By Freedom Newspapers
The 65-year history of how modern health care payment and delivery developed in America has at its center one key fact: Almost no individual pays his or her own way.
From this condition, we find: that health care costs rise faster than other consumer prices; that the first question at a hospital is “who is your insurer,” not, “what is wrong;” that doctors often feel responsible first to their administrator and not to the patient; that the patient often doesn’t regard the doctor as “his” or “her” doctor; that the relationship is depersonalized. That doctors may not even know the true cost when they talk to the patient.
It’s a broken system.
To an important degree, the economic situation becomes the rough equivalent of: How many meals would you eat in fine restaurants if all that was required of you was to be hungry? Name anything you covet. How much more of it would you have, as an individual or for the entire community, if it didn’t cost you anything to get it?
The difficulty in today’s health care market is it’s not a market at all. There’s demand — everyone wants as much as needed or beyond. There’s supply — sellers are pleased to provide as much as people demand. But the problem is some poor sap in the middle is required to pay for what someone else wants and someone else sells.
Sooner or later the poor sap paying the bill feels the strain and cuts back what customers demand most. Imagine if some poor sap stuck with the bill for decades started to ration your supply of restaurant dinners or dictate how expensive a car you could buy. Now you understand the economics of health care.
This train wreck began in the health care industry during World War II when employers were prohibited by law from giving pay raises. To attract quality employees, employers needed to get around the wage and price freeze. The IRS was glad to oblige. In lieu of higher wages, employers were encouraged with tax breaks to provide health insurance. Employees, who previously bought their own insurance or paid for their own medical care, received both now, largely at their employers’ expense. The benefit is not taxed as personal income. Over the years employees came to pay a small percentage of the premiums, and maybe a modest co-payment. But mostly if they wanted it, someone else paid for it.
“Exempting employer-provided medical care from taxation led to the replacement of a consensual system, consistent with the rest of the economy, by a bureaucratic, third-person payment system completely inconsistent with the rest of an open economy,” noted the late Milton Friedman, Nobel Prize winning economist, in his forward to the book “The Cure, How Capitalism Can Save American Health Care.”
This corruption of normal economics conditioned people to feel entitled to something they had received for decades at little personal cost. Government’s foolish attempts to fix this problem applied principles of socialized medicine. It only made things worse as government tried to be the poor sap paying the bills, and to impose price controls and rationing to keep costs manageable. The result is a third party increasingly deciding things like whether it’s “medically necessary” to treat a patient with acute congestive heart failure.
“Restricting patient choices in this way, flouting the laws of economics, has been a mistake,” observed Dr. David Gratzer, author of “The Cure, How Capitalism Can Save American Health Care.” “It’s the reason why, while pocket calculators have declined in price from $500 to $5, the price of pacemakers keeps rising.”
Some countries like Canada are even further down this slippery slope. In Newfoundland residents must wait 33 weeks between referral from a general practitioner and receiving an MRI test, thanks to inevitable rationing that comes from government regulation, according to the Vancouver, B.C.-based Fraser Institute’s yearly survey of medical waiting times.
Not only doesn’t it work when people are removed from the economic reality of their needs and wants, it is wrong.
Advocates of even greater third-party interference in the health care marketplace often claim everyone has a “right” to health coverage, which necessarily means imposing on someone else the requirement to pay for what the first fellow considers his “right.”
“That’s why socialism is evil,” economist Walter Williams explained. “It uses evil means (coercion) to achieve what are seen as good ends (helping people) … . Reaching into another person’s pocket to assist one’s fellow man is despicable and worthy of condemnation. For the Christians among us, socialism and the welfare state must be seen as sinful. When God gave Moses the commandment, ‘Thou shalt not steal,’ I’m sure he didn’t mean thou shalt not steal unless there’s a majority vote’.”
Many people like the ideas for mandating insurance for all Americans as a way to fix the broken system. Before they reach for government as the No. 1 answer, it would be wise to look at history, and the market, and other voices for reform.