Health Care "Reform"

Written by Trey Sellers

The health care debate is still in full force, and while there is strong support and opposition to the reform being proposed in Washington, we can all agree that health care costs are a burden on a large portion of American families. The important point to realize, though, is that the legislation being proposed is simply more of the same, an expansion of the status quo. The health care industry is rife with government intervention in the form of subsidies and over-bearing regulation, so it’s hard to understand how the proposed legislation, which calls for an enormous amplification of that intervention, can be heralded as “reform” or “change”. Ten years down the road, when health care costs continue to spiral out of control, health care “reform” supporters will be scratching their heads, wondering why their solution didn’t work, and pounding the table for the government to come to the rescue.

One of the more prevalent rationalizations for a socialized health care system, no matter what form it may take, asserts that health care is a right. This claim is easily struck down when considering the nature of rights as inalienable of the essence of humanity and when comparing health care to other natural rights. Rights are intangible, and as such, they cannot be priced in a currency. For instance, a grocery store cannot sell a six-pack of Freedom of Speech, but no one would need to buy it anyway, because this right is retained in everyone’s innate humanity. A price can be placed on a drug, however, and that drug can be sold in a pharmacy, just like every other kind of product is sold by businesses. Asserting that health care is a right means that I should be able to walk into a pharmacy and demand any drug that I need for free. If this scenario sounds ridiculous, then I think you are starting to get the picture.

The health care industry is simply a collection of products and services with buyers and sellers, and is therefore no different than any other industry. It is held to the same economic laws of supply and demand, and it is affected by government regulations and other interventions in the same way as any other industry. Recognizing this fact makes it easy to diagnose the causes of the problems America faces in health care, and solutions to those problems become readily apparent.

By far, the major cause for concern regarding health care in America is the cost, both of the products and services in the market, and premiums for insurance used to cover those costs. With these costs rising at astronomical rates, there are a significant number of people who cannot afford health care or insurance, and some end up in financial ruin as a result. No one debates these facts, but most people do not understand the causes of these severe hikes in price. A common direction to point the finger of blame is toward the “greedy” executives of health insurance companies, pharmaceutical companies, and hospitals, who “are only in business to make a profit.” A growing minority of people, however, realize the truth behind America’s skyrocketing health care costs. It is the government that is to blame, as government policies have created an economic environment in the health care industry that must necessarily force prices to rise.
The government policies responsible for the health care problems we face today can be grouped into three distinct categories:

1.    Subsidies

Government subsidies, in the form of Medicare, Medicaid, and VA benefits, for example, put a large amount of upward pressure on health care prices. The first reason for this, as mentioned earlier, is that the health care industry is not exempt from the economic laws of supply and demand. Subsidies reduce the out-of-pocket costs to the beneficiaries for products and services, creating an artificially low price in the market. As price falls, demand rises (with a constant supply), meaning more people will seek to be subsidized to get the benefit of the lower out-of-pocket costs. The total cost of the products and services rises, though, on account of the greater demand in the market and the fact that competing on price is no longer necessary. In health care specifically, reimbursements to doctors and other product or service providers is capped as a means to prevent them from charging exorbitant prices. This price fixing often translates to a very slim profit margin or a loss on products and services rendered, and to make up for those losses, prices are raised on the consumers whose health care costs are not being subsidized. As these events take place, doctors decide to see less and less subsidized patients to increase profits, and more and more people are priced out of health care and need to be subsidized. Every one of these factors and events drive health care costs higher, and since nothing is free, either someone has to fit the higher bill, or someone has to be denied care. Most of the time, it is a combination of the two.

2.    Regulation

One way government regulations affect health care costs is by restricting competition. Licensing laws act as severe barriers to entry into a medical profession, which reduces the supply of medical professionals in the marketplace. Legislation prohibits the sale of insurance policies across state lines, creating monopolistic-type conditions within state borders for insurance companies. Coverage mandates placed on insurance companies add risk to policies that must be offset by higher premiums and reduce the “surface area” on which they can compete for business.
Government regulations also raise health care costs by creating excess costs to doing business for insurance companies, pharmaceutical companies, pharmacies, doctors, and hospitals. Restrictions on bringing new drugs to market, enforced by the FDA, demand that pharmaceutical companies jump through hoops to comply. Doctors and hospitals are bogged down with bureaucratic paperwork and red tape. Hospitals are forced to provide treatment to everyone who comes into their emergency rooms, resulting in a significant amount of uncompensated care. All of these regulations create costs for product and service providers that must be passed on to consumers, leading to higher prices.

3.    Monetary Policy

Although seemingly unrelated, America’s monetary policy plays a significant role in inflating health care costs. Because of the unfathomable amounts of spending in Washington, and particularly regarding health care subsidies, the federal government must borrow vast sums of newly printed money from the Federal Reserve in order to fund its expenditures. This creation of phantom money out of thin air inflates prices (as I explain in two of my articles, America the Junkie and Inflation is Theft (and you are getting ripped off)), but those rising prices are not reflected evenly across all industries. Since a large portion of the new money flows into the health care industry in the form of subsidies which are not available in other industries, health care prices rise at a much faster pace. The catch-22 here is that the more subsidies provided, the more money the government needs to print to fund them, and the more money that is printed, the higher prices go and the more money is needed to fund the subsidies.

Solutions

As expected, there are numerous solutions being proposed by Congress as a means to curb health care costs, and of course, none of them will work. They are all expansions of the semi-socialized system currently in place, and as I have explained, the economics simply do not support them. The only way to lower health care costs and give everyone access to high-quality, affordable health care is to create a truly free market in the industry, devoid of all government intervention. There is no better mechanism for quality, low-cost products and services than a free enterprise system, and this fact is evident in every market that has relatively minimal interference from government. A perfect example of this mechanism at work is the computer market. Computers today are unbelievably advanced and ever more affordable, and despite a rapidly depreciating currency, they have still managed to grow better and cheaper year after year. Even in the health care industry, Lasik eye surgery and breast augmentation procedures, which are not subsidized, are continually getting more affordable, while the rest of the industry suffers from costs spiraling out of control.

The following are necessary steps to create a free enterprise system in the health care industry:

1.    End All Subsidies

Medicare, Medicaid, VA benefits, and all other government subsidies should be abolished. This, of course, cannot be done overnight. It would be wise to gradually wean those who are dependent on these programs off of them over a certain period of time, maybe 10 to 20 years.

2.    End All Regulation on Companies in the Health Care Industry

The free market is the absolute best regulator, and no government bureaucrat can match the checks that consumers and competition place on businesses. Stabbing your own customers in the back is very bad business in a free enterprise system, and without government granted monopolies and other protections, businesses would actually have to compete in order to avoid going bankrupt and make a profit. Every dollar spent by consumers is a vote for a specific business and against others, and a free enterprise system would shift power back into the hands of the people and away from corporations, who rely on special privileges from politicians to help them stifle competition, protect profits, and socialize losses. This also means abolishing the FDA and other bureaucratic black holes. The FDA’s existence creates loopholes for businesses that would not be available in a free enterprise system. Once again, the market and consumers will regulate companies much better than any government agency. Government’s only role in any industry should be to ensure the enforcement of legal contracts and to protect property rights and individual rights.

3.    Repeal All Licensing Laws

A lot of people view a repeal of licensing laws for medical professionals as ridiculous. How can patients be safe without a government entity to give doctors licenses to practice? The simple fact is that licensing laws are completely unnecessary to ensure the quality of care given by medical professionals. By repealing all licensing laws, we can let the market, patients and consumers, decide who has the proper education and knowledge to treat us. Perhaps independent, private accrediting companies would sprout up to certify a physician’s knowledge of his specific field and ability to treat patients. These types of companies would create productive jobs in private industry to replace the non-productive jobs offered by government for the same purpose, and since wealth can only be created by expanding productive capacity, society’s level of wealth, as a whole, would improve. A free market has an irreplaceable ability to develop ingenious solutions to even the most complex problems. Licensing laws have limited the supply of medical professionals, and have therefore exerted upward pressure on health care costs.

4.    Abolish the Federal Reserve and Implement Sound Monetary Policy

The Federal Reserve and America’s monetary policy is a hidden culprit for the high cost of health care. Without the counterfeiting machine driven by the Fed, the government would have to directly tax citizens to pay for the outrageous amounts of subsidy spending, and raising taxes is a very unpopular political move. Instead, legislators simply run the printing presses at full capacity, driving prices through the roof and exploding the national debt, putting up the lives, property, and freedoms of the People as collateral. The flow of newly printed money into government subsidies has helped to force health care costs upward at a breakneck pace, and many people have been priced out of the market. A free market in health care cannot exist without sound monetary policies, and in order to create one, the Federal Reserve must be abolished.

Health care “reform” legislation will, without a doubt, pass through Congress and become law. It could take a number of different forms, but they will all fail to decrease health care costs overall, the quality of care will most likely fall, and the American people will be left holding the bill. It is obvious that the most prosperous industries in America are those that have relatively minimal interference by government. They supply productive jobs and put forth high-quality products and services with an efficiency that allows consumers to benefit from extremely low prices. Meanwhile, the industries upon which government lays a heavy hand, specifically health care and financial services, are in crisis. The only real solution to the health care problem is to get government out of the way and let free enterprise do what it does best. Sadly, though, offering freedom and prosperity doesn’t get you elected.