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Friday, August 14, 2009

The Overlooked Solution for Health Care


Discussing healthcare reform with an advocate of government control is frustrating. It almost feels as if one is speaking a foreign language — and in a sense, the free-market proponent is speaking a foreign language. The meaning usually doesn’t get through.

This is most obvious when the advocate of a State solution says, as President Obama said, “The scary thing is to do nothing.” Anyone who thinks that the free-market solution means doing nothing is either ignorant or dishonest. Sorry, I see no other alternative. It doesn’t take much looking to see that we have nothing like a free market in medical services and insurance. Insisting we do is an effective way to assure that the free market is never considered as an alternative to the current State-ridden system.

The statist also shows his lack of understanding (or of honesty) by loosely accusing the free-market advocate of “being in the pocket of the insurance and drug companies.” Is it impossible that someone could sincerely believe that the market solution is just and efficient? Those who throw this charge around miss a perhaps subtle point. A free-market advocate and big entrenched insurance companies could oppose the same proposal — say, a government-run insurance program — without having any other positions in common. The market advocate rejects not only the so-called public option; he also favors dismantling the entire protectionist-regulatory-monopoly-privilege system the insurance companies have enjoyed for generations. No insurance company favors that. Similarly, libertarians and pharmaceutical companies oppose government’s negotiating drug prices. But no Big Pharma company is likely to favor repealing the FDA, the monopolistic patent system, and other privileges because these interventions protect it from upstart competition.

There’s a deeper barrier keeping the honest advocate of nationalized medical care from truly hearing what the libertarian says: the (implicit) belief that medical care is a right, and its corollary, that no one should have to pay (very much) for these services.

This is where the discussion needs to be but usually isn’t, which accounts for the mostly unsatisfying outcome. There is no meeting of the minds on what is in dispute, much less on what ought to be done.

Someone who believes that medical care is a right will never accept that consumption of medical services should have anything at all to do with one’s income or wealth. That’s just wrong, he will think. What’s more, he’ll think there’s something deeply wrong with the market advocate for thinking this way. “What’s the market got to do with it?” he’ll wonder in horror. “We’re talking about medical care!”

The libertarian may never convince the statist, but the first (and perhaps the last) thing to be discussed should be whether medical care is a right. Of course, it can’t be a right. In the absence of a contract, no one can have a right to anything that must be provided by someone else’s labor. It really is that simple. The alternative proposition is in essence a slave proposition. Most people will never be persuaded by the excellent efficiency arguments against nationalized medicine — the fact that bureaucratic rationing and triage are inevitable with government in charge — if they cling to the medical-care-is-a-right theory. So we may as well have the debate there.

Demand-Side Innovation

Innovation would also emerge on the demand side. Again we can refer to history. In an earlier time Americans (and Britons and Australians) of modest means, including new immigrants, obtained medical care through sophisticated mutual-aid societies and in particular the institution called lodge practice. Exemplifying what Tocqueville identified as an American penchant for setting up associations, early Americans established “friendly societies” not only for social contact but for the safety net later provided, in coercive and much inferior form, by the welfare state. One member benefit of these societies was access to a family physician with whom the group contracted on an annual basis. “Lodge practice,” historian David Beito writes, “became particularly extensive in urban and industrial centers. In 1915, for example, Dr. S.S. Goldwater, Health Commissioner of New York City, went so far as to assert that in many communities it had become ‘the chosen or established method of dealing with sickness among the relatively poor.’” Lodge practice flourished until State-empowered organized medicine, whose members’ incomes were threatened by this unorthodox competition, put the screws to the “lodge doctors” it reviled. Who knows how mutual-aid would have evolved had it not been crowded out by “Progressives” aping Bismarck and wielding the power of taxation? What we do know is that people found a way to make medical care “universal and affordable,” that holy grail the politicians still haven’t located.

Free people are resourceful even when their resources are modest. The key is to keep government out of the way.

Admittedly, the sick and destitute would have had trouble joining a mutual-aid society. But a free and prosperous society would also be a generous society. History demonstrates it. As in the past, philanthropic foundations, charity hospitals, teaching hospitals, and pro bono medicine would all combine to provide for those who truly could not make it on their own. Government intervention undoubtedly makes these things less common. If laws mandate that all hospital emergency rooms treat whoever shows up with whatever ailment, we can anticipate that charitable efforts will be less abundant than in a free society.

We will never achieve the medical system — indeed, the society — worthy of free people as long as we are trapped in the juvenile mindset that someone owes us medical care. It is an absurd doctrine — is that someone also owed medical care? But worse, it is fodder for political opportunists, who will exploit this demand to increase State power at the expense of freedom and therefore dignity. If we follow this path, rationing of medical care might be the least of our worries.

No Right, No Service?

The libertarian must also head the statist off at this pass: the inference that if you don’t believe health care is a right, you must believe that people of modest means would be — and even should be — without adequate medical attention.

Of course, this is ridiculous. Opposition to nationalized agriculture or housing doesn’t imply that people of modest means should starve or go homeless. When you consider how concentrated wealth was throughout history, it is astonishing how competent market-oriented society — despite all the State’s efforts to cripple it  — has been at delivering necessities and one-time luxuries to the masses. From the Industrial Revolution onward, to the extent people have been free to engage in enterprise, it was regular people whose living standard increased by orders of magnitude.

The point is that markets deliver, and medical care has been no exception. If the price of basic care has soared since World War II, we can largely thank all the ways government has unhinged demand from cost considerations. Much medical care is optional or marginal, and  if government, by disguising the true cost, makes it possible for people to overconsume it, those of modest incomes who don’t qualify for handouts will suffer the consequences.

It is simply wrong to believe that in a “freed market,” as Charles Johnson calls it, large numbers of people would  go without medical attention. A free society would be richer at all levels than our semi-free society because it would have none of the barriers that today impede economic self-advancement. (See Johnson’s article on the matter.) A freed medical system would be competitive, entrepreneurial, and innovative in getting services to greater numbers of people at reasonable prices. How do we know? We’ve see the same pattern in other industries that are far less straitjacketed than the medical industry. In case after case, what began as luxuries for the rich have become commonplace items for nearly everyone. A government-free medical industry would have no income-preserving professional licensing, no paternalistic drug prescriptions, no competition-inhibiting patents, no monopolistic certificates of need, no protectionist medical guild. In their place would be competition and entrepreneurship, the discovery process that serves consumers in ways we cannot imagine in advance

Demand-Side Innovation

Innovation would also emerge on the demand side. Again we can refer to history. In an earlier time Americans (and Britons and Australians) of modest means, including new immigrants, obtained medical care through sophisticated mutual-aid societies and in particular the institution called lodge practice. Exemplifying what Tocqueville identified as an American penchant for setting up associations, early Americans established “friendly societies” not only for social contact but for the safety net later provided, in coercive and much inferior form, by the welfare state. One member benefit of these societies was access to a family physician with whom the group contracted on an annual basis. “Lodge practice,” historian David Beito writes, “became particularly extensive in urban and industrial centers. In 1915, for example, Dr. S.S. Goldwater, Health Commissioner of New York City, went so far as to assert that in many communities it had become ‘the chosen or established method of dealing with sickness among the relatively poor.’” Lodge practice flourished until State-empowered organized medicine, whose members’ incomes were threatened by this unorthodox competition, put the screws to the “lodge doctors” it reviled. Who knows how mutual-aid would have evolved had it not been crowded out by “Progressives” aping Bismarck and wielding the power of taxation? What we do know is that people found a way to make medical care “universal and affordable,” that holy grail the politicians still haven’t located.

Free people are resourceful even when their resources are modest. The key is to keep government out of the way.

Admittedly, the sick and destitute would have had trouble joining a mutual-aid society. But a free and prosperous society would also be a generous society. History demonstrates it. As in the past, philanthropic foundations, charity hospitals, teaching hospitals, and pro bono medicine would all combine to provide for those who truly could not make it on their own. Government intervention undoubtedly makes these things less common. If laws mandate that all hospital emergency rooms treat whoever shows up with whatever ailment, we can anticipate that charitable efforts will be less abundant than in a free society.

We will never achieve the medical system — indeed, the society — worthy of free people as long as we are trapped in the juvenile mindset that someone owes us medical care. It is an absurd doctrine — is that someone also owed medical care? But worse, it is fodder for political opportunists, who will exploit this demand to increase State power at the expense of freedom and therefore dignity. If we follow this path, rationing of medical care might be the least of our worries.


  • 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.