Health care has gotten to be one of the top issues of our time. Many people believe that the present system in America is broken. It is too expensive and excludes too many people. The political solution is to move from a highly centrally planned system to one that is even more centrally planned. Government is to be the savior and magically solve all of the problems and make everyone healthy, but that can only happen when it gets big enough, and interferes with the markets on a grand enough scale.
The problem with central planning in health care is the same as the problem for central planning in any other area of our lives. It assumes that the planning body is able to make decisions for hundreds of millions of people and optimize the results. The justification for government provision of health care is wrapped up in morality and rhetorical turns of phrase, as it must be to get around the obvious contradictions and logical incoherence.
Discussions of health economics, even by many PhD economists, often seem to neatly and conveniently avoid any mention of the relationship of prices, supply and demand, the essentials in any economic discussion. In every respect, the provision of health care is an economic issue, similar to the provision of food, shelter, clothing, transportation, and every other need of humanity. There is absolutely nothing special about a doctor doing brain surgery. It is a service that he or she provides, and the market for brain surgery operates according to the same economic laws as the markets for plumbing, catering or transportation services.
Not all discussions of health economics avoid economic principles, however. A growing number of participants acknowledge the tradeoff in the triangle of access, affordability and quality. In a health care system, you can successfully manipulate one or maybe even two of the three, but you can’t manipulate all three at once. You can artificially make health care accessible to everyone and even control prices to make it more affordable. In that case, the quality will inevitably suffer. You can have the highest quality and make it accessible to all, but the society will go bankrupt trying to pay for it. In order to make a high quality health care system with a low overall cost to society, you must necessarily exclude people with expensive problems. The three factors are opposing. You can’t have them all together.
The iron triangle of access, affordability and quality is really just a nod to the relationship of demand, price and supply. In any market, whether for health care or automobiles, manipulation of prices, demand or supply inevitably leads to negative unintended consequences. Health care would benefit a great deal if only people would take economic law into account.
Central planning, in all of its various forms, must, by its very nature, ignore economic law. It must manipulate prices, demand or supply. There are no other tools for central planners to use. Taxes, regulations and other legislative vehicles are merely the methods they choose to impose controls on supply, demand or prices.
If one assumes that all politicians and bureaucrats are actually benevolent and really care about the needs of the citizens, one might believe that the laws and regulations they enact will be beneficial to all of the people. That belief fails on at least two points. The first, most glaring fault is that politicians and bureaucrats are generally not benevolent and don’t care for the rest of us. Their career advancement depends on accumulation of power. Their benevolence falls toward those special interests that give them the highest bang for the buck they take from taxpayers.
The second failing is vastly more important, though much more subtle. Planning by government assumes that individuals don’t plan, or more to the point, that individual’s plans are wrong and don’t count. In reality, only the plans of people count. All that government planning can do is restrict the options for consumers and entrepreneurs and distort the economic environment under which they make their decisions.
The crisis in health care has only been an issue since politicians decided they know better than consumers do. The real solution to the health care crisis is to remove the cause, the severe interference that has distorted the markets for decades. Quality health care will be affordable only when individuals are accountable for their own costs and providers are free to compete on their own terms. Everything else is political whitewash.
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Sir-
Your argument is valid if you assume that health is not synonymous with the physical and economic security of the country.
Your same arguments could be applied to education and the military as well. There is a limit to markets. I believe government should be small and only address those issues that are critical to the survival of the republic. I think health is one of those critical services. It should be centralized and it should be removed from the markets as a system.
We need healthy citizens to drive production, to avoid epidemics and bring down the costs that come from chronic illness left untreated. We can maintain our HMO like system AND deliver it to all Americans. Are you so tied to your orthodoxy that you are will to put the safety of Americans at risk?
Consumer choice leads to quality and better price.
Private schools are in general considered as better than public schools.
Why?
My guess is simply because the consumer– in this case parents that can afford private schools —can take their business elsewhere if they are not happy with the product or results. The competition is the discovery process that tells us which method is best, with consumer choice as judge.
Healthcare will improve and be less expensive if there is more consumer choice. If that is called a free market in healthcare, I’m all in favor of it.
But just like in our economy everything but Free Markets have been tried yet it will likely take the blame, again.
Hi Eric,
Thanks for the comment. I think I understand your reasoning, but I don’t really think that what I am saying is exactly orthodoxy. It has, in fact, been way out of fashion for decades. The whole point of the article is that the closer we approach the present orthodoxy of total government control of health care, the less secure and the less healthy Americans will be.
I challenge you to name one area of health care, or any market for that matter, that is not grossly distorted by thousands of pages of regulation and billions of dollars of government money with strings attached. There is none, and to blame free markets for the problems we have, when free markets don’t exist, is absurd.
You mention education. That, like health care, is a miserable failure only because it is a government monopoly. Yet people still want more government in education. It is beyond belief to me.
Central planning has been proven so detrimental to the health of a nation’s economy and people so many times, and in all sorts of configurations, that it amazes me that people can still seriously believe that government can solve all of the problems. From the manipulation of interest and money that caused the current crisis to the political football that used to be called science, to foreign policy that deliberately creates enemies, our government has not made us more secure. It has weakened us and left us exposed.
I would agree with you that there is some very limited role for government. My view of limited seems to be very different than your view, however. We do need healthy citizens, but that is not, under any circumstances, government’s job. Hitler had an intense interest in making healthy Germans. That analogy is not far off the mark with many of the dangerous things that have been happening in our government and economy. There is a correlation between economic freedom and the health of citizens. There is no correlation between bureaucracy and health.
I would reverse the question to you. Are you so orthodox, in expecting government to solve all problems, that you are willing to sacrifice the security and safety of Americans?