Choose wisely: Healthcare law changes about consumer options

By Michael Hicks

Every criticism of more market-based solutions for America’s healthcare devolves to two fetid arguments.

The first is that Americans are too stupid to make wise choices about healthcare, and the second is that markets for healthcare (and health insurance) have been made so complicated that even smart people cannot navigate them.

I beg to differ.

American consumers are mostly a sophisticated lot. They make long-term choices about acquiring human capital in schools and college, which involve millions of dollars in lifetime earnings. They form families, and choose the size and composition of their household to satisfy their particular interests, loves and aspirations.

American families make occupational and location choices that involve complex, long-term trade-offs regarding income, time spent in formal education, risk of unemployment and the demands of raising a family. American consumers arrange their lives to participate in social and community organizations in complex ways involving everything from book and athletics interests to faith and fraternal matters.

American families also make complicated financial arrangements, with most purchasing homes, automobiles and investing in retirement plans, which include a wide variety of sophisticated insurance products.

Still, not every American is a wise consumer. Indeed, data suggests that about half of Americans are below average intelligence. What is surprising is how well consumers do things in their own enlightened self-interest.

That many people have problems figuring out the healthcare system we have now is not because they are stupid, as so many pundits who promote more government control of healthcare would have you believe. Rather it is because all the familiar signals of price, quality, choice and comparison available in other markets are ruthlessly suppressed from healthcare markets.

Indeed, limits on interstate insurance competition, restrictive licensing rules and opaque pricing are all the result of government rules that reduce the effectiveness of market-based choice in healthcare. Therefore, it is with an immature sense of hypocrisy that those who support Obamacare oppose more forceful market-based solutions for healthcare. After all, their own policies have purged consumer choice from healthcare.

Ironically, Obamacare (the Affordable Care Act) intentionally increased transparency in pricing, and constructed all sorts of pseudo-market mechanisms to reduce costs. In fact, the only areas in which the ACA can claim any sort of cost reduction comes in its few efforts to make healthcare markets more transparent in their pricing. In every other regard the Affordable Care Act is on the cusp of a grand collapse. This inevitable Obamacare collapse won’t change access to healthcare, just the way we pay for it.

Congress is once again taking up that issue and has had a rocky start of it. The disagreement among the majority party is how much to rely upon market-based solutions. In my judgement, the mistake they made is in not being more honest about the significant challenges facing an overhaul in healthcare financing.

It is easy to see both the shortcomings and benefits of the wide-ranging ACA. It is far harder to unravel the decades of efforts to rob families of information and choice about paying for and accessing healthcare.

It is also important to discuss honestly the need to sustain some non-market-based solutions. There remains tens of millions of Americans who choose not to enroll in Medicaid, which is free (to them). The likelihood that these people will instantly turn into sophisticated healthcare consumers is slim.

After all, CDC studies report that these folks smoke at twice the rate of insured adults. Still, it would seem that introducing the nearly one in three uninsured adults who smoke to the costs of their decisions is prudent. That we treat them and many others like them as little children, and hide from them the cost of their choices is not making anyone better off, despite what ACA advocates would like you to believe.

Government can do many wise and useful things. One thing it does poorly is mimic the signals free markets provide for costs and quality. Expanding market-based choice for healthcare is the low-hanging fruit for reducing healthcare expenditures.

Those people who oppose giving you more options about how and when you spend money on healthcare treat you as if you are stupid, and they wish to make important life choices for you. Unless you are indeed stupid, you should ignore them.

Michael J. Hicks is the director of the Center for Business and Economic Research and an associate professor of economics in the Miller College of Business at Ball State University. Send comments to [email protected].