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Wednesday, July 22, 2009

How to Stop Socialized Medicine Without Doing Anything

I greatly enjoyed the essay in The Objective Standard titled Moral Health Care vs. Universal Health Care by Lin Zinser and Dr. Paul Hsieh (see their excellent website FIRM which stands for Freedom and Individual Rights in Medicine). This piece details the history of government intervention in health care and clearly shows how it is government, not the free market, which is to blame for the state of health care today. If you truly want to understand the causes of the problem, read this essay. (In 2007, back when I was the only one who read my blog besides my mom, I blogged about the economic and moral issues underlying socialized medicine here and here. In the first link, I go into some detail on the economic causes of the health care crisis. In the second link, I philosophically relate environmentalism, religion, and socialized medicine.)

In particular, their essay details how the government provides incentives to business to purchase health care benefits on behalf of their employees rather than pay them cash wages. Because health care benefits, mainly in the form of comprehensive insurance policies, are tax deductible to the employee and the employer, while wages are taxable to the employee and employer, employers and employees prefer to be paid in benefits rather than cash. Employees, rather than purchasing a catastrophic policy in a similar fashion to how car insurance is purchased, instead are given comprehensive policies that greatly and artificially increase the demand for service. This artificial increase in demand results in exploding prices, pressure on payments from insurance companies, followed by more government demands for more comprehensive coverage, higher costs, repeat ad infinitum. Such distortions, along with government mandates and restrictions on the insurance companies, have resulted in a form of de facto socialized medicine.

One could see this point very simply by imagining that employers suddenly begin providing "car care" benefits. Such policies would effectively give employees a blank check on car maintenance. Rather than fixing their car when it was necessary, car owners would flood auto repair shops with every possible problem from small dings and scratches to more serious problems. Naturally, auto repair shops would begin increasing prices as well as offer more elaborate services as long as they could deem them to be "necessary" and as long as the government forced the insurance companies to provide the coverage. The government might even mandate that car owners be covered for "pre-existing conditions" which would radically drive up costs as owners of broken down cars or cars that were advancing in miles figured out how to game the system. As the government mandated that more problems be covered, prices would increase further. I don't think I have to extend the analogy further...

Such knowledge points the way toward an effective, albeit partial, solution. The government should stop providing incentives or forcing employers to purchase health insurance on behalf of their employees. If individuals were not provided these policies, they would purchase catastrophic policies and pay for routine services in the same way that individuals pay for an oil change out of their pocket but retain collision insurance policies if something major occurs. Of course, this is not all. There are myriad ways in which government policies distort and destroy the private market for health care and health insurance which this essay details.

Note that, rather than rationalizing the marketplace for health care by removing artificial demand created by the government and restoring economic freedom to the health care market, Obama's "plan" actually will exacerbate the problem by forcing everyone to purchase comprehensive insurance policies or by providing policies through a government sponsored program. Such an approach is equivalent to throwing gasoline on a fire (an approach which I discussed in more philosophical detail in
this past post.)

Given the political reality that the government seems intent on intervening in the health care market even more dramatically by, for example, offering "competing" public insurance plans or mandating that individuals purchase some form of coverage, I propose an even simpler way to fight socialized medicine without doing anything: doctors should simply refuse to contract with insurance companies or the government. In other words, doctors should do nothing until they get paid their asking price.

Some doctors are already doing this by
going "private", i.e., by setting up practices, often known as concierge practices, that do not accept insurance or medicare. In other cases, some major medical groups are dropping insurance carriers. The doctors are the last line of defense against socialized medicine. They could stop it tomorrow, if they chose to do so. I applaud efforts being made by groups, such as FIRM, that attempt to educate policy makers on the causes of the crisis, and I further advocate that we attempt to focus on educating the doctors, who could put an end to this nonsense very quickly if they were to shrug.


Michael Labeit said...

These two articles from mises.org argue against government run/regulated healthcare from a Misesian economic calculation perspective. Very good.



Anonymous said...


Mike Hanski said...

You are absolutely right. The government and insurance companies are the cause of poverty because these companies are luring the poor with money. Students of our country can end this. They should write as many essays as possible so that our country does not have to face poverty and we can live life comfortably. We can Stop Socialized Medicine with the sharing of essays on this topic.