Yaron Brook on Health Care

Forbes.com has just published the following excellent opinion piece by Yaron Brook on health care:

The Right Vision Of Health Care
Yaron Brook 1.08.2008

With the primary season in full swing, the presidential candidates are fighting over what to do about the spiraling cost of health care--especially the cost of health insurance, which is becoming prohibitively expensive for millions of Americans.

The Democrats, not surprisingly, are proposing a massive increase in government control, with some even calling for the outright socialism of a single-payer system. Republicans are attacking this "solution." But although they claim to oppose the expansion of government interference in medicine, Republicans don't, in fact, have a good track record of fighting it.

Indeed, Republicans have been responsible for major expansions of government health care programs: As governor of Massachusetts, Mitt Romney oversaw the enactment of the nation's first "universal coverage" plan, initially estimated at $1.5 billion per year but already overrunning cost projections. Arnold Schwarzenegger, who pledged not to raise any new taxes, has just pushed through his own "universal coverage" measure, projected to cost Californians more than $14 billion. And President Bush's colossal prescription drug entitlement--expected to cost taxpayers more than $1.2 trillion over the next decade--was the largest expansion of government control over health care in 40 years.

Today, nearly half of all spending on health care in America is government spending. Why, despite their lip service to free markets, have Republicans actually helped fuel the growth of socialized medicine and erode what remains of free-market medicine in this country?

Consider the basic factor that has driven the expansion of government medicine in America.

Prior to the government's entrance into the medical field, health care was regarded as a product to be traded voluntarily on a free market--no different from food, clothing, or any other important good or service. Medical providers competed to provide the best quality services at the lowest possible prices. Virtually all Americans could afford basic health care, while those few who could not were able to rely on abundant private charity.

Had this freedom been allowed to endure, Americans' rising productivity would have allowed them to buy better and better health care, just as, today, we buy better and more varied food and clothing than people did a century ago. There would be no crisis of affordability, as there isn't for food or clothing.

But by the time Medicare and Medicaid were enacted in 1965, this view of health care as an economic product--for which each individual must assume responsibility--had given way to a view of health care as a "right," an unearned "entitlement," to be provided at others' expense.

This entitlement mentality fueled the rise of our current third-party-payer system, a blend of government programs, such as Medicare and Medicaid, together with government-controlled employer-based health insurance (itself spawned by perverse tax incentives during the wage and price controls of World War II).

Today, what we have is not a system grounded in American individualism, but a collectivist system that aims to relieve the individual of the "burden" of paying for his own health care by coercively imposing its costs on his neighbors. For every dollar's worth of hospital care a patient consumes, that patient pays only about 3 cents out-of-pocket; the rest is paid by third-party coverage. And for the health care system as a whole, patients pay only about 14%.

The result of shifting the responsibility for health care costs away from the individuals who accrue them was an explosion in spending.

In a system in which someone else is footing the bill, consumers, encouraged to regard health care as a "right," demand medical services without having to consider their real price. When, through the 1970s and 1980s, this artificially inflated consumer demand sent expenditures soaring out of control, the government cracked down by enacting further coercive measures: price controls on medical services, cuts to medical benefits, and a crushing burden of regulations on every aspect of the health care system.

As each new intervention further distorted the health care market, driving up costs and lowering quality, belligerent voices demanded still further interventions to preserve the "right" to health care. And Republican politicians--not daring to challenge the notion of such a "right"--have, like Romney, Schwarzenegger and Bush, outdone even the Democrats in expanding government health care.

The solution to this ongoing crisis is to recognize that the very idea of a "right" to health care is a perversion. There can be no such thing as a "right" to products or services created by the effort of others, and this most definitely includes medical products and services. Rights, as our founding fathers conceived them, are not claims to economic goods, but freedoms of action.

You are free to see a doctor and pay him for his services--no one may forcibly prevent you from doing so. But you do not have a "right" to force the doctor to treat you without charge or to force others to pay for your treatment. The rights of some cannot require the coercion and sacrifice of others.

So long as Republicans fail to challenge the concept of a "right" to health care, their appeals to "market-based" solutions are worse than empty words. They will continue to abet the Democrats' expansion of government interference in medicine, right up to the dead end of a completely socialized system.

By contrast, the rejection of the entitlement mentality in favor of a proper conception of rights would provide the moral basis for real and lasting solutions to our health care problems--for breaking the regulatory chains stifling the medical industry; for lifting the government incentives that created our dysfunctional, employer-based insurance system; for inaugurating a gradual phase-out of all government health care programs, especially Medicare and Medicaid; and for restoring a true free market in medical care.

Such sweeping reforms would unleash the power of capitalism in the medical industry. They would provide the freedom for entrepreneurs motivated by profit to compete with each other to offer the best quality medical services at the lowest prices, driving innovation and bringing affordable medical care, once again, into the reach of all Americans.

Yaron Brook is managing director of BH Equity Research and executive director of the Ayn Rand Institute.