Free-Market Healthcare

The blessed overlords in D.C. are telling us all that if we just put our faith in them, we'll all be taken care of. Besides being a moronic fantasy denying the very notion of scarcity, it's a complete denial of the principles of freedom of choice and self-ownership. Add to that a healthy dose of economic fallacy, and you've got a recipe for disaster.

What's the problem? The problem, to be clear, is NOT health care per se; it's health insurance and the requirements put on doctors. No, our health care system is not perfect, people die everyday. This will always happen as long as people err.

Insurance is hedging against the risk of things that are not under our control. Think of car insurance. We have insurance against things that we cannot directly control (wrecks, things falling on our cars, vandalism) and that are relatively expensive for us to fix. What is health insurance these days? Besides the part that is real insurance, it is essentially pre-payment for medical services. The government requires insurance companies to offer all manner of coverages to people. What if the people don't want this or that particular coverage? "Too bad", say the overlords, "you will take our benevolent gift". This control over the service itself has the effect of driving up prices. If companies are forced to insure all their customers against every disease under the sun, they, quite obviously, must charge more to cover the risk.

Another factor driving up prices deals with government control over supply. The most obvious example of this is arbitrary restrictions on consumer choice of insurance. We are restricted by the federal government from purchasing insurance in other states. This reduces competition since the companies in any given state have a "captive market"; a captive market created by the government. Government licenses are required to start a medical school, to open a hospital, and to practice medicine (not to mention that nurses are arbitrarily prohibited from doing many things they really could do). All of these factors have the result of increasing prices by limiting supply. If one has to jump through hoops to set up a medical school and maintain licenses, not only will there be a smaller number of these schools (which means less doctors), but he or she must charge students more to pay for all the bureaucracy that is created. After a doctor has incurred massive debt in these schools, he or she must now charge higher prices to pay off this debt and to pay for all of his or her licensing fees. Further, the doctors that do exist can charge higher prices because there are fewer doctors than there would be in a free market. Why are the politicians not talking about this? They operate on the fallacy that holding down prices will fix the problem. If the price of a good drops artificially, more people will demand it. This will create a shortage of care and we will all be poorer.

The solution? Cut the government out of it. They've done enough damage. Cut out the care requirements and the license laws. Now, some may worry that without government control, doctors will have no incentive to keep things clean and to provide good care etc. Nevertheless, the market has a solution. Have you ever heard of Underwriters Laboratories? If not, look at any one of your electrical appliances. I can almost guarantee there is a UL seal on there somewhere. This seal indicates that Underwriters Laboratories has put the product through rigorous testing and has certified its safety. How would this work in healthcare? I don't know exactly, because I'm not a doctor or a hospital administrator. The general idea goes something like this: people demand to know that their doctor is a decent person and has good training. Some person, seeing this desire of people, founds a company (somewhat like UL) that certifies the soundness of a particular doctor's practice. We trust the market to keep us safe from the hazards of potentially dangerous appliances; we trust the market to tell us if a certain higher educational institution is up to par (i.e. accreditation companies); why can we not trust the market to give us safe medical practice?

This article by Prof. Hans-Hermann Hoppe gives a concise plan to end the government control and the high prices. I have drawn insights from him and from others. I note this article as a reference to fill in some gaps I have left out of this analysis.

Tu ne cede malis, sed contra audentior ito.