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Friday, July 31, 2009

Are We Really All Healthcare Collectivists Now?

“We have to do something about health care.”

The scariest word in that sentence is not something. It’s we.

The first-person plural form is not merely a convenience, as in “We’re in for a cold winter.” It indicates that decisions about “the healthcare system” are to be made collectively, with one decision binding everyone.

That’s collectivism.

So why is virtually everyone a collectivist when it comes to heath care? I do not exaggerate. Every prominent participant in the current debate over how to “reform” the medical and insurance industries — regardless of party — approaches the issue in collectivist terms. They have differences at the margin — tax increases versus tax credits, a government-run “public option” versus subsidized nonprofit cooperatives — but there is no disagreement that we must have a policy.

But why must we do anything about health care? Why can’t you do what you want, I do what I want, and he and she do what they want? Isn’t that what’s supposed to happen in a free society? Reformers would say that costs are rising too much and some people can’t afford insurance. But that is no answer. It tells us only that possibly ameliorable conditions exist, not that collectivism is a good approach.

When we see problems in other important markets, most of us don’t expect televised presidential town-hall meetings, congressional committees, and omnibus legislation to give us The One Answer. We individually adjust our behavior in the marketplace and anticipate that entrepreneurs will cater to us. Solutions are micro, marginal, and tailored to individual needs, not macro, holistic, and procrustean.  Out of this arises an orderly marketplace — without a conscious overall plan. That’s why it works so well. No one has found a better way to make masses of people at all income levels better off.

Health Care Is Different?

Why is health care different? Must we collectively and consciously reinvent it? The social knowledge problem that F. A. Hayek spelled out should make us wary of any such response. All of us together acting in the market are wiser than any group of congressmen. (Did I really need to say that?)

The reformers’ stock answer is that this is something only we, working through the “democratic process,” can handle. That’s an assertion. Where’s the proof? What if earlier collectivist decisions gave us rising medical and insurance costs?

In fact they did. Nearly every aspect of medicine and health insurance that the politicians say needs fixing is the result of politicians’ previous attempts to fix something. Much of the escalation of prices comes from consumer demand that is freed from normal cost constraints thanks to third-party payers: government-privileged insurance companies, Medicare, and Medicaid. While that intervention boosts demand by eliminating cost consciousness, others constrict supply: occupational licensing, insurance mandates and barriers to entry, patents on drugs and devices, FDA regulations, certificate-of-need requirements, and more.

Making Things Worse

With each so-called reform, we (in reality, they, the politicians) made things worse. It’s time we — collectively — stopped trying to reinvent the medical and insurance industries.  Instead that task should be left to us individually — acting, transacting, competing, and cooperating in the marketplace. Only then will solutions emerge from people’s — not politicians’ —  choices, as entrepreneurs (neither aided nor impeded by the State) pursue profit by producing goods and services that make us better off.

Notice that entrepreneurship is missing from the public debate over medical care. Typical of the politicians’ arrogance, they can’t appreciate the role entrepreneurs— without privileges of any kind — play in bettering our lives. In a free market they look for unmet or poorly met consumer demand and devise ways to meet it. To do that job well, they need price signals that convey accurate information about consumer preferences and resources — which means prices undistorted by government policy. The successful entrepreneur’s payoff is profit, the result of transforming lower-value inputs into higher-value outputs.

Profit is the key, but “profit” is a dirty word in the current debate, one more arrow against freedom in the demagogues’ quiver. Insurance company profits are condemned not because the corporate state bulks them up through anticompetitive regulation, but rather in principle. The politicians are always ready to exploit people’s deep suspicion that profit is added to the price rather than extracted from the costs. If government interferes with profit-making, it suppresses entrepreneurship, which in turn cripples the market’s ability to serve us. To paraphrase Hayek, profit-seeking is a discovery procedure. The government condemns profit at our peril — especially in the medical industry.

Let’s hear no more about what we — collectively and coercively — must do about health care. If government would get out of the way we — individually and cooperatively — would figure out what to do. Collectivism and government planning trample freedom and foster social stupidity. Individualism and free markets respect each person’s dignity and liberty while getting the most out of the “wisdom of crowds” in the marketplace.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.