Free Marketers for High Health Spending

Like Jim Henley, I’ve been a bit confused by the logic of some recent free market defenses of high health care spending:

The argument is that if we further nationalize health-care financing it will mean reducing expenditures which will mean squeezing the profits of Pharma which will reduce innovation and more people will die and that’s bad. How is this not also an argument against any course of action which reduces health-care spending? For instance, favored right-wing programs are tort reform and increasing the share of health-care costs borne directly by the consumer. The argument is always that these changes reduce “unnecessary procedures” and – ta-da – control costs. But this would also, then, reduce the incentive for innovation in the health-care sector. Lower profits; less capital attracted.

I think y’all are proving too much.

To sharpen the point, if what were happening was that right now health care spending was driven by market forces, and liberals were proposing to change that by involving the government, then I would see why the “but sky-high health sector spending is a good thing!” argument reflects a coherent free market position. In fact, however, about half of US medical spending is directly driven by the government. And the “private” spending is heavily shaped by a very substantial tax subsidy. So the argument that we shouldn’t try to restrain health cost growth because high levels of health care spending is good is basically an argument in favor of large government subsidies for health care.

If that’s your view, then that’s your view. But if that’s your view, then ought to be for even more government subsidies, right? Why not impose a value-added tax and use it to finance higher Medicare reimbursement rates? Why not beef up Medicaid spending?