Perhaps the most prominent debate over the past half a year has been healthcare reform in this country. Raging discussions on television, in households, and on the floors of the House and Senate have set the nation ablaze with conflict over a problem which has, indeed, been a point of contention since FDR’s New Deal. It would seem that the only thing that people can agree on is that our system is broken- we need change, and we need it now. But, when attempting to understand why this system is broken, many potential causes have been brought up an discussed, some with more merit than others. Indeed, there is a large and vocal sector of this nation which decries the involvement of businesses in healthcare, which inveighs against what has been deemed a private trade in a human right, and indeed believes that a free and unfettered market has led to individual servitude to the cost of healthcare It seems that too often this view- of the evil of markets and the necessity of government intervention- is taken for granted. In an effort to dispel this view, let us examine closely an alternative idea- the idea that government, not markets, are at fault for high costs and the removal of the individual’s right to choose.
Why, exactly, are healthcare costs so high? It goes beyond unethical companies, ramping up prices for their own profit. Indeed, we must look past this perception and examine what companies are required to do by law. The 1945 McCarran–Ferguson Act empowers states to regulate healthcare providers, a power that the states have taken to using liberally. Using a mandate system, the states are able to require healthcare providers to provide certain services, regardless of who the customer is. Just a few examples:[1] In 48 states, all insurance must cover breast reconstructions. In 50 states, mammograms must be covered (even if the consumer isn’t female). In 46 states chiropractors must be covered, in 45 alcoholism treatment, and in 47 diabetic supplies (even though only 7% of Americans are diabetics[2]). These costs effectively force the majority of insurance payers to shoulder the costs of the minority, which arbitrarily increases costs and provides the individual with services they don’t need. These healthcare mandates require the provision of expensive services that are generally unneeded, and can be attributed to a major increase in the cost of healthcare- research concludes that states with 26 or more mandates have far higher costs than those with fewer.[3] The state mandate system results in massively increased prices for everyone at the benefit of very few.
It is fallacious to suggest that there is anything like competition in the healthcare market. Indeed, the single largest healthcare provider doesn’t even compete on the open market- the Federal government covers approximately 1 in 3 Americans[4]with Medicaid, Medicare, and employee services. The federal government removes all of these individuals from the market, driving up prices for other consumers, and indeed charges those not on Federal plans to support those on Federal plans- according to a 2006 UN study,[5] the US Federal government is the spender of 45.8% of all the money associated with healthcare costs in America, or 20% of its 2006 budget (which is 540 billion dollars, and that’s just to cover 1/3 of us!) So, a third of the United States is not even competing on the open market, and rest is taxed for it.
Unsurprisingly, it doesn’t stop there. By Federal Law, it is illegal to sell insurance across state lines[6]- if I am dissatisfied with the quality of service in my state, I’m out of luck. This is a blatantly anti-competitive measure, which keeps money in the state at the expense of the consumer. Similarly, state and government forcing the involvement of health insurers into more and more services has made it harder for doctors to compete. Doctors are forced to deal with federally mandated prices when dealing with Medicare and Medicaid patients, which drives up their prices in dealing with other insurers- according to an interview with Dr. Randall Paul, M.D., it’s around 3 times cheaper to just pay your doctor in cash.[7] In general, the government increases prices by limiting competition through the removal of individuals from the market, through federal regulations on where competition is allowed, and through effectively raising the prices of the average doctor visits, raising the cost of healthcare as well.
It is a shame that so many individuals have pointed the finger of blame at unrestricted markets, when the body truly to blame is government. Thanks to the government, healthcare insurers are remarkably restricted, and are required to provide coverage of a variety of things which most individuals hardly need. They are also federally disallowed from competing across state lines, and through federal activities, the prices for doctors have sky-rocketed. If we want cheaper healthcare, the answer is not more government, which gave us high costs and restriction of our right to choose. Rather, we need to free healthcare markets, allowing insurance providers to compete on price and quality. We need to allow the individual the right to pick what he needs for his own healthcare, rather than assigning arbitrary attachments which benefit the minority at the cost of the majority. If we want to make health insurance affordable and better for the individual, then a free market solution should be the obvious one.
[1] http://www.cahi.org/cahi_contents/resources/pdf/HealthInsuranceMandates2008.pdf
[2] http://docnews.diabetesjournals.org/content/3/1/1.1.full
[3] http://www.heritage.org/Research/HealthCare/upload/84532_1.pdf
[4] http://www.policyalmanac.org/health/medicare.shtml, http://www.bls.gov/oco/cg/cgs041.htm and http://siadapp.dmdc.osd.mil/personnel/MILITARY/rg0902.pdf
[5] http://www.who.int/whosis/whostat/EN_WHS09_Table7.pdf
[6] http://www.kaiserhealthnews.org/Stories/2009/November/06/health-insurance-across-state-lines.aspx
[7] http://www.youtube.com/watch?v=YHkfITHeJss
I was able to acquire three more books for 2010. Before I took up economics, I was an avid historian. I was interested in mostly military history: classical military history and the Second World War. My interest in history has rolled over as I now mull over economics textbooks. After finishing Murray Rothbard’s Economic Thought Before Adam Smith, I became interested in writing a piece on the Spanish Empire. Specifically, the article would deal with the conquest of the Americas, the influx of gold and silver bullion into Spain, its spread into Europe and the resulting inflation. There would be some history on the price-fixing which took place during various Spanish reigns (well, all Spanish reigns really), but for the most part it would deal with how Spain’s power was dependant on this new bullion to maintain their relative high purchasing power compared to other European nations.
Wikipedia
On the Ludwig von Mises Institute’s forums, a member asks whether Wikipedia is an example of “mob rule” or a work in progress. I offered my two cents:
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Tagged: accuracy · factual · wikipedia