WHY WE DON'T NEED HEALTH INSURANCE
	by David S. Lawyer, Aug. 1992, minor editing Nov. 1996

A major problem with our costly heath care system in the United States
is health insurance.  If people don't have health insurance, the money
that is now paid for premiums can go directly to them, and in most
cases they can make better use of this money than the health insurers
can.  The U.S. spends over 11% of its GNP on health care.  Eliminating
health insurance would help reduce this expenditure.  Ironically, the
proposed cures for the health care problem by both the Republicans and
the Democrats is to significantly increase the number of people covered
by insurance, thereby making the problem worse.

One of the reasons for the high cost of health care is the existence of
insurance.  This encourages people to obtain treatment which they
either don't really need or is not worth the cost.  It makes it easy
for doctors to overbill the insurance companies for services not fully
provided or not really needed (i.e. not cost effective).

People who utilize their insurance often act quite rationally from
their point of view but quite irrationally from society's best
interest.  For example, suppose a given treatment which costs $10,000
will provide you with $2,000 worth of benefit in improved health.  If
you had to pay for this treatment you would not do it since the
benefit is far below the cost.  But if your insurance will pay 90% of
the cost then you only need to pay $1,000 out of your own pocket in
order to gain a $2,000 benefit to you.  You gain a benefit of $1000 
but society loses $8000.

People who have no insurance have a much greater incentive to take
good care of their health and lead more healthy lives.  If they don't,
they will have to pay the resulting medical bills.  Insurance
(including so called "national health insurance") pays for illness
caused by neglect of ones health.  If you neglect your health by
smoking, drinking to excess, failing to exercise, reckless driving,
etc. is it fair to make someone else pay for your medical costs?  Many
illnesses are self inflicted.  Of course it might be nice to have the
government (i.e. the taxpayers) pay for illnesses that you are not to
blame for.  But establishing blame is often impossible, especially
since an illness may have many contributing causes.  The most feasible
solution is thus to have each person pay directly for his own medical
expenses.

Even for illnesses cause by air pollution, the individual is often at
least partially to blame for not taking an active roll in reducing air
pollution, including writing letters to politicians etc.  And what
about illnesses causes by genetic defects?  If parents know that their
offspring will be financially burdened by genetic defects that they
might pass on to their offspring then perhaps they will decide not to
have children (depending of course on the severity and probability of
the defect).

Government does have a very significant role to play in medicine.  It
can provide the public with factual information regarding medicines,
medical procedures, preventive medicine, and costs.  It can require the
labeling of products that have not been proven effective, even in
cases where misleading claims for the product do not come with the
product.  It can subsidize self-diagnose and treatment by making
available computer programs (and even public computer terminals) which
will help diagnose illnesses.  It can support preventive medicine that
has a very high benefit/cost ratio.

Government could impose a tax on medical care for the rich and
distribute these taxes to the poor by subsidizing their medical costs.
This will tend to increases the incentive for rich people to take care 
of their health, but it will still provide more incentive for poor people
to do so since their out of pocket payments for subsidized medical care
will hurt them more financially. 

The government should guarantee loans for medical expenses provided
that: 1. There is a fair chance that the loan will be paid back.
2. The treatment proposed is necessary and cost effective.

A constitutional amendment is needed to give the federal government the
power to regulate medicine.  Assuming that the commerce clause grants
such powers leaves the way open for a conservative Supreme Court to
declare federal regulation of medicine unconstitutional.