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Volume 14, Number 7
Socialized Medicine, Take Two
Two years ago, the Clinton administration fell into near total
disrepute among the public. The primary reason was its plot to
socialize and nationalize the entire medical industry and
conscript doctors and patients into a central plan.
Conservatives, Republicans, and free-market economists fought
back in a well-financed PR blitz. These groups roundly, and
rightly, denounced the administration as nearly totalitarian for
assuming it could override the free market and provide equal
health care to all.
This campaign was a model of how threats to liberty and the
free market can be defeated once exposed. The public has no
desire for big government today. People need only be told about
the plans of the elites, inspired into political action, and
those plans will be reduced to tatters. The same fate should
befall any similar Republican scheme.
What was the core of Clinton's "Health Security Act"? Let's
look at Health Security: The President's Report to the
American People. "Every American," wrote Clinton, "must have the
security of comprehensive health benefits that can never be taken away.... We must--and we will--outlaw insurance company practices
that discriminate against consumers and small businesses and make
care available to all Americans, no matter where they live or how
old or sick they are."
Is that socialism? Of course. If insurance companies aren't
allowed to take into account how sick a person is, or is likely
to be, there is no way to compute risk, assess profits and
losses, cut costs rationally, or otherwise allow a market to work
the way it should. The voluntary market system, in which medical
services are delivered on a free enterprise basis, is pushed
aside by a command-and-control system that ends up creating more
There were plenty of spin-off complaints. The plan would have
required premium caps and price controls. It would have dictated
a benefits package for insurance companies. It would have
forcibly created risk pools based on demographic lines and caused
population shifts. It would have required federal coercion for
enforcement. All this and more was in the massive arsenal of the
Political experts also say the Clinton medical fiasco--led by
his wife Hillary, called a Marxist by Congressman Dick Armey--was
key to the Republican takeover of Congress. Some observers even
suggested that the president, much less his wife, would never
recover from this legislative fiasco.
Then: it was the Republican's turn at bat, and history quickly
turned to farce. The leadership decided it needed to pass a
health care bill before the November election. Democrat Ted
Kennedy, a longtime proponent of socialist medicine, then
cooperated with Republican Nancy Kassebaum to produce a bill in
the Senate, while the House introduces its own version. The
Senate bill covers mental health (in case the Senators have to
reenter the private sector?), while the House bill offers some
specialized tax breaks, but otherwise the bills are identical.
Incredibly, the core of this Republican-backed bill is
exactly the same as the Clinton bill. Look at the section of the
bill called "Guaranteed Availability of Health Care Coverage,"
and compare Bill Clinton's grandiose promises with the actual
language from the Republican side:
"An insurer may not decline to provide whole group coverage to
employers; and a group health plan (whether an insured health
plan or self-insured health plan) may not establish eligibility,
continuation, enrollment, or contribution requirements for
participants or beneficiaries based on: health status, medical
condition, claims experience, receipt of health care, medical
history, evidence of insurability, or disability of a participant
That's legislative language for a mandate to replace the
market with a broad government demand for exactly what Bill
Clinton promised: "We must--and we will--outlaw insurance company
practices that discriminate...."
There's more that links the repudiated Clinton plan with the
beloved Republican plan. There's "Guaranteed Renewability,"
mandated and state-certified "Health Plan Purchasing Coalitions,"
and vague insinuations of premium caps. A "study," for example,
will assess "the need for Federal standards that limit the
variation in health insurance premiums...."
There are criminal penalties for "federal health care
offenses," as Jane Orient of the American Association of
Physicians and Surgeons discovered. It imposes fines up to
$10,000 "for each instance" of what it calls "health care
fraud"--meaning not complying with the new dictates--and prison
terms up to 10 years. For violations involving less than $100,
one year in jail is the penalty.
Are the Republicans attempting to legislate socialism? Of
course, just like Clinton before them. As James Glassman has
written, "Inevitably Americans will arrive at the destination they
rejected when Bill and Hillary Clinton proposed it:
government-controlled health care."
Their bill, like Clinton's, forces insurance companies to fork
over money for medical services for anyone and everyone, no
matter how sick or healthy a person is, and equalizes premiums
among all groups. This is the abolition of free enterprise. It is
a command-based system that nationalizes insurance companies and
socializes medical care in a piecemeal fashion.
The Republicans were right to ridicule the Clinton plan,
predicting that it would lead to high prices, fewer services,
shortages, and generalized disaster. But the Republican version
of the same passed it overwhelmingly in the House; the Senate
passed it unanimously. Bill Kristol's Weekly Standard
and the Wall Street Journal, which were on the warpath
against Hillary's bill, have cheered the new version to the
The truth is that all respectable sides are pumping for a
universal right to health care--or its equivalent in health-care
insurance. The government is pleased to see to it that everyone
can exercise that right. Already having endorsed the ends,
Washington will have to go all the way and mandate the means.
In due course, the "poor" and the unemployed will be insured.
Insurance companies will be forced to lump in high-risk,
high-payout customers with low-risk, low-payout ones. The middle
class will subsidize the poor, the healthy will subsidize the
sick, and traits that cause people to be poor and unhealthy will
no longer be discouraged.
Insurance is suppose to work like a business. Like all
businesses, insurance companies survive and profit by providing
consumers valuable products and services. When consumers pay
premiums, they avoid financial risk, and these premiums cover
losses and expenses incurred by the insurer. The insurer, in a
free market, provides only what the consumers demand. Consumer
are paying to reduce risk, not to subsidize other consumers. If
they wanted to do that, they would contribute to charity.
What if, for example, Chevrolet attempted to raise its price
by thousands of dollars To give extra revenue to the customers of
Cadillac dealers. In short order, Chevy would be in financial
trouble because consumers would shift to other sellers. They
would have to lower their price if they are so allowed.
To prevent such involuntary subsidies, insurers must stratify
consumers according to the probability of accidental loss. Where
the probability is higher, premiums cover high insurance payouts.
It also requires preventing intentional "accidents" by consumers.
If life insurers were prevented from discriminating based on age
and health they would be forced into bankruptcy.
The only mystery is how the Republicans got away with this.
The answer is that they guaranteed profits for the largest and
most influential special interest groups while providing just
enough favors to potential opponents of the bill to buy their
support. They knew leftists would have no incentive to expose the
plot; in fact, the left secretly cheered.
We do need medical reform. But real reform would have to
strike at the heart of the system. Today, 18% of total federal
outlays go to Medicare and Medicaid. That must stop. If we
removed the subsidies and mandates, prices would plummet, perhaps
enough to remove the need for health insurance altogether. We
also need to break up the medical monopoly and decontrol drugs
and delivery services. The Republican bill does none of this; it
is not a choice but an echo of the Democrats.
Jeffrey Herbener teaches Economics at Grove City College