It’s Time to Release the Kraken … of Competition

It’s Time to Release the Kraken … of Competition

Repeal? Replace? How About Step Aside and Let Entrepreneurs Work? Especially in Healthcare.

Do you remember the great chewing gum crisis of 2005? When chewing gum cost $367 a pack on average, was only available in two inconveniently located stores, and tasted like sawdust? Of course you don’t, because it never happened. That is because the production and sale of chewing gum is left largely to market forces: supply, demand, innovation, and, ultimately, consumer choice.

Healthcare and health insurance are more complex than chewing gum to be sure but that is an argument for decreasing the government’s role in it, not turning it over to distant, unaccountable bureaucrats and, perhaps worse, politicians jockeying for position in the next election.

I am already on record with my own business plan, a mutual insurer offering combined life-health-disability policies that can begin in utero. I think it will work, but I do not know for certain. Other social entrepreneurs, like the trio of Amazon, Berkshire, and Bank of America, have their own plans, equally uncertain. Health insurers and healthcare providers, like Sanford in the Midwest, also have ideas percolating. The only real test is to offer rival plans to consumers and see which they prefer.

Right now, health insurance entrepreneurs are almost completely stymied by the dictates of the Affordable Care Act (ACA). Idaho is attempting to sidestep ACA but potential insurance entrepreneurs know that a state government cannot readily protect them from the federal government. (Look at how the Feds stomped on Colorado marijuana sellers by denying them access to the banking system.)

What entrepreneurs need is a credible commitment by the federal government to allow them to experiment with health insurance and healthcare delivery systems for the next 10, 15, or 20 years. That would require passage of a law requiring healthcare organizations to pay the same taxes on the same basis as their peers but otherwise giving them free reign to experiment in an environment that no longer favors employment-based group health insurance. 

Releasing the Kraken of competition will allow providers, insurers, and consumers to negotiate with each other directly, rather than via the government. If market forces are truly allowed to determine the results, they will almost certainly be better than ACA or any single payer or universal health system. If they are not, the political path to some system of socialized medicine in America should be clear. Before America goes down that likely irreversible path, however, it needs to do something that it hasn’t done since World War II, allow consumers to decide what type of healthcare and health insurance they want without distorting markets in favor of the largely pernicious employment-based variety.

What about the impoverished? It is quite possible that (social) entrepreneurs will find a way to adequately meet their healthcare needs, just as they do their needs for clothing, entertainment, food, refrigeration, transportation, and, yes, chewing gum. If not, the proper policy is to provide vouchers and let them decide which healthcare and insurance plans work best for them.

I call my proposal the Kraken, a mythical sea monster of mammoth proportions, to invoke the power of markets to destroy the old and thereby make room for the new. The Kraken of competition is indeed scary but it never destroys wantonly or capriciously. Rather, it directs its wrath at the weak and inefficient, at the institutions and practices that have made our healthcare and insurance system the wreck it is today.