We should clarify the type of universal coverage. Universal health savings accounts or universal catastrophic coverage come with fewer problems and more benefits than universal comprehensive coverage.

The core problem that arises with universal comprehensive coverage is a loss of efficiency. Ways that tends to happen tend to derive from loss of skin in the game. An example of that is that when taxes pay for regular treatment of diabetics, it reduces some of the costs of behaving in such a way that you become diabetic, which in turn increase healthcare costs due to more diabetics. It also increases the cost of treatment for diabetics since the price tag is paid regardless of how high it is. With universal coverage comes a significant amount of rules, which results in reduction in entrepreneurship and innovation for revolutionary treatments or administrative efficiencies that would ultimately reduce costs. The rules also constrict supply of practitioners, thereby increasing labor costs and thus price tags of treatment. Really, there is an unlimited list of things we could get into, but I'll stop here.

What we've seen in real time from regions with universal comprehensive coverage is rationing and low growth in innovation of care. This result makes sense given economic theory. The supply restrictions and cost constraints pretty much give governments no choice but to ration.

The main benefit of universal comprehensive coverage is that there is a reduction in adverse selection, which results in lower insurance costs. It's not enough to make the net a reduction in costs, however. The adverse selection problem arises in healthcare because people who want to buy insurance are typically more expensive to cover, so when covering healthy people who don't want to buy insurance is mandated, there is a reduction in the cost of this adverse selection. This was a focal goal of Obamacare, yet as we can see it was not powerful enough of a cost reduction to counter the vast cost increases that came along with all the rules and regulations that increased costs. An example of a rule that did so is mandating plans cover more than what people want to buy.

Keep in mind that Obamacare is a universal comprehensive reform. When you hear about how the proposed GOP plans would reduce the amount covered, what's actually happening is that those people would simply drop insurance due to having the choice to. They're covered now even though they don't want to be. Another thing rarely mentioned regarding Obamacare is how the effective coverage is much lower than people think because a key way insurers have dealt with the big cost increases is hiking up deductibles. Now lots of people are paying for coverage that they never use because the deductibles are so high. That's on top of the premiums rising a lot. Cheap catastrophic plans, like the one I used to have, don't exist anymore due to regulations.

Even though I prefer government staying out of healthcare, I certainly can make a case for how government can construct a healthcare system that would knock the socks off any in the world (probably even Singapore's, which is much better than any other). It would involve all government transfers going towards health savings accounts instead of Medicare and Medicaid and multiple tax/employment subsidies. A similar approach appears to be the main innovation for why Singapore's system is so much better than others. The government would also need to deregulate things like licensure and against crossing state lines, allowing people to supply the care they want and consumers to choose to buy what they want. This is a BIG problem. On the supply and demand diagram for the healthcare market, the price level is higher than it should be due to the supply curve being further to the left than it should be. An example of this problem is that there are a bunch of people with skills that are not allowed to practice because they haven't jumped through hundreds of thousands of dollars worth of hoops in order to make it legal. Derivative problems from this include things like price tags not even applied before the sale of treatment.

I don't consume healthcare because of these problems, and I certainly would consume it if those problems went away. I am not unique in this regard. I read a study a while back that demonstrated an increase in dental health after deregulation such that people without typical expensive pedigree and licenses were allowed to offer care and consumers were allowed to buy it. This resulted in lower costs and thus more dental care, resulting in improvement in dental health.

In short, the price of healthcare is quite high for two main reasons: (1) demand is pushed right due to payment not coming from the individual. This can be solved by shifting to health savings accounts, where people pay for their own coverage, resulting in incentive to not consume too much and even incentive to live healthier. In Singapore, if they live healthy enough long enough, they are allowed to use the savings to pay for other things. This is a huge cost saver. (2) Supply is pushed left due to regulations that benefit relatively wealthy incumbent providers at the expense of everybody else. This can be solved by making it legal for people to choose what is best for them instead of the government's severely restricted choices.


The mess will probably not be solved because people really believe the government should be setting rules here. The fear of botched treatment is so pervasive in voters' psyche that they favor just about any restriction the government can think of even though the unintended consequences are a decrease in health and increase in suffering.