Milton Friedman and HSAs

Posted by David Edman in April 2010, Blog, Insurance Purchasing Strategies on April 12th, 2010 | No Comments »

As employers, we need to keep finding more efficient ways to purchase health insurance. Obamacare will not change much for the average employer, other than to increase your costs. In the midst of the health reform debate, the Wall Street Journal published an excerpt from an article written by Nobel Prize winning economist Milton Friedman back in 1996. Friedman, who died in 2006, saw certain aspects of our health care system that led to an article titled “A Way Out of Soviet-Style Health Care“, which I would urge all of you to read.

Friedman says that health care can be universal and public—but “Free, no.” Doctors and hospitals don’t work for free, it’s just that the patient doesn’t pay them. “Treatment isn’t free, it’s just depersonalized. Everywhere there’s a schedule, a quota the doctors have to meet; next!…And what do patients come for? For a certificate to be absent from work, for sick leave, for certification for invalids’ pensions (i.e. disability): and the doctor’s job is to catch the frauds. Doctor and patient as enemies—is that medicine?”

Friedman’s answer—give people the option to purchase insurance with a very high deductible, i.e., a policy for medical catastrophes, which would be decidedly cheaper. The difference can be deposited in a special “medical savings account” that can be drawn on only for medical purposes. Mr. Friedman was talking about Health Savings Accounts before we called them HSAs. It is still the best way for employers to purchase health insurance to obtain the maximum value for your health dollars.