Freeman

PERSPECTIVE

Strength Springs from Strong Ideas

JULY 01, 1992 by HANS SENNHOLZ

The Foundation for Economic Education is a “home” for the friends of freedom everywhere. FEE’s spirit is uplifting, reassuring, and contagious, inspiring the creation of numerous similar organizations at home and abroad. F. A. Harper founded The Institute for Humane Studies; Kenneth Ryker created the Freedom Education Center in Cedar Hill, Texas; and Ralph Smeed, the Center for Market Alternatives in Boise, Idaho. In London, Antony Fisher founded the Institute for Economic Affairs; in Buenos Aires, Alberto Benegas Lynch established the Centro de Estudios sobre la Libertad; and in Guatemala City, Manuel F. Ayau built the magnificent Universidad Francisco Marroquín. FEE’s dedication to the ideals of liberty has been and continues to be an inspiration that offers great hope for the future and new courage and confidence.

We honor Leonard Read who created this home for the friends of freedom. He knew that freedom means the pursuit of our own goals, provided we do not deprive others of their freedom to pursue theirs. His goal was peace in all social relations.

FEE now is 46 years old. Although it is the oldest institution of learning dedicated to the study of freedom in all its ramifications, it is as vibrant with life and energy today as it was at its inception. Now, as in the past, it heeds the words of George Washington: “Let us raise a standard to which the wise and honest can repair. The rest is in the hands of God.”

—Hans F. Sennholz, President

 

Will More Government Improve Health Care?

We are about to do something, anything about health care supply.

The impetus comes from the charge that we spend more on health care but compare unfavorably with other countries in terms of life expectancy, infant mortality, and efforts to lower various disease rates. This supposedly shows that our health care supply is both more costly and defective.

But the cause may lie on the demand, not the supply side. Maybe we spend more on health care because we have higher demands due to factors such as high crime rates, drug use, and lifestyles.

Further, it is possible we spend more on health simply because we are richer. If we demand proportionately more health care as incomes rise, our higher costs might be due to our preferences, not supply-side inadequacy.

Would you conclude that because we spend more on recreation than some other country that our recreation industry is bad and needs reform?

Simple connections between spending and health are tenuous and worthy of better analysis before we charge off and change the system or throw more money at it. The evidence suggests that this will make matters worse.


Instead of wringing our hands over the 35 million who do not have health insurance, we should look at getting rid of the ways the government has raised the cost of insurance and priced some out of the market.

A major cause of high insurance premiums is the mandated benefits required by most states. For example, in Washington State, most health insurance policies must cover alcohol and drug abuse and the services of chiropractors, occupational therapists, physical therapists, speech therapists, podiatrists, and optometrists . . . .

This is how special interest groups get their services included in health benefits, thus helping their business and spreading the cost to everyone. Why not include economists, too?

For $100 I would be glad to give you advice that might improve your economic health. And you would be more inclined to buy my services, even if useless, if insurance (other people) paid 80 to 100 percent.

All this points out a real problem with health insurance. Insurance is supposed to protect people from events not their fault. When it pays for a discretionary service, it is no longer insurance but welfare, and when some choose it—need it or not—this raises both health and insurance costs.


If the price of bread is $2 in one country and $1 in another, you might conclude that bread is “cheaper” in the second country.

But then suppose you discovered you had to wait for three hours to get the $1 bread, as Russians do. Is the $1 bread still “cheaper”?

Similarly, the statistic that Canadian per capita health care costs are only 75 percent of the U.S.’s is used to conclude the Canadian system is “cheaper” and we should adopt it.

But think of the waiting lines for many medical services in Canada: 24 weeks for coronary bypass, 16 weeks for tubal ligation, 14 weeks for tonsillectomy, 16 weeks for hysterectomy, 33 weeks for septal surgery, and so on.

As a result, many sick Canadians come to the U.S. for treatment and others die waiting.

Do you still think health care is “cheaper” in Canada?


When you have an industry that is full of supply-side rigidities, monopoly, and bureaucracy, most of which are due to government regulation, throwing more money at it will simply raise prices and reduce output. Health costs shot up after Medicare and Medicaid, and the rise in real output slowed or declined.

As Nobel laureate Milton Friedman recently observed: “The U.S. medical system has become in large part a socialist enterprise. Why should we be any better at socialism than the Soviets?”

—John T. Wenders, from a column in the Moscow (Idaho)/Pullman (Washington) Daily News

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July 1992

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