 Welcome to Free Thoughts, a podcast project of libertarianism.org and the Cato Institute. I'm Trevor Burrus. And I'm Aaron Powell. Joining us today is John C. Goodman, Senior Fellow at the Independent Institute and President and Founder of the Goodman Institute for Public Policy Research. He is the author of Priceless, Curing the Healthcare Crisis, and the new book, A Better Choice, Healthcare Solutions for America. He is also the co-author of 1992's Patient Power from the Cato Institute. He has been called the father of health savings accounts. Welcome to Free Thoughts, John. Glad to be with you. So, I'd like to start with the title of your last book, as you mentioned in your newest book, which is a sort of summation of parts of your last book. But the title of your last book, Priceless, is an intentional double entendre. It is. So, in what way is the American healthcare system priceless? Well, in one sense, there are no real prices in the medical marketplace, and it's priceless in that sense. But at the same time, your healthcare is priceless. And I wanted to get both of those ideas across. So, how do we get to a priceless—I mean, it's a very big question, and it's almost the entire question of this podcast, but how do we get to a priceless American healthcare system? Well, how we got there was over a hundred-year period. We have completely suppressed normal market forces, and we've done it year after year, decade after decade, until we reach a point where no one sees a real price for anything, no doctor, no patient, no employer, no employee. What does that mean to not see a real price, though? Because if I go to the doctor, I get a bill, and it's got costs on it, so there is a price I'm looking at. Well, when you walk in the doctor's office and you ask what this is going to cost, they probably don't know. And there is no real price there. They have different payment rates from different insurers, so depending on whether you have Blue Cross or Edna or Medicare, the reimbursement or the payment would be different. Those aren't real prices. That's not what happens in a normal market. You don't go to a restaurant and you pay one fee, and the table next to you pays a different fee for the same food. So what happened in 1935, just playing a random ear, there was health insurance, I assume. Did it exist before then? Well, there was very little then, but over the period of the 20th century, principally because of the American Medical Association, people did get pushed into health insurance schemes, and we encouraged through the tax law for people to use insurance rather than out-of-pocket payment, third-party insurance rather than self-insurance through a health savings account. We encouraged through the tax law people to get group insurance through an employer rather than have it on their own because the tax advantages are there. And because there's an open-ended tax subsidy, we encouraged people to over-insure. So at the end of the day, we have insurance companies paying almost all the bills. And when third-party insurers, but that I mean insurance companies and government and employers, when they're paying all the bills instead of the patient, the providers no longer are competing for us on the basis of price and quality and access to care. And so out-of-pocket was probably most of the way that medical costs were paid for in the 30s, insurance starts to come around in the 50s, and the first big U.S. program is Medicare and Medicaid, correct, for I mean like big top-down program. Those are the first big government programs, and they're huge. And we have almost 50 million people in Medicare and maybe 70 million people are so in Medicaid. So these are huge programs and all run by government, and all the bills are paid by government. How do those affect the price of healthcare in general? They have effects on the price. You mean the cost? Yes, on the cost, yeah. Well, we didn't have a serious healthcare inflation problem until 1965 when we got Medicare and Medicaid. Interestingly, there's not a lot of evidence that the introduction of Medicare made much difference for the healthcare of the elderly, but we definitely spent a lot of money, our taxpayer money, and that additional spending, billions and billions of dollars forced prices, and it's been going on ever since. How much of that is policy forcing up prices and how much of that is simply medical care becoming more sophisticated? Because I mean medical care and prior to the 20th century, for all intents and purposes didn't really exist. I mean, there wasn't much they could do, and what they could do was pretty cheap, but then we had radical explosion in what we're capable of, which brought a whole lot of technology, and that stuff's expensive. Well, it's expensive because we reward the kind of technology that increases costs and therefore increases payments by third-party payers. If you contrast this with a field like cosmetic surgery or lasing surgery where there are no third-party payers, we've had in those two fields tremendous innovation and technological advance, and yet the real price keeps coming down. In a normal market, technological improvement tends to lower costs, only in healthcare does it continue to raise costs. Those things are elective surgeries. They're not necessary care. You can choose not to get Lasik and you can get glasses, which are good enough, and you can choose not to get cosmetic surgery, and so to some extent we're very price-sensitive on that. They have to keep costs down, right, or people will just opt out, but cancer treatments you can't opt out of, you know... Kidney dialysis, heart attacks. And those also have a huge technological component. Yes, but you're not focusing on the right variable here. People can choose not to do a lot of things in healthcare. A lot of people who could use a knee replacement don't choose to get their knee replaced, so there's a lot of choices are being made, but that's not what's critical here. What's critical is who pays the bill, and when we pay the bill ourselves, there's never a question about price. We know when you're going for cosmetic surgery, procedure, you know in advance what the price is going to be, same for Lasik surgery, same for the walk-in clinics, wherever the third parties aren't, you know what the prices are, and you also know that the providers are competing for your business based on price, quality, and access. How much of this, though, do we want prices in there in the sense that... Do we want people facing these bills and making those decisions when they're in a highly vulnerable state? You've just found out that you have pancreatic cancer. You're not necessarily thinking straight. You're in stages of grief, and now you have to make these decisions about whether you want to bankrupt your family in order to support yourself, that it seems like... I mean, if we analogize that to... There are other areas where people are in highly emotional states when they buy stuff, where there are markets, and yet the prices are extraordinary, something like the wedding and funeral industry. There's competition in the wedding and funeral industry, but it doesn't seem to be doing much. The prices are extraordinary, certainly way above what they would need to be to have even enormous profits in these things, but people just can't think straight when a loved one has just died or when they're about to have the most important day of their life. Or when they have pancreatic cancer. Right, and so do we want, you could make the argument that like, look, we want to protect them from that. We want them to not have to think about that and just be able to get the health care that they need. What we want is what Adam Smith wrote about 200 years ago, and that is we want people on the producer, supplier side, to find it in their self-interest to meet our needs, and that's what's critical here. It makes it more difficult if it's an emotional situation, but people can have advisors and have doctor advisors, and that works quite well. But if on the supply side of the market, people are not trying to meet our needs, if they're not competing on price and quality and access, then they're not going to meet our needs very well. How do you react when someone says, which I'm sure you've had many times, and maybe you've already answered this question, that health care is a right? Well, I react by saying that no country in the world has made health care right. It's just rhetoric. If you live in Canada, you don't have a right to any particular medical procedure. You don't have a right to an MRI scan. You don't even have a right to a place in line if you're the 50th heart patient waiting for surgery. You're not entitled to the 50th surgery. Other people can get in front of you. In fact, Americans can go up and pay the hospital and get ahead of you. You mean just as a matter of both legal, they don't have a right to it legally, and they don't have a right to it functionally? Yes, and yet they continue to use the language of rights because it somehow makes everybody feel good. So the right to health care has no content as far as I'm concerned. What is meaningful is designing a health care system that meets people's needs efficiently and does so at minimum costs and produces high quality results and doesn't make us wait for months or years to get it. And that's something you've written about a lot in all of your books, but the time price versus the money price. Can you explain a little bit how that works? Well, people on the left tend to ignore the time price of care, and that's because they believe in health care systems where money plays no real role, money from the patient. And so instead of rationing on the basis of price, we ration by waiting. By the way, we've also done that in our country. We wait for care everywhere. We just don't wait as long as the Canadians wait. But waiting is costly, time is valuable. The walking clinics and the CVS pharmacies are called minute clinics. And the reason for that term is they're suggesting to you they know your time is valuable as well as your money. And that's what we would expect to happen in a real market for health care. But don't those, I mean, there's an emergency that those clinics, urgent care, they take our insurance. I mean, how are they different from the hospitals and wherever else? And they also don't tell me, I mean, I take my kids to urgent care and they don't tell us the prices up front. But we also don't wait very long. Well, at the walking clinics, they came into existence to cater to people who were paying out of pocket with their own money. Now, through time, the insurers began to pay for their services because they realized that this is much cheaper than having the patient go to the doctor's office or the emergency room. But essentially, it was a market formed to deal with people paying with their own money. And generally, when people pay with their own money, they don't they're not asked to guess what the price is going to be. So at the minute clinic, you actually have a price list. And if you have an earache or sore throat, you know, advance what you're going to pay. So this is what happens in a normal market. Now, some people I can hear my left wing friends in my in my ear. And I understand the argument, some people say that well, this is entirely unfair. That we you shouldn't have to think about how much health care you need, you shouldn't have to think about whether you have enough money to fix your knee or fix anything, whether rich people can have a knee and you can't have any is fundamentally unfair. We need to fix that in some way as a matter of simple justice. It needs to be fixed by paying for it from above or subsidizing or doing price controls or anything like this that just the basic premise of people paying for health care is unfair. Yes, I'm moving the opposite direction. I think a lot of evidence is out there that people can manage their own health care with a little bit of training instructions from providers. And if people are going to manage their care, they'll do a better job if they manage the money that pays for that care. So I believe in health savings accounts, I would make it easier for employers and insurance companies to put money into health savings accounts that people are willing to manage their own care. And people need to always be conscious that health care costs money. And if they know what the real cost is, then they can make trade offs. And imagine a mother who wakes up in the middle of the night, her daughter is sick. Does she take that daughter to the emergency room or not? Who's the best person to make that decision? The mother is. So the mother should know what the cost is. And she is in the best position to evaluate the need. How much of a difference does it make where that money they're spending comes from? So if they are spending their own money out of their pocket, and they're, you know, they're seeing the prices and they're choosing between them, versus we've given them say a voucher that then they can spend, but they're still seeing prices and choosing between providers. Well, I think people need to understand is their money and a voucher doesn't quite sound like money. So but if there's a if there's an account, and they can see how much is in the account when they spend from it, it's like like any other account. That's important. People will be better managers of health care dollars than employers and insurance companies or government. There's no substitute for the patient managing the money. Two of your total books, patient power, and then Priceless and then the kind of addendum or summation of Priceless in the new book. But you mentioned in the introduction of Priceless that you could have called it doctor power, which is an interesting element of your patient power and doctor power, which seems to connect these two parts of your thinking that you have to be looking at both the demand and the supply side if you want to do any serious health care policy whatsoever. I want to liberate the market and their two sides of the market, people getting the served and people doing the service. Doctors are horribly constrained by the third party payer system. And by that again, I mean by employers, insurance companies and government. So I want to liberate the doctor and liberate the patient and let them interact with each other as they would in a normal marketplace. Well, so on the third party payer system, with a little bit more history involved, why do we get insurance through our jobs? Why do so many of us do that? What was an accident in World War II? We had price controls. But for some reason, the federal government decided that if employer provided insurance, that that didn't count or wasn't covered by the price control. So instead of paying price controls on wages, price controls on wages, what would just what's the what was the motive behind that? What would it's in wartime? And we're saying as part of what we're doing during wartime, employers can't compete with each other on how high of wages they're willing to pay. It's in wartime and a lot of resources are going into the war. And that means that people with the same income now are chasing fewer goods and services. And so the government mistakenly decided that it would control prices and wages. In any event, they decided that money spent by an employer on healthcare didn't count as part of the wage, although it surely is part of the total compensation to the business, at least to the employer. So that decision was made. And then the IRS followed up and decided, well, okay, we won't tax contributions for health insurance the way we tax wages. And and from then on, health insurance provided at work was a tax favored benefit. And you know, if you're in the 50% tax bracket, that means that the subsidy you get from having employer pay your premium is 50%. So that's that's quite large. But even if you're in the 25% or 35% bracket, the subsidy is large. Can you break that down just a little bit more exactly how that works? So you basically face the choice where your total compensation package includes, let's say you make $50,000 a year, you have $9,000 that your that your employer spends on your healthcare plan that has a tax break behind it. But you could you could decline the healthcare plan and then get money in return. But that money is now taxed, correct? At your wage rate. That's basically what you're saying. Well, we don't generally give employees the right to choose between health insurance and wages. And in fact, the federal law makes it difficult to do that. But it is definitely true that in the aggregate, health insurance is a substitute for wages. And so all employers know this and employees know that. And in your example, the total compensation package is $59,000 and 50,000 is wages and 9,000 is health insurance. The 50,000 wages gets taxed. Let's say it's a 30% tax. The $9,000 is not being taxed. So so the implicit subsidy there is 30% of 9,000. That's $3,000. So the government in that example is paying for a third of the cost of health insurance. So if the health insurance, if employers started offering this during World War Two, but you had mentioned when Trevor asked about 1935 and whether people had health insurance, there wasn't a lot of it. So did was health insurance something prior to employers starting to provide it that people had been buying most like lots of people in buying from themselves. And then they're like, Oh, great. Now my employer is giving it to me. Or did the this, you know, route around the price control, create the market for insurance. Well, prior to World War Two, there was very little health insurance. After World War Two, it became more common. For reasons we've discussed, employers saw an advantage to providing it. But also remember, one of you remarked earlier that in an earlier age, there wasn't much doctors could do. I just watched a movie the other night, The Last Hurrah, and the politician has got a heart condition. And the doctor says, you know, you'd be best to go home and be in your bed. Well, we wouldn't do that today, right? We would have him in the hospital. We would have him hooked up to all kinds of monitors. So health care becomes more expensive. And therefore the desire to have health insurance increases. So those two things tended to go together. The it seems to me too that after that, we get this increase in expense. But now you have a problem where you're not you're insured. And so I assume that more and more people are getting insured starting with the tax break through their employer. Just it kind of just goes up over time, I imagine the amount of people after the tax break comes in, the amount of people getting insurance through their employer continues to increase. And now you have a different kind of market because the employers are shopping for insurance for their employees. So there's another intermediary between the the patients and the insurance. And that creates maybe distortions of some sort. Well, absolutely, because you you have a not necessarily long term relationship with employer and not a long term relationship with the insurance company. And yet they're paying all the bills. And when they're paying the bills, the doctor see tends to view the the insurance company or the employer as as his customer, not the patient. And it's the bill payer that influences what the doctor does a lot more than what would be good for the patient. So third party payment automatically distorts the incentives of the doctor. But it also distorts the incentives of the patient. If I know I'm not going to pay anything out of pocket for an MRI scan, I'm more likely to get the scan, even if it's unnecessary. This is one of the weird things about calling health insurance insurance. And so I'm curious, I guess, if it's always been this way from that World War two on that, you know, I have I have house insurance. But if I decide, you know, my curtains get ruined or something and I need to replace them, my house insurance doesn't cover that. It's for if the place burns down or something. And I have auto insurance, but that's if my car gets really wrecked. But otherwise, there's this extremely high deductible, right? But health insurance works basically. I mean, I just never opposite of that. Yeah, I never pay any. It's not really insurance. It's like a alternate way of paying for healthcare. Was that how insurance worked when the employers were first providing it during World War two? Or is that something that's come about over time? Well, you're correct that insurance today is prepayment for the consumption of medical care. It's not real insurance. Early insurance was real insurance. Now, the American Medical Association has had a political agenda that goes all the way back to the middle of the 19th century. And one of their goals was to change how health insurance worked. And the hospitals created blue shield and blue cross and the doctors created blue shield. And in both cases, they created these entities because they wanted their bills paid. So they didn't want insurance to act like auto insurance or homeowners insurance. They wanted insurance plans that got all the bills paid. In fact, in the early days of blue cross, not so long ago, the way blue cross would pay hospitals is based on how many bed days their patients were there. So let's say that blue cross had half the bed days over a year. Then blue cross would pay the hospital half of its cost for a year. So it was cost plus reimbursement. And all the other insurers were forced to pay the same way. So we literally suppressed the market in health insurance. The hospitals, the doctors did not want it to work like normal insurance. So we get what you described as not like real insurance. Why did the doctors get that cushy system and the hospitals get that? I mean, I can imagine that auto mechanics would love it if car insurance worked the same sort of way. And auto detailers and people who clean your car and they could all get together and make it all be auto insurance. So was there something special about health care that allowed it to become that kind of insurance? The doctors have been the historically the most powerful of the lobbying groups. They didn't want for they didn't want for profit medical schools. And so they use their lobbying power to wipe out that. And so all medical schools became nonprofit. They didn't want for profit hospitals they wanted. So they use their lobbying power to greatly reduce the number of for profit hospitals. They really didn't want for profit health insurance companies and Blue Cross originally was not for profit at all. So so they use their political power. And then they set up Blue Cross they set up Blue Shield and they went to legislature and Blue Cross Blue Shield got certain privileges that other insurers didn't have that allowed them to become dominant in the market. And once they were dominant, a company say like Aetna would come to the hospital and the hospital would say we're not going to deal with you at all unless you pay for pay us the way Blue Cross pays. So that's how the market evolved. I describe this as the complete suppression of normal market forces. And by let's say well actually let's say the early 90s when you first get a Hillary care as I guess what it was called but it had some features that were common to the Affordable Care Act. But the crisis of the uninsured, how much was that an unemployment problem or an underemployment problem or some sort of between jobs problem? Well it's all of that. People between jobs are unemployed. Anyone on his own who buys health insurance doesn't get the same tax break that employers get unless he unless he's qualified as an independent business. And so yes we subsidize employer provided insurance and we penalize people who obtain it on their own. And then we have a quote unquote crisis for the uninsured. But that also seems to create a problem of not having that dynamic market of insurance raises the question about quote unquote how the real insurance market would operate because people are going to always say well in any free market of insurance the insurer is going to try and kick off all the sick people and make sure it has no sick people on there and that's what a free market insurance is going to look like. But some of that appearance of insurance seems to be how insurance appears to have been created by this employer system and these other kind of distortions. Well actually it's the other way around that under Obamacare the insurers are running away from sick people and they only want healthy people and that's very evident in the way they're competing. They have very narrow networks in Dallas for example Blue Cross in the exchange pays doctors 10% less than Medicaid pays. So they have really low fees the best doctors don't join their networks. But since they're paying low fees they can get their premium down. They're convinced that only healthy people that healthy people only pay attention to price. And so they'll be attracted by low premiums they won't look at the network. The only people who look at networks are people who are sick. And so that's the way the insurers are acting. What I would regard as a real market for insurance would be one in which insurers get real premiums that reflect expected costs. And in a real market you would find people specializing in cancer care and care for AIDS patients and care for heart patients. And they would try to attract patients with problems. Because in a normal market when people have problems there are opportunities to make a profit. I guess there are roofers and people out there to fix your teeth and I mean there's dental insurance but that's very different than other types of it. There are all these things out in their market that try to fix your problems and but isn't it just sort of unseemly that they're trying to get a profit off of sick people? No, no, no. Again back to Adam Smith. We wanted you want people to find it in their self interest to meet your needs. One way to think about health insurance is compared to other kinds of insurance. We all see these ads for casualty insurance on TV and one of the ads the actor standing in front of the town he said it took 20 seconds for this town to be destroyed and that's the all state ad. And then all the Aflac ads are communicating the same message. The message is that we know you don't think about health insurance until you have a real problem. If you have a real problem then we'll be there. Health insurance doesn't advertise that way. The health insurers don't never say if you have cancer, you have AIDS, boy are we the plan for you. It's just the opposite. They tend to show pictures of young healthy people because that's who they want to join their planet. They do not want to attract people with problems. But I mean a lot of medical problems show up when you least expect it. And so what's to stop in a free market for health care? Yeah they attract me when I'm young and healthy and then I get cancer and they dump me. I mean that seems like a big concern as well is that we just you get sick and you suddenly become the very expensive person and now either your premium shoots so high up that you might as well not have insurance because you can't afford them or they just kick you out entirely and we don't have a legal regime to protect you from that. Well in most states that has been illegal for decades. Insurers cannot kick people out of a plan simply because they get sick and that's been federal law for since 1996. And it should be the law. Part of the insurance contract should be that you can continue to renew and then when your health status changes they don't get to jack up your rates or kick you out of the plan. It's the law now it's been federal law for quite a long time. It was law in most states for a long, long time and that's the way the law should read. But the Obamacare situation is in your newest book it seems to be as you mentioned already with how they're running away from sick people that's producing a lot of the exact opposite of what it was intended to produce. Well Obamacare is bait and switch. President Obama said you know if you're sick you've got a pre-existing condition and insurers aren't going to be able to discriminate against you. Well true enough they can't deny you enrollment in their plan but they're discriminating in a different way. They're getting very very narrow networks that leave out the best heart doctors, the best cancer doctors and they hope you won't join their plan and if you do they hope you won't like it and you'll go join some other plan. So we just substitute one kind of discrimination for another. How do those narrowed networks work? Because if these doctors are opting out of them that you're the best heart surgeon and you opt out because they're not paying you enough but now how are you earning anything because how many people are going to buy heart surgery without insurance? Well now I'm talking about what happens in the Obamacare exchanges and there are only about 6 to 8 million people in those exchanges. So we got 150 million people getting insurance from an employer and they're not having those same perverse incentives but it could expand to the rest of us so we need to worry about it. Let's go back a little bit and just sort of set the scene because Obamacare, the Affordable Care Act, passed in 2010. First of all the question is a lot of people said it was a conservative plan originally or it was very much like a conservative plan so the first question is was it? How was it like a conservative plan for healthcare? Well it's a managed competition plan in which people pay the same premium, community rated premium regardless of their health condition. This has been the way That's a price control essentially correct? Yes it is. Now this has been the way the federal employees plan has worked for many many years and Hillary Clinton tried to design her reform based on the federal employees system and so did Mitt Romney and so did Barack Obama and along the way the Heritage Foundation some other conservative think tanks thought this was a good idea but you got to remember in a community rated system no one's paying the right price so it means that some people are being under charged and they will over insure and other people are being over charged and they will under insure so no one's paying the right price no one's got the right kind of insurance and for the federal employees you had the office of personnel management sort of road heard on the system and insurers had kind of gentlemanly competition so the problems weren't that bad. What's happening in the Obamacare exchanges is we're getting dog eat dog competition. This is real fierce competition and when people compete in the face of perverse incentives you get real perverse outcomes. Now if I can set up the scene because some of these things I think are still inscrutable to people about what the Affordable Care Act is it's a command that you can't deny pre-existing coverage based on pre-existing conditions. It's price controls community rating based on that. It's a mandate that you have to buy health insurance or have an employee get it through an employer and then for those who aren't part of that it creates these exchanges which is what you've mentioned but for those who understand these what are these exchanges you're talking about? Well this is the individual market. People who buy insurance on their own and the exchanges have basically taken over that market and you go electronically online and buy insurance and you've probably read horror stories about how difficult this is but if you're sick enough you'll bear with it and what we're finding out is that the people are sicker than we really imagined they would be and if they're sicker that means costs are higher and that's why we're now for next year getting really high premium increases with some Blue Cross plans for example asking for 50% increases around the country. So that's the exchange and that's what's happening. And this is this was expected would you say or is this worse than it was expected? What were the predictions? Now on the other side too I want to push back and say that you do hear if you were reading if you read The Huffington Post or you listen to President Obama you hear tons and tons of data about how it's working how people are covered price the price curve is steady is going down for the first time in 10 years coverage is higher people are satisfied they have as many as many stats on the other side about how it's working as this side is your side has about how it's not working. Okay. So I don't play I don't I don't play that game. Yeah, but are some of their stats are more people covered? Well, may I put it in slightly different way? Okay. For me it's not an issue we hear some good points here's some bad points that's maybe a wash. What we need to think about is what's the worst thing can happen? What's the worst thing can happen is a death spiral and a death spiral occurs when you get higher cost than expected and the insurers raise their premiums cover those costs and as they do so healthy people tend to drop out the only people who remain are sick and so you have to have another round of price increases and that keeps on going until in the end the premium you're charging is about equal to the cost of medical care no one can afford it and that a death spiral is the insurance industry equivalent of bankruptcy. So that could happen in the exchange and if it does then I suspect that what would happen is the government would step in and run the entire exchange program like like another Medicaid program government would just end up providing insurance and paying the bills. And this is the thing that strikes me as odd is because right now I think the fine for a single person not buying insurance the tax sorry is $95 and so that means I can either and they can't deny me from getting insurance if I get sick so if I didn't have insurance so I can either pay let's say $2,500 in a year for insurance or I can wait till I get sick and then still get insurance and pay a $95 fine. How is it so clear to us I mean this is me trying to push back on myself that seems so obvious what did they do to try and keep that from happening? It can't be as clear that this is just going to go spinning down the drain. They had to have seen that this was in the law that the incentives weren't there or am I giving too much credit? Well we're in uncharted waters and so nobody knew exactly what was going to happen. I can tell you that this last tax period more than seven million people paid that tax because they didn't have health insurance and there are millions more that didn't pay a tax because they were exempted for one reason or another. So a lot of people aren't paying the tax and you're absolutely right if they develop a serious illness they're going to find a way to get health insurance and that contributes to death spirals that people stay out while they're healthy and they only enter when they're sick and that means the cost of insurance really gets high. Couldn't we solve it though by just jacking up that fine you just keep raising it until people start buying insurance? We could indeed or tax. We could indeed but the problem with the Obama administration is although they argued forcefully for a mandate they exempted millions and millions of people. I mean you know if you got your electricity cut off for a month or two you're exempted from the fine. If you don't owe income taxes you're exempted from the fine. They found dozens and dozens of reasons to exempt people and what you're suggesting is now let's go in the other direction let's make it even more onerous if they don't ensure. Well interestingly as a legal point it could be possible based on Chief Justice Robert's opinion in the first Affordable Care Act case that a too high a fine that was too high would be unconstitutional. We have no idea where that is but it could be possible if it's almost punitive. But given his willingness to bend things around it's unlikely. Yeah, yeah we'll see what happens. I think it's worth pointing out that we never had to have a mandate in the first place despite the claims that it was needed. In our Medicare program we have community rated guaranteed issue which means they can't turn you down for Medicare Part B for Medicare Part D which is the drug program and for MediGap insurance. So all the seniors pay community rated can't deny them care and yet there's no mandate. How do we do that? Well, the way we do that is we tell the senior if you don't join when you're first eligible your premium is going to go up and in the MediGap insurance market they can actually underwrite you if you don't join when you're eligible. You said that to some extent we're in uncharted waters here and don't know exactly how everything will play out but Massachusetts had a system at least somewhat similar to this for a while before Obamacare. So how have things as first how have things played out in Massachusetts and then can we draw conclusions from that to what may happen nationwide? Massachusetts had almost everybody insured before they started. So they had less than 10% uninsured. They insured about half of those. What's happening with Obamacare is a far larger pool of people lots and lots of people who were sitting on the sidelines with medical problems and didn't have insurance and now all of a sudden these people get highly subsidized insurance. It may settle down and work in a reasonable way but in the back of my mind I think we should keep in mind that a death spot hold is possible and if it does the whole market collapses and the government is going to have to nationalize it. And is that this seems to be a very big concern because there's a lot of problems you listen to but there's employer incentives about trying to keep people at lower wages. There's a ton of things that are happening. We predicted our side is predicted this is going to crash. Do you see if a crash occurs the basic call would be for a single payer system that they tried to work within the free market system of the past and I'm putting free market in scare quotes here. The pre Obamacare system was clearly free market and now we tried the free market so now it's time to actually have top-down command and control. Okay, two things. One, I'm not predicting a crash. I'm just holding it out there is the worst thing that could happen and it's worrisome enough that people are talking about it but it may not happen. Yes, if it crashes that's exactly what the single payer folks would say. But remember, we're only talking about six to eight million people now that are in these exchanges getting subsidies at the moment and the 150 million people getting insurance from their employers they're not affected by this. The Medicaid, previous Medicaid population and seniors they're not much affected, at least not till now. So it doesn't mean the whole country goes to socialized medicine. It just means, what I think it would mean is another Medicaid-like program. If it crashed, the government would take it over, the government would subsidize it, probably let the private insurers run it but they would do it like Medicaid and that would mean a greater government presence in health care but we would not have socialized medicine for the whole country. No. Would socialized medicine for the whole country be better, worse than what we have now or the direction we're headed? I mean, people over, much of Europe has socialized medicine and the Europeans talk about how much they love it. The Scandinavian countries- They think we're crazy. Yeah, I mean, what's wrong with socialized medicine? The people who talk about how much they love it are people who are healthy. And if I'm healthy in Britain and I go to the doctor I don't have to pay anything. That seems like a pretty good system to me. The people who don't like it, the people with cancer who cannot get the latest drug that's available in the United States and the British National Health Service says if you want it, you pay for it out of your own pocket and we're talking about thousands and thousands of dollars. So in evaluating health care systems, they're all bureaucratic, by the way. I mean, our system is just as bureaucratic as the Canadian system or the British system. They none of them work like real markets. They all have problems and they have similar problems. And in most of these countries, there are tragedies with people not getting care, having to wait too long for care. So it's... And we get misled on the costs because other countries suppress the real cost of their health care system to shift a lot of the cost to doctors. But in real terms, it's not clear that we're spending more on health care than other developed countries. And our outcomes are better. It seems to me that if we step back and try and think about health care differently, which of course is what we've been trying to do, but fundamentally, innovation should be near the top of our list because I'm not really that concerned about whether or not there's an equitable distribution of bloodlettings. It's not like, oh man, all the rich people got all these bloodlettings or they have an imbalance of bodily humors and we need to figure that out. We need a fact that you can treat a heart attack with an angioplasty now and you couldn't do that 30 years ago in that we should be focusing on. If you could unleash forces that would make treating cancer $20, very big hypothetical there, but that would change the entire question about providing health care and who gets it or am I mistaken? Well, the problem is that in a third-party payer system where somebody other than a patient is paying almost all the bills, the incentive for the innovators is to figure out how to get more money out of the third-party payers. So, most of the innovation is innovation of a type that figures out how to create a computer program that'll get more money out of Medicare or a new product that will get more money out of insurers and instead of getting cost down, nobody's out there spending a lot of money trying to figure out how to make pills for $20. And this is another thing too. If no one is paying for it in there, this is a question about, like, why can't you email your doctor? Or why can't you call them? I can tell you. Yeah, it's just because no one's paying for it and the same answer to your previous question. It's because a third-party payers don't pay for it. Yes. And the only reason they don't pay for it is because when we set up Medicare 45 years ago, that wasn't one of the things that they put down on paper that Medicare would pay for. So, Medicare has about 7,500 tasks it pays doctors to do for all practical purposes. The telephone's not there, email is not there. And so this is how bureaucracies function. Every other profession, your accountant, your lawyer, the engineer, the architect, you can talk to them by phone, by email. Or your veterinarian. Exactly. But not the doctors, yes. Well, that seems to be the moral of the story almost that Medicare didn't put it on the bureaucratic sheet 50 years ago, creating a sort of bureaucratic situation that created a culture of just being like, hey, you should call your doctor. And everyone says, are you kidding me? That's the craziest thing I've ever heard said. But did it not cover consultations? Oh, it will pay for consultation. So is it an email just, or does it actually say like an in-person consultation? Absolutely. Oh, and since you brought that up, we have a huge problem with telemedicine. So you have the Mayo Clinic that wants to take care of stroke victims in rural areas in Minnesota and other states. And the AMA is against it and the Medicare won't pay for it. And so we have a huge battle in bringing American medicine into the 20th century. That may surprise you, but we have people, the American Medical Association and Medicare want to live in the last century. So the story, we can, like the story so far, we have this bureaucratic system, let's say we start with insurance model coming through the price, the tax break through your employer, Medicare and Medicaid, a ton of other things in between. We get up to the point of Obamacare and we have systems defined by bureaucratic red tape and the price list and whether or not you can call your doctor and all these things. And then it just seemed that in almost everyone of the situations, the Affordable Care Act doubled down and entrenched that model even more and then added even another layer on top of it all in the name of this pursuit to get higher access in lower care, which it's not, doesn't seem to be doing. Is that an accurate story? Well, that is accurate. You have to understand that on the left, people do not like the idea of using economic incentives to get a more efficient system and they don't even like to talk about it and they think that economic incentives shouldn't really be part of a good healthcare system. It's only people on the right that talk about getting the economic incentives right. Although they seem less enthusiastic when it's Medicare. Well, the incentives that they're talking about are bureaucrat, the only incentives that they like on the left are incentives created by government to try to get people to do something government wants them to do and all those experiments are not working very well at all. Well, that's the, in priceless, you mentioned the private public dichotomy, which I think is interesting. If the government denies you a procedure, it's okay. If a private insurer denies you a procedure, it's a huge injustice. It's the way many members of the public think and yeah, it's how they would think in Britain, for example, if you don't get your kidney dialysis, the doctor would say, well, we just can't afford it and people accept that. If it were a private insurer, they would go wild. This is just an outgrowth of, government is the public will. So it's a precious individual who's denied it to you in the private sector, but if it's denied by government, then what it is is that the people, all of us as a community. Including Bob the GS12. Denied this, which is a much more reasoned decision that took into account the interests of everyone. I'm sorry, I guess, Aaron's doing a good job of, I just can't even pretend not to laugh. Bob, the guy in a cubicle at GS12, he's the one, he's the epitome of the embodiment of public will, apparently. What happens here is in Medicaid. Arizona Medicaid started cutting people off, ran out of money, so it didn't give people heart care and other kinds of expensive surgery and some people died and people just accepted, but I guarantee if United Health did that, there would be outrage. And that probably like for, I think a good summation question is the last chapter in your newest book, which is titled, Why I am More Egalitarian on Healthcare than Most Liberals. Yes, I am. Why? What I think we ought to do is get rid of all the ways that we subsidize healthcare, which are different ways that work and in exchange and in the marketplace and just have a universal tax credit. It's vital to everyone. And I would set it at about $2,500 for an adult, $8,000 for a family of four. That's what you get from government to subsidize your health insurance. That amount of money will buy a Medicaid-like insurance plan. And if you want more options and more access and you would add additional after-tax dollars of your own or your employer could do the same. And I would do this for everybody. So basically I'm more egalitarian. I would treat everybody the same. So Bill Gates gets his $8,000. Poor person gets $8,000. They're all treated the same. To me, if we're gonna have government be involved at all, let's have it do something very standard, do the same thing for everybody and then get out of the way and let an individual choice and markets determine how the system evolves. Thank you for listening. If you have any questions, you can find us on Twitter at Free Thoughts Pod. That's Free Thoughts P-O-D. Free Thoughts is produced by Evan Banks and Mark McDaniel. To learn more, find us on the web at www.libertarianism.org.