• 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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