. If they don’t, they pick the cheapest. Neither results in the best deal. The only incentive is that you’ll prefer a job with better healthcare, so your company will try to find a provider that can give better deals. It’s kind of distant though. It’s not like government healthcare has very direct incentives, but I suspect that the value of the two are similar, as opposed to the private sector being substantially better.
Does it? Thats a pretty broad statement, and even if it does in general that doesn’t mean it does in particular cases. The obvious counterexamples are natural monopolies, e.g. water, roads and I would argue healthcare.
The main incentives are voter pressure for better healthcare and the cost of various infrastructure and treatments. As the public generally demands healthcare be at least as good as it has been before, if not better, there is an incentive to be efficient in allocating cost to healthcare.
That requires argument. Notice that the standard argument for water and roads doesn’t apply to healthcare.
Raikoth/Yvain argues it better than I can
Which arguments do you mean? The obvious ones to me are economies of scale, limited resources and price control which seems to apply.
Could you clarify, are you arguing free market is always superior to state action, or that it sometimes is and sometimes isn’t but healthcare isn’t one of the latter cases?
Note: That’s Yvain’s website.
The former is almost always true and the later is always true, so is your claim that all industries are natural monopolies?
I mean that healthcare is not a public good in the sense that it is both excludable and rivalrous.
The examples FiftyTwo provided—clean water and roads—aren’t public goods either. In a sufficiently populated economy, they are rivalrous. They are usually classified as common goods, non-excludable and rivalrous.
Why are they regarded as non-excludable though? Both roads and clean water could be delivered as private goods. Toll roads demonstrate that roads can in fact be excludable. The Cochabamba water war would not have happened if clean water were non-excludable by its very nature. Non-excludability is not an intrinsic property of these goods. Providing these goods in a non-excludable manner is a social decision. We (or at least most of us) think it’s important enough that people not be denied access to (certain) roads and clean water on the basis of their economic status that we are willing to tolerate some inefficiency in their provision.
So whether or not a good is a public good is not a great basis for deciding how that good should be provided, because whether or not a good is a public (or common) good is often a consequence of decisions about how it should be provided [1]. The way healthcare is provided in the US right now, it is both excludable and rivalrous. If we lived in a country with government-funded universal health care, healthcare would be non-excludable but still rivalrous, just like roads in the US.
Appealing to the excludability of health care in the status quo in order to distinguish it from roads and water isn’t a great argument for treating health care differently. Of course, you may have independent reasons to think health care should be provided in an excludable manner while roads should be provided in a non-excludable manner. But the mere fact that these goods are actually provided in these ways is not an argument for the claim that they should be provided in these ways.
[1] There are certain public goods—pure public goods—which cannot possibly be provided in an excludable manner, at least not with currently available technology. Examples are streetlights and flood control. What I say here doesn’t apply to those goods, of course. But roads and clean water are not pure public goods.
Yes, there’s certainly something to be said for having water not be a government monopoly.
Well, interestingly, that’s not all that far-fetched. Complicated features of production lead to non-convexity, which can break down proofs that the free market finds optimal solutions. To the extent that the real world is messy, there are lots of things out there that are qualitatively monoply-ish.
A large part of the problem is that since private insurers don’t have that much political power, politicians can score points by passing laws requiring them to cover certain procedures, which may very well not be cost-effective.
The politicians presumably get a balancing disincentive when they have to pay for these medical procedures and hence raise taxes, increase deficit or redirect money from other projects (most likely those that have less public support, for better or worse).