Consumer empowerment as a solution to health system financing.

Abstract

The health system of the welfare state has basic design flaws. First, it treats citizens as recipients of entitlements that are bestowed on them rather than as sovereign customers who otherwise can choose among an array of goods and services; with uniform health plans, there are no incentives to economise. Second, benefits are provided by government through monopoly schemes; their performance has been dismal when compared with other sectors of the economy that, under competition, have yielded continuous efficiency improvements. Ceaselessly rising costs for healthcare are the consequence. Applying the principles of the market economy to healthcare--and to social security in general--would unleash a vast potential of efficiency gains. The issue in such a reform is equity. Healthcare must be affordable for all. In reconciling efficiency and equity, the cornerstones of this proposal are financial empowerment and individual responsibility; to hand the individual the money required to purchase the current level of benefits--nobody loses--and to leave it to the individual, within bounds, whether to do so. While guaranteeing that everybody can buy the current benefits, the savings from restraint will be the individual's to keep. The reform steps would be as follows: (i) empowerment, (ii) fairness and finance, (iii) safeguard and choice, and (iv) savings to keep. This is a 'consumer model' of healthcare. Efficiency is achieved by privatisation, individual responsibility and freedom of choice on the demand side and by competition on the supply side. Equity is guaranteed by financial empowerment of the individual and a no-loss rule; mandatory minimum insurance would preserve the safety net.