According to polls taken in recent years (e.g., Pew Research, Gallup, Data for Progress), a solid majority of Democrats and well over a third of all Americans are in favor of replacing the current healthcare system with a proposal known as “Medicare for All” where privately-owned hospitals, pharmaceutical companies, and medical practices would continue to exist, but all their expenses would be paid for by the federal government. By becoming the sole payer, the federal bureaucracy would be in a position to impose its central plan upon these nominally-private businesses and their customers, thus giving rise to a fully socialized healthcare system in the form of corporatism.
As most Americans express negative opinions about almost all federal agencies, with an existing provider of socialized healthcare (the Department of Veterans Affairs) being ranked the very worst agency of all, why has this variant of socialized healthcare become so popular? Even if many Americans understand neither the economic case against socialism, nor concrete examples of socialized healthcare dysfunction, nor the inherently totalitarian tendencies of even well-intentioned socialist movements, they still seem to understand that federal bureaucracies are not a particularly cost-effective nor satisfying alternative. So why is federalizing healthcare an exception?
According to the latest Kaiser Family Foundation Health Tracking Poll, by far the biggest concern Americans have with their private health plans is out-of-pocket costs. Nearly two-thirds worry that they won’t be able to afford adequate healthcare; a concern that is just as prevalent as their worries about rising gasoline prices and transportation costs and ranking far ahead of all other economic issues. While this doesn’t automatically translate into political support for socializing healthcare, it might just bamboozle those who don’t understand that “Medicare for All” implies central planning. By framing a corporatist healthcare scheme as being a mere extension of existing Medicare benefits, Democrats are deceiving many Americans about the fundamental transformation a single-payer reform would institute; corporatism conjures up an illusion of capitalist efficiency even if it is really socialism.
The use of the “Medicare” label for this scheme obfuscates the fact that, under the current system, the federal government hasn’t yet displaced the private sector as the primary source of funding of healthcare expenses. The Centers for Medicare and Medicaid Services estimate that the federal government currently pays for only 31 percent of total healthcare expenses in America, while state and local governments (which mostly direct their payments through private middlemen) account for another 16 percent.
That transitioning to a fully-socialized healthcare system would make things even more miserable than they are now shouldn’t be taken to mean that the public’s concerns about the unaffordability of healthcare are somehow illegitimate. Quite to the contrary, soaring healthcare costs do require attention in several respects.
First, healthcare happens to be seriously afflicted by market-warping privileges, immunities, and subsidies that harm consumers. Both the federal and state governments create artificial restrictions to the provision of healthcare and otherwise increase healthcare costs through the imposition of licenses, patents, insurance regulations, medical school accreditations and quotas, tax laws, etc. As Patrick Newman documented in his book Cronyism: Rise of the Corporatist State, 1849-1929, the American Medical Association (AMA) had lobbied to restrict the supply of doctors and Big Pharma to effectively monopolize drugs more than a hundred years ago.
The consequences of more than a century of medical market rigging are that Americans pay nearly twice per capita as much as residents of other industrialized countries for fewer healthcare goods and services; the prices of healthcare-related goods and services are ridiculously higher in America because of governmentally-created restrictions on the supply of doctors, nurses, patented/FDA-licensed medicines, etc.
Curiously, even as many anti-capitalist partisans cheered the assassination of UnitedHealth Group CEO Brian Thompson, they somehow failed to notice that the health insurance sector’s profit margins are at the low end among all publicly-traded corporations; for the most part such insurers merely pass on to their policy holders whatever costs that medical professionals, hospitals, and pharma companies charge them. Insurance companies just bring the bad news about high costs to consumers; shooting the messenger does not strike at the root of the competitive restrictions responsible for them.
If one is serious about significantly cutting healthcare costs, insurance is not the place to start. Instead, one would be better advised to look closely at Big Pharma, whose large net income margins as a fraction of total revenues rank alongside other genuinely privileged entities like licensed fractional reserve banks and patent-protected/government-subsidized tech firms. Big Pharma partakes of a combination of the patent and licensing rackets, has blanket immunity from liability for certain products like vaccines, and systematically corrupts politicians, federal and state regulators, medical researchers, medical journals, and even national news outlets to find ways to artificially boost demand for its products while excluding competition and censoring adverse information. All these privileges and immunities need to be abolished.
Likewise, artificial barriers to entry to medical professions via state licensing and via regulations of medical educational institutions are another privilege that needs to be ended. Here private health insurance firms could be a crucial ally in replacing government-controlled licensing, regulation, and medical school accreditation, since insurers have consumer-aligned financial incentives to enforce effective quality controls and safety rules on medical professionals while avoiding artificial restrictions on competition. The vital regulatory roles played by private safety organizations in other sectors like Underwriters Laboratories, the National Fire Protection Association, and the Insurance Institute for Highway Safety could be replicated in the healthcare sector too, if only governments would get out of the way.
Democrats might retort that under a single-payer system the government could incorporate cost controls into its central planning; forcing privileged interests to take price cuts. However, they neglect to mention that there is no firm obligation under “Medicare for All” to actually implement such cost controls. If corrupt politicians and bureaucrats happen to find it expedient to keep letting their well-heeled donors gouge consumers with various privileges, immunities, and subsidies, concentrating all buying power in their hands only makes their infernal plundering unstoppable. Corporatism, after all, is merely socialism without the pretense of egalitarianism; it poses no inherent obstacle to private profiteering by the nominal owners of the means of production even as costs are socialized.
Second, we shouldn’t ignore the role that Medicare and Medicaid, as well as the forms of private coverage artificially favored by the government’s tax and insurance laws, play in artificially boosting demand for healthcare goods and services, thereby artificially driving up prices even further. Ludwig von Mises explained that “health” as such is not an insurable risk, but rather is always subject to potential cost escalation due to moral hazard and adverse selection issues:
There is no clearly defined frontier between health and illness. Being ill is not a phenomenon independent of conscious will and of psychic forces working in the subconscious. A man’s efficiency is not merely the result of his physical condition; it depends largely on his mind and will. Thus the whole idea of being able to separate, by medical examination, the unfit from the fit and from the malingerers, and those able to work from those unable to work, proves to be untenable. Those who believed that accident and health insurance could be based on completely effective means of ascertaining illnesses and injuries and their consequences were very much mistaken. The destructionist aspect of accident and health insurance lies above all in the fact that such institutions promote accidents and illness, hinder recovery, and very often create, or at any rate intensify and lengthen, the functional disorders which follow illness or accident.
Absent government interference, private plans try to mitigate such problems by requiring large deductibles and co-pays to deter frivolous use of healthcare services and by requiring preexisting condition exclusions and rate discrimination associated with numerous risk factors to deter cost avoidance by defections of less risky individuals from insured pools that also contain riskier individuals.
In contrast, unconditional benefit guarantees like Medicare promote greater expenditures when patients and doctors cease caring about costs, and encourage people to lead unhealthy lifestyles at the expense of people who scrupulously lead healthy lifestyles. Such government plans can control costs only through mandating universal coverage, rationing medical goods and services, regulating lifestyles, and engineering the premature demise of riskier population groups. Consumers and doctors alike need to become more cost conscious.
Third, it is an inescapable economic reality that improvements in future standards of living require private thrift, which is incentivized in large measure by individuals taking personal responsibility for their own economic security, and that the resulting savings not be diverted by government deficits or by government taxes towards supporting present consumption. As I have explained in several previous articles, the enactment of Medicare and other entitlement programs in the mid-1960s was followed by a decline in America’s net savings as a fraction of national income from double digit percentages then down to zero percent today—economic growth is dying. Instead of accelerating its economic decline with a “Medicare for All” scheme, America desperately needs to change course if it is to reindustrialize—that is, towards a future with Medicare for None.
