This is my longest, meatiest, and most important post to date. Dive in at your own risk, but for those of you short on time, here are the main points:
- The interventionist system that has led to the ACA and the AHCA leaves much room for improvement (to say the least).
- Despite disagreements about how, almost all of us want the best attainable medical outcomes for the greatest number of people possible.
- Socialized medicine is tempting, but it is unsustainable, violates the rights of individuals, and is not superior to the free market in attaining the above goal.
- A free market healthcare system is probably not what you had imagined and would best serve the most people, while preserving the right to life, liberty, and property.
As is too often the case in modern politics, when the U.S. Congress actually manages to pass a piece of legislation, it also succeeds in pissing off at least half the country, while simultaneously leaving the other half unsatisfied . When the Affordable Care Act (ACA/Obamacare) passed in 2010, much of the country was in an uproar about death panels, government overreach, and socialism, while many others lamented the government mandate to buy a product (health insurance) without providing a public option or wanted to completely socialize health care.
We should begin with a couple assumptions so that we are all on the same page. One can disagree with these assumptions, but that may affect the conclusions reached later on.
- Individuals have a right to life, liberty, and property with the caveat that each person may not violate the life, liberty, or property of another person.
- If a person has an issue that health care can help, it is a desirable goal that he or she receive that help, as long as doing so does not violate Assumption #1.
- There are certain treatable medical conditions that exist despite no fault of the afflicted individual.
- There is an immeasurable benefit to each individual living in a healthier society versus a less healthy one (Due to fewer sick days improving productivity/education, less disturbance on family units from deaths/severe illnesses/changes to schedules, etc.).
The American Health Care Act (AHCA/Trumpcare) recently passed the U.S. House of Representatives and is making its way to the Senate for tweaking and an eventual vote. While even Democrats admit that Obamacare is far from perfect, the AHCA takes poor legislation and replaces it with something worse, instead of just getting rid of it all. The left is already threatening lawsuits if Trumpcare becomes law, on the basis that the AHCA will slash funding for government-supported health care services to New Yorkers. Trade groups have come out against the bill, and House Republicans were in such a rush that the Congressional Budget Office hadn’t scored the final version. I don’t think any of us are surprised.
The current health care/health insurance situation in the United States is so far removed from the necessary solutions that one can be forgiven for thinking it near-futile to talk about them. This is the result of more than 100 years of government interference and industry collusion with the coercive power of government, so overnight solutions are rather unrealistic.
As we search for alternatives, let’s begin with a look at three situations that happened to me in three different health care systems:
- Copenhagen, Denmark, 1997 – I came down with excruciating abdominal pain near the end of a Nordic cruise. The ship’s doctor was confident enough that it wasn’t apendicitis, but I had to get checked out once we got to port. As U.S. citizens, my father and I walked into a Danish hospital, I was signed in, seen by a doctor, and had some non-invasive tests. After my Fifth Disease diagnosis, I signed out. Denmark’s socialized medicine covered the expense. There was no bill.
- Connecticut, USA, 2013 – My dogs did not always get along as well as they do now. During the adjustment period after adopting Maynard, there were a number of fights I had to get in the middle of to stop. One morning, they started a fight while I was sleeping, and in my dazed state, I put an arm between their mouths as they lunged at each other. Long story short, I got a saline solution cleaning, two separate stitches in my arm, and bandages on my thumb and arm, to go along with a prescription for antibiotics. The prescription cost $40 or so, the contracted ER doctor’s bill was $400, and the ER itself billed me an additional $2,900. This was without health insurance, but that makes the third situation even more telling.
- Tela, Honduras, 2016 – I have made it almost four years in Honduras without needing to see a doctor or go to a hospital, but I do have some experience with a dentist and an optometrist. My time living in the U.S. has me so conditioned that medical care is expensive, that I put off going for a dental cleaning until finding out it only costs about $21, done by a dentist (versus $75-200 by a dental hygienist in the U.S.). If you choose to have x-rays, they are $12 each, and when I needed resin-based fillings, each tooth cost another $21 (versus $135-240 in the U.S.). I decided to get contacts a year ago, and the optometrist eye checkup cost all of $6. These prices are all WITHOUT insurance.
Socialized Medicine/Universal Health Care
From a surface view, it is hard to beat the allure of socialized medicine. Of course, we understand it is not “free”. It is included in the tax burden. Had my father and I been Danish citizens in the above example, he would have been paying a 57% income tax rate to support the various social services (I was still a minor). Even as foreigners, we still paid the 25% VAT on any goods we purchased while in the country. If enough people step outside a classical liberalism understanding of the Law, and instead agree the majority in a society may force a minority to give up their property (i.e. the lower and middle classes electing representatives who in turn set higher tax rates on the rich – in Denmark’s case, anyone making over $70k/yr), then this society could function for a time. However, even if every member of the society voluntarily agreed to the tax burden required to fund socialized medicine, would it be a sustainable health care option?
I was a big fan of Michael Moore’s Sicko when it came out. I bought the DVD and watched it over the years with some unknown number of family, friends, and ladies I was dating. In it, Moore compares and contrasts socialized medicine in Canada, England, France, and Cuba with the pre-Obamacare U.S. medical system. Years later, when Bernie Sanders made Medicare for All one of the foundations of his presidential campaign, it appealed to my humanistic side and ultimate desire that the greatest number of people possible be happy and productive in their lives. Even today, as diametrically opposite as the two positions may seem, I feel that socialized medicine is the second best option to a free market health care system, and much better than the current, bastardized U.S. system.
The conservative arguments against socialized medicine center around taxation/funding, government rationing of care, and the general ineptitude of government to respond to market demands. Going back to Assumptions 1 & 2 from earlier, we each have a right to life, liberty, and property, and we may decide to give part of that property (in taxes) to support the health care of others. It is, however, fallacious to assume that because you and your friends are ok with this, that everyone in a country of 326 million people agrees with you. Call them heartless bastards all you like, it is their right to refuse to share their property. Similarly, we each have the right to walk past a beggar on the street without giving him a donation.
While the 2010 worries about “death panels” were predictably exaggerated, there are documented cases of rationed care and extraordinary wait times in countries with socialized medicine. I don’t consider it overly alarmist to ask, how would you feel if a government court determined that your child had to come off life support, regardless of the fact that you raised private money to fly to the U.S. for non-socialized treatment? The rather obvious solution is to have parallel systems, a public option that provides an alternative to the private system. Australia has this, as does Honduras. The Canadian government is in a protracted court battle to prevent private health care from competing with the socialized system.
Whether universal health care or a public option is the desired end, think about some of the large operations run by government: public education, the postal service (rebuttal), the interstate highway system, and various federal agencies. Do you really want national health care to be run by this same system? We are all privy to the lack of funding for public education and the deteriorating status of our national infrastructure. I cannot imagine a nationalized health care system in the United States being any different in execution to those examples, even if it drastically cut the current cost of health care ($3.2 trillion annually). The public system in Honduras is both underfunded and the victim of corrupt officials stealing from the funds. I joke that tax evasion is almost as popular here as football (soccer), and that takes away from both the relatively low income tax of 10-20% and the 15% VAT. The resulting I.H.S.S. health care is plagued by a lack of supplies, unreasonably long wait times, and unhappy employees. I don’t mean to imply a public option in the United States would be equally bad to what Honduras has, but this is an example of much of what can go wrong.
The term economist Ludwig von Mises would use for what has gone on with health care in the U.S. for the past 50+ years is interventionism. While proponents of socialized medicine often claim that we have been using a free market system, I have already linked above to a lengthy article describing the 113-year history of government impediments on free market health care. One result of those interventions was a dramatic rise in health care (and insurance) prices. When Obamacare took on the admirable goal of getting more Americans covered by health insurance, it did so within the Frankenstein system, and therefore had to both force some people to buy a product they didn’t want (or pay a penalty tax) and force insurance companies to cover un-insurable conditions.
So, when we experience problems with the interventionist health care system, it is easy to blame “big business”, but these issues are not due to market failure, and drug prices and shortages are a response to interventionist policies. Rather, a free market healthcare system is the solution to, not cause of, the current situation.
Free Market (Sustainable) Health Care
The aims of classical liberalism and socialism coincide in the sense that both are seeking the best possible outcome for the greatest number of people. The differences stem from the means necessary in order to achieve that end. Of all the available options, only free market health care provides a sustainable way to help every member of the society, with the bonus of not infringing on the life, liberty, or property or those individuals.
The usual objections to trying such a system are that monopolies will form, treatments will prioritize creating consumers instead of treating a condition, and that profit has no place where lives are at stake. It is an unfortunate truth that the American healthcare system currently has groups acting to monopolize various aspects, but those cases are due to government power providing them the position to do so. Without a limit on medical school acceptances, “proof of need” laws for new medical facilities, or 20-year patents on drugs, the supply of medical care would ebb and flow with demand. Big hospital groups would exist, but only if consumers were preferring them for their services and prices. Any attempts at monopoly prices would lead to smaller competitors rising up to claim market share as disillusioned customers sought alternatives.
With all due respect to my favorite comedian, Chris Rock, he overlooked a basic principle of capitalism when he said, “There’s no money in the cure. The money’s in the medicine.” As tempting as it is to believe big bad pharma corporations and HMOs just want to create customers for life and make sure we are sick as often as possible, market forces make this extremely unlikely in an interventionist system (now), and impossible with free market health care. Here’s why: in any situation where every company is only providing a temporary/string-you-along/live-with-it solution, the first company to offer a cure will reap an incredible financial reward and potentially wipe out their competitors. People want cures, the faster the better. Do you think a “works within 7 days” cold remedy could survive in a free market next to a shelf of 24-hour cold relief? A friend of mine mentioned that the companies could act according to the Nash equilibrium, and thus all keep providing only temporary solutions, since the long-term payout would be greater. The reason collusion in that form doesn’t last is there will always be one (or many) companies willing to take the short-term payout to create an advantage over competitors. In a similar dynamic, most lottery winners take the lump sum over the annuity payments. It may not be rational to you, but it is rational to them.
Is there a problem with profit being part of the healthcare system? While I can understand the reactive response, “yes”, the true answer is that not only is it not a problem, profit is actually one of the best ways to make sure the system works well. In capitalism, businesses thrive or flounder based entirely on how well they satisfy the needs of the consumers. Pharma companies that produce ineffective drugs, drugs that kill people, or price their drugs irrationally will go out of business. Hospitals in poor condition or with bad results will go out of business. Doctors who treat patients and staff like garbage or fail to continue learning about the advances in medicine will go out of business. While errors and poor service do happen in a free market system, the self-correcting mechanism inherent to capitalism is the fastest and most accurate in existence, because it takes place on a transaction by transaction level.
The healthcare providers and insurers who best serve the consumers (people who need medical care) will reap the most profits, they will grow, and they will be able to help more people with that level of service. Simultaneously, the system will allow for high-end, state of the art facilities concurrently with cheaper, more widespread facilities. Not everyone needs Cadillac-level care. Often, when Honda-level care will suffice, it is a waste of precious resources to choose the former. The pricing system naturally controls the use of limited resources, and capitalism allows the full spectrum of quality and price options. If we had free market health care when I was bitten by my dogs, I would have had the option of going to a top-of-the-line hospital and maybe even paying the $3,000 I was charged in real life (Though I presume the actual price of even the best two stitches in the world would cost less in a free market). However, I would also have had the option of going to a “Kia” hospital, and getting treatment 95% as good for $21 (The actual price of what it would cost me at a private ER in Honduras). $3,000 versus $21, and I would be free to choose. Ladies and gentlemen, the beauty of capitalism.
While socialized medicine seems like the ideal (“We all chip in, and everyone can have great healthcare!”), and its ability to temporarily help the entire population puts it as my second place option despite infringing on individual’s rights, mounting evidence (1, 2, 3) brings into doubt the sustainability of universal healthcare systems. It appears the way to make one work the longest is to preserve as many free market aspects as possible (a la Singapore). By now, that shouldn’t surprise you.
With free market healthcare, not only does everyone have access to medical care, but it is available at a wide range of price points, without any tax burden (Currently, about 10-20% of your gross income goes in taxes to support healthcare programs even if you don’t use any medical care at all. You would get to keep that instead.), and at prices much lower than current levels due to a more competitive market and to supply finally adjusting to meet demand. Free market health care is not a panacea, but its implementation would result in the greatest possible outcomes for the most people, and that is what we are searching for.