Socialized Healthcare Is Not Cheaper Than Free Market Healthcare


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