In a 7/19/9 New York Times Magazine article “Why We Must Ration Health Care,” Princeton bioethicist Peter Singer argues that we need government to actively ration the amount of medical care Americans get, particularly as they near the ends of their lives.  Unfortunately for his readers, his argument is riddled with false hypotheses, untrue statements, and faulty logic. It is also unethical.

He mistakenly argues that health care is both a “scarce resource” (which it is) and a “public” good (which it is not). An economist could have told him that a public good must be both non-excludable and its consumption non-rivalrous. That’s economic geek-speak meaning that it’s not a public good if its use can be limited to paying customers or if nobody else gets to use it when you do—whether you paid for it or not. Accordingly, national defense is a public good, but health care is an “economic good” which defines as “a commodity or service that can be utilized to satisfy human wants and that has exchange value.” Thus, economic goods include anything for which the supply is limited and that somebody has to be willing to pay for–like medical care.

This distinction between public and economic goods  is critical, because Mr. Singer’s argument for government rationing is completely dependent on medical care being a public good. If it were, then it could be an appropriate target—as with national defense—for government and/or other communal mechanisms to provide or control. But as an economic good, we know from centuries of experience that there is no known system of economic organization more successful at creating, delivering, and fairly rationing such goods than lightly-regulated market capitalism. Markets deal with rationing by the simple expedient of each person deciding for herself how much of a good or service she wants and is willing to pay for, given her own means and priorities for spending, saving, and passing on material legacies to her family and others.

Mr. Singer further confuses the rationing issue by reiterating a common myth that “employer-financed health insurance exists only because the federal government encouraged it by making the premiums tax deductible.” In fact, employer-based insurance is one of only two naturally arising markets for health insurance (the other being healthy individuals). Even if the government had never excluded employee health benefits from taxes, employer-based insurance would still be dominant.

Mr Singer does correctly state that the case for government rationing “starts with the difficulty of thinking of any other way” for the government to support medical benefits for the aged, disabled, poor, and the uninsured; but then he takes it as a given that there is no such way. In fact there is at least one, which I’ve dubbed the American Choice Health Plan—a comprehensive, internally-consistent, properly regulated, market-based health care system that will assure affordable, fully-portable insurance for everyone and deliver massively lower medical costs, dramatic improvements in medical quality, a continuing flood of innovation, and an end to shortages of primary care (or any other) providers.

Mr. Singer also fails to distinguish between two different types of public safety-net support mechanisms in his justification of government rationing: (1) directly provided public subsidy payments to individuals and (2) directly provided public insurance or medical services. In fact, only the second approach arguably justifies rationing of specific medical services at the government level. The first — direct individual subsidy—requires only rationing of the amount of the subsidy, not of the actual services subsequently purchased by the subsidized consumer under normal market conditions.

The problem in health care lies in the “normal market conditions” part, because there is a fundamental market failure in health care that has prevented spontaneously-arising markets from functioning to provide everyone with the health insurance necessary to pay for the full range of medical services people need—something markets have successfully accomplished in providing our other basic necessities of food, clothing, housing, and transportation. This market failure directly results from the necessity for insurers always to achieve a financially-viable mix of healthy and sick insureds despite the tendency of sick people to buy and hold health insurance more readily than healthy people—a phenomenon known as adverse selection.

But it turns out that this market failure is one that is readily correctable—and has been throughout the decades since health insurance became a fundamental necessity of American life. Also, it can be corrected in a way that completely obviates the need for state or federal governments to directly provide insurance or medical services—or to ration services.

The correction requires a new set of mandatory (i.e., regulatory) underwriting, benefit, and rating rules that will permit competing private insurers profitably to enroll everyone seeking to buy coverage. These rules will have the added benefit of causing the medical delivery system to reform itself to competitively deliver far higher value pursuant to the dynamics of Adam Smith’s invisible hand and Joseph Schumpeter’s creative destruction. Such actions will finally position health insurance and medical services firmly within the same market economy that provides all our other economic needs. Not only is this an eminently doable task, but it can be accomplished without any need for the government to force employers to provide–or Americans to buy–health insurance.

This approach, described in detail as The American Choice Health Plan in my book Cured!, would allow health insurance and medical care markets to deliver necessary, affordable insurance and medical care to everyone—with the government chipping in with safety-net financial support for needy individuals, but not with direct government-provided insurance or medical services. Thus, the government would establish a set of regulatory boundary conditions within which virtually everyone’s medical care needs would be met by the dynamic facility of markets to quickly and automatically adjust to changing needs, information, circumstances, and resources.

As for rationing, we would now have a mechanism by which everyone can individually decide how much insurance she is willing to buy to make good on options that let her get as much (or as little) expensive care as she chooses–whether end-of-life or otherwise. We know that there are many people who rationally forswear heroic measures that might delay their deaths but unacceptably degrade the quality of their remaining lives. Instead, they often choose approaches that ease pain, allow them to be with their loved ones, and allow them to savor each remaining conscious moment of life. Others want to exhaust every possible option, no matter how expensive, to hang on to life on any terms to the bitter end. These decisions can and should be made by individuals and their families, not by governments.

At the same time, government would be within proper ethical bounds to contribute no more in targeted financial safety-net assistance than would support insurance to provide, say, the $5 million or so that Mr. Singer seems to suggest is justifiable for saving a life. But everyone—including the vast majority who need no such assistance—would have the individual right to buy whatever level of insurance coverage they want and can afford, taking into account their own economic and other priorities for leading—and concluding—a life well lived.

Mr. Singer actually came to a somewhat analogous conclusion, but wrapped it in a larger, unsupported argument that government must be the uber-rationer for everyone via a government-run health insurance system. Such a system is neither optimal, ethical, desirable, nor, fortunately, necessary.