All Commentary
Monday, January 1, 1990

The Coming Push for National Health Care

Terree P. Wasley is a Washington-based economist and free-lance writer who has worked on tax and health care issues for the U.S. Chamber of Commerce, the Goldwater Institute, and The Heritage Foundation.

Conservatives and free-marketeers across the country have cause to celebrate these days. For the first time in decades, Congress has eliminated a welfare-state program. Repealing the catastrophic care plan for the elderly has raised hopes that future spending sprees on health care will face insurmountable opposition in Congress. Health care experts, journalists, and broadcast commentators have advised that other forays by the government into health issues, such as mandated benefits, long-term or nursing home care, national health insurance, and nationalized health care are virtually dead in the water. The Wall Street Journal even remarked that this recent defeat has killed for now any further attempts to socialize American medicine.

Despite this remarkable success in rolling back one program, now is not the time for those who believe in free markets to relax. If current wisdom is correct, then the Bush Administration has a unique window of opportunity through which to propose major reforms to this country’s ailing health care system, bringing it back into balance with our free-market convictions. The time may be right to urge significant changes that would curtail spiraling health care costs, making health care more affordable and offering citizens the chance to choose the way to provide for their own future health care needs.

The Administration must act now, for to wait may allow an opportunity to pass that might never come again. Those who believe government can best provide for our lives are already working behind the scenes for passage of a comprehensive national health care plan for all Americans—and their target date is 1990.

Calls for some kind of national health care program have increased during the past year and are coming from a variety of sources. The rapid escalation in health care costs, particularly in the 1980s, and attention to the fact that approximately 30 million Americans lack health care insurance, have raised demands for some kind of uni versal solution.

Not too surprisingly, the A.EL.-C.I.O. used its national convention in November to kick off a major campaign for national health insurance legislation in the next Congress. However, what has amazed some are voices from the business community speaking out for more federal government involvement in health care. Ever-rising health care costs, due to government interference and a perverse system of incentives and controls, have so frustrated American business leaders that some have now resigned themselves to failure and are asking the government to bail them out.

Art Puccini, vice president at General Electric, in a speech early last year, said, “rising employee medical costs may lead some of us who today are free-market advocates to re-examine our thinking and positions with respect to government-sponsored national health insurance.” Ford Motor Company has been using its seat on President Bush’s competitiveness council to push for government health care, and General Motors vice president Beach Hall has been seen at several recent Capitol Hill meetings on the issue.

Walter B. Maher, director of employee benefits for Chrysler Corporation, has urged that a national budget be set for health care each year—much like in Canada, Britain, and other countries with national health care plans. The Washington Business Group on Health, which represents about 180 Fortune 500 companies on health issues, is one of several groups drafting a national health care plan with the goal of controlling health-related spending.

Astonishingly, it’s not just big business, frustrated with mounting health care costs, that is turning a favorable eye toward a national health plan. A recent Dun & Bradstreet survey of small business found that 38 percent favored some form of national health insurance. The Independent Business Federation says 15 percent of its members polled in 1989 would agree to a mandatory national health insurance program.

In addition to business, another unlikely group has joined the clamor for national health care: physicians. Last year, Physicians for a National Health Program, a two-year-old group of 1,200 doctors from across the U.S., proposed a single public insurance plan that would pay for all approved medical services. According to Dr. Arnold Relman, editor-in-chief of the New England Journal of Medicine, “Nothing short of a comprehensive plan is likely to achieve the goals of universal access, cost containment and preservation of quality that everyone seems to want.”

Many experts believe that it is currently impossible to undertake a national health care program of any kind, because of Federal budget deficits. Despite this, polls are showing that Americans see the deficit as less and less of a threat and that they are concerned about those who don’t have access to health care because of its current high costs. Because of that concern, and if skyrocketing health costs are not slowed, some health care experts, such as Harvard University professor Robert J. Blendon, predict that national health care will become a major issue during the next few years.

Socialized medicine, the word normally used for a national care program, conjures up vivid images in most Americans’ minds. One sees Soviet citizens dying because of a lack of adequate medical care, British citizens waiting for months to undergo a simple procedure or surgery, rich Europeans paying under the table to get their names pushed to the top of a waiting list, and Canadians hopping the border into the U.S. to have procedures done, rather than wait months or maybe years in their homeland.

No one, including most members of Congress, expects the American people to accept a socialized system like that of the Soviets, with its centralized control of every aspect of health care. Recent attention given to the severe problems besieging the British national health care system has prompted Prime Minister Thatcher to institute some market-based reforms and has turned proponents away from that example. However, many bills recently introduced in Congress would provide for a system of national health insurance modeled after the perceived success of the Canadian health care system.

One of the bills receiving the most attention is Senator Kennedy’s “Minimum Health Benefits for All Workers Act.” This bill would require all employers to provide health care insurance for workers and their dependents. Besides being a major intrusion by the government into individual and business decisions, the bill would increase health insurance costs by $100 billion, result in a loss of one million jobs, and spawn a further escalation in medical price inflation. One cannot overlook that mandated benefits are really transfer payments in disguise, with all the pernicious economic consequences of such transfers. A study by the National Center for Policy Analysis estimates that as many as 25 percent of the uninsured lack health coverage because current state-mandated benefit laws make it too expensive.

Governor Michael Dukakis has been touting his new Massachusetts universal health insurance program as a model for the nation, and politicians in some states have believed him. Under the Massachusetts program, all companies with more than five employees that don’t provide insurance are required to contribute as much as $1,680 a year for each employee to a pool providing health insurance to people without coverage. Interestingly, a year after the plan has gone into effect, it is facing severe budget shortfalls, and hospitals and businesses are concerned they will be left footing the bill for skyrocketing costs.

Many politicians have praised the Canadian system of health care as successful in providing satisfactory health care at lower costs than the United States. But the problems inherent in any health system based on social insurance or direct government funding are already showing up in the Canadian program. These endemic flaws should give pause to U.S. lawmakers eager to adopt a plan similar to the Canadian one.

The underlying problem with any social insurance system is that patients make little or no contribution to the cost of their care. What follows is the exorbitant increase in the demand for health care services, and the resulting price controls, rationing, income controls on physicians, shortages of equipment, deterioration of medical facilities, and long waiting lists. Canada has exhibited all of these symptoms, and many Canadians routinely cross the border into the U.S. for treatment. Price controls, rationing, and waiting lists do put a lid on health care spending, and that is exactly why many politicians can boast that Canada spends less on health care than the United States. But is that the quality of health care Americans want?

As mentioned above, a unique window of opportunity may exist in Washington following the collapse of the catastrophic health care legislation. Now is the time to reverse the trend toward nationalizing our health care system and replace it with a free market. The creation of Medicare and Medicaid in the 1960s, their continued ex-pansion, and the addition of a crazy quilt of health care programs by both the Federal and state governments have virtually destroyed Americans’ access to reasonable and efficient health care.

Government intervention has our health care system caught in a vicious cycle of government-encouraged demand that drives up costs, bankrupts Federal and state budgets, and leads to still more infusions of money and program expansions that encourage additional consumption. Only the elimination of government interference and a return to a free market in health care will end the move toward nationalization. Only a free market will break the spiral of ever-increasing medical costs. As Ludwig von Mises wrote, “The pricing process of the unhampered market directs production into those channels in which it best serves the wishes of the consumers as manifested on the market.” Only a free market in health care will allow individuals maximum choice in meeting their health care needs.

1.   For a detailed history of our health care system, see Critical Issues: A National Health System for America, edited by Stuart M. Butler and Edmund F. Haislmaier (Washington, D.C.: The Heritage Foundation, 1989), chapter 1.

2.   Ludwig von Mises, Human Action: A Treatise on Economics (Chicago: Contemporary Books, 1966), p. 394.