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Brooks Wilson's Economics Blog: Health Care and the Miracle of Markets

Monday, November 2, 2009

Health Care and the Miracle of Markets

I sent the following letter to the editor to the Waco Tribune-Herald.

Sunday’s front page article titled, “Public option would cover few,” quoted Eastman Kodak’s CEO, Antonio Perez, who correctly fears the public option, errs incorrectly asserting that there are no miracles to solve the health care problem. The miracles are in the markets which are locked out of the current political debate.

Why haven’t markets worked better in developing new medical services at lower costs? In part, it is the unintended consequence of the government’s price-wage freeze in 1942 designed to organize our war effort. While wages were frozen, the government allowed companies to attract valuable workers by increasing fringe benefits such as employer provided health insurance. The government exempted wages used by the employer to buy insurance from taxes while taxing wages used by households privately purchasing health insurance, giving incentives for households to push as much of their medical care costs through their employer obscuring the true cost of medical care through the third party payment system.

By putting insurance plans purchased by individuals on the same tax footing as employer purchased plans, the insured will again be forced to consider cost. Insurance providers will innovate. Low cost, high deductible plans will probably emerge. Health care innovators will focus not on just prolonging life, but doing it at a low cost.


Brooks M. Wilson

For students who wish to read more on how a employee provided insurance plan leads to escalating costs, read "Rationing Health Care."

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  1. Jason Weaver4/11/09 12:44 AM

    I completely agree. My dad owns his own business and the numbers he puts up for his employee's insurance is incredible. Because of this, his small business has to jump from insurance company to insurance company like a mad man to get the most benefit at the lowest cost. With employees actually having more invested into their insurance, I can guarantee that they would feel a lot more like my dad and his company. There is no doubt that insurance providers and health care leaders will be forced to be more innovative.

  2. Mary Catherine Driese4/11/09 7:43 PM

    This idea seems to make more sense than what I have heard in the past - it is more fair, eliminates the third-party participation, and gives the population what they really want: low cost, fantastic health care.

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