Socialized Healthcare Is Not Cheaper Than Free Market Healthcare

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In the fall
of my sixth year of grade school, I was treated to my first real
lesson in American politics on the occasion of the annual election
for president of the student body. It was a lesson I have not forgotten
after all these years, and a lesson which has gained increased importance
for me in the current phase of the election cycle whenever I hear
politicians making bombastic promises to reform healthcare.

This memorable
grade school election was hyped up for weeks by the faculty and
administration who (in their zeal to indoctrinate us with "civic
values"), led us to believe that our participation in the election
constituted both a sacred right and a solemn duty. The event did
not live up to the pompous hype. What actually transpired in the
so-called "debate" preceding the election was a farcical
competition to see which candidate could make the most fantastic
and utopian promises to the student body. One candidate promised
to get MC Hammer to perform at our school — prompting the most uproarious
applause imaginable. Another promised to extend the summer and winter
vacations by months. Still another promised to have candy and soda
vending machines installed in every classroom, (although, to be
fair to this particular candidate, this promise has actually been
partially fulfilled by the public school board, which was eager
to boost revenue by fattening their inmates with sweets). Since
not a single student had any idea about what a "student body
president" does, or had the wisdom to question the truth of
their claims, we unsurprisingly elected the student who had made
the most fantastic promise (the one who promised MC Hammer, in case
you were wondering).

The lesson
for me was that we need to rationally analyze the fantastic promises
of aspiring politicians, rather than blithely assume that they can
deliver whatever they promise. If we fail to rationally analyze
their promises, we have only ourselves to blame for the disillusionment
that will inevitably follow. We learned this lesson the hard way
when MC Hammer failed to make an appearance at our elementary school
that year.

Over the past
few months, we have been treated to a slew of promises regarding
healthcare reform that make this grade school lesson more important
than ever. Virtually every Republican and Democratic presidential
contender has made some ridiculous promise to reform healthcare
in ways they claim will make healthcare both cheaper and more widely
available for everyone. (The lone holdout in this competition to
make the most utopian promises is Dr. Ron Paul, who is, quite simply,
too wise and too virtuous to make impossible promises simply to
get elected.) We have even been treated to a recent propaganda film
promoting healthcare reforms that would make the Soviets and Nazis
beam with pride.

Before we start
believing the fantastic promises of aspiring politicians and rich
socialist filmmakers, however, let's take a sober look at what would
actually be required to make healthcare cheaper and more widely
available for everyone in the United States. Armed with that knowledge,
we would then be able to determine whether these plans to socialize
American healthcare can actually deliver what they claim to be able
to deliver. In other words, let's find out what would actually be
required to get MC Hammer to come to our school, before we simply
assume that he'll automatically come simply because some pompous
little politician says he will.

In order for
any good or service to become cheaper and more widely available,
one of two things must occur: 1) the production of the good or service
must increase, or 2) the demand for the good or service must decrease.
The second of these alternatives is very unlikely to occur in the
healthcare industries in the United States over the next couple
of decades, simply because the giant Baby Boomer generation is entering
the stage of life when the demand for healthcare services tends
to be highest.

That leaves
us with one, and only one, alternative. In order for healthcare
services to become cheaper and more widely available in the United
States, the supply of doctors, the supply of hospitals, and the
availability of medical supplies and drugs must be increased in
order for the price of these goods and services to fall and thus
become more widely available to everyone.

Once this obvious
economic fact is recognized, it sheds a great deal of light on the
healthcare promises of the current batch of presidential contenders.
No presidential contender (with the lone exception, again, of Dr.
Ron Paul), has ever promised that his (or, equally importantly,
her) healthcare reforms will actually serve to increase the
supply of healthcare goods and services. (Have you ever, for example,
even heard a politician state that we need more doctors?)
On the contrary, they strangely (and wrongly) view the supply of
doctors and the supply of other healthcare goods as unchangeably
fixed, and their so-called healthcare reforms thus only propose
to divvy up the existing healthcare pie in different and politically-motivated
ways.

Since their
proposed socialist reforms do not actually aim to increase the supply
of doctors, medicine, and hospitals, it should be obvious that their
proposals will not deliver what they claim they will deliver. The
proposals logically cannot, in other words, decrease the price of
healthcare or make it more widely available to everyone. For, on
the one hand, if there is no increase in the supply of these goods
and services, the price for these goods and services will remain
exactly the same. Prices are determined by the supply of
a good and the demand for it, and thus high prices cannot be altered
simply by wishing them to change or changing the group who pays
them. High prices can only be lowered by increasing the supply of
the good or service. On the other hand, it should also be obvious
that these proposals will not make healthcare more widely available
to everyone, because they do not propose to increase the supply
of healthcare services. They simply aim to distribute the existing
supply of healthcare services somewhat differently. The proposals,
in other words, do not aim to create more healthcare services that
will make everyone better off; rather, they simply propose
to take healthcare services from some people and give
them to other people. They propose healthcare robbery, and nothing
more.

Recognizing
these economic facts, moreover, leads us to ask the most critical
question of all: Why is the supply of healthcare goods and services
so restricted in the first place? Why are there so few doctors in
this country, so few hospitals, and so few medical goods in this
country, which is ultimately what causes the high prices? If we
can answer these questions, we will have both identified the cause
of our high healthcare costs, and identified the necessary means
to lowering the prices of these goods and services.

The answer
to these questions is deceptively simple: The government of the
United States has (through its arbitrary regulation and licensing
of doctors, medical schools, hospitals, prescription drugs, and
other medical goods) artificially restricted the supply of these
goods and services below what would exist in the absence of these
regulations. Were it not for these licensure and other regulatory
acts by the U.S. government, entrepreneurs and individuals (spurred
by the high price of these goods and services) would be flocking
into the healthcare industries in droves, thus increasing the
supply of these goods and services. Medical schools would be
opening left and right, and students would be flocking to those
schools in the anticipation that they would earn large incomes as
doctors. Potential drug manufacturers and medical equipment manufacturers
would jump at the chance to enter the market, lured by the promise
of high profits, were it not for suffocating government regulations
that economically bar entry. The end result of freeing the market
for medicine would be the necessary increase in the supply of healthcare
goods and services, a consequent drop in prices, and the availability
of healthcare goods and services would thus multiply exponentially
— for everyone. The size of the healthcare pie has thus artificially
been restricted to its current size by government licensure laws
and other stifling regulation — the supply of doctors and medicine
is not naturally any more fixed than is the supply of potato
chips. The healthcare pie can and would be increased by simply freeing
the market and ridding it of burdensome government interference.

The answer
to our healthcare woes is thus not more government regulation, or
the shifting of payment for healthcare from individuals to the government.
In the first place, we are the ones who pay the taxes that
government would inevitably use to pay for healthcare were it socialized.
We would, therefore, still be paying the same high prices (since
the supply of these goods and services would be the same as before)
— in addition to paying for the behemoth bureaucracy that would
be required to run such a program. We would also put ourselves at
the mercy of that same medical bureaucracy — which would inevitably
possess the diabolical discretion to tell us when we can or cannot
obtain services. The end result of socialization would be both an
increase in the price of healthcare for those of us who pay
taxes (since we would have to pay the same prices for healthcare
services with our taxes, plus the added costs of a new healthcare
bureaucracy), and the forfeiture of our individual liberty to determine
when or if we want certain medical services.

The solution
lies not in socialized healthcare schemes that promise something
impossible, but rather in freeing the market in healthcare, as has
been advocated by Dr. Ron Paul. Only this solution would spur entry
into the healthcare industries, increase the supply of doctors,
and consequently reduce prices and increase the availability of
these goods and services for everyone.

This free market
solution does not possess the rhetorical splendor of a ridiculous
socialization scheme. All it has going for it is that it will actually
work to lower the price of healthcare and make healthcare goods
and services more widely available for everyone. We are all
free, of course, to believe the fantastic healthcare promises of
the current batch of opportunistic and mendacious politicians if
we so choose. Just don't complain to me or Dr. Ron Paul when MC
Hammer doesn't show up.

July
16, 2007

Mark R.
Crovelli [send him mail]
is a graduate student in the department of political science at
the University of Colorado, Boulder.

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