Monday, February 04, 2008

Reforming Health Care: Part 3 - Why A Government-Run Monopoly Is Wrong For America

There has been much talk about the United States being the only developed country without some sort of socialized health care. We spend the most on health care but don't get comparable results, they say. How do we survive, one might ask. Although our current system is at best mere survival, I would strongly disagree that a government run system is the solution.

First off, lets ask what is uniquely different between the United States with our private insurance system and other developed nations with a form of government run insurance, as it amounts to. Advocates in the United States seem to think that we will magically start spending less money on health care if we switch to socialized health care. This is not true. People in other countries are much healthier than Americans. In essence, our obesity makes us uniquely American. People in Europe don't have car-centric societies, they use public transportation and walk a lot more. (To be fair, Europe is more densely populated and so public transportation makes more fiscal sense to build light rail, etc.) They also eat healthier, not necessarily because they don't ever eat fattening food, but they eat in moderation, we eat fattening food to excess. To a large degree, we spend so much on health care because we have to treat preventable diseases caused by obesity, whereas countries in Europe do not. If we switch to a government run system then those costs do not go away. We don't have a health insurance problem so much as a health problem. Higher health care costs from obesity drive up insurance premiums, which drive people out of the system. Socialized medicine does nothing to fix this.

Second, lets look at how advocates say socialized health care costs save money. They say that a government run system is more efficient. There is less overhead, no marketing costs and no profits. To that I pose this question, what is so unique about the health care industry that would cause the same reasoning of lower costs do to lack of profits, marketing costs, and other overhead from applying to any other industry? Why should we in the United States not have a government run telephone system? You get the same thing no matter what provider, the ability to talk with another person, so why do we need so many competing companies? Cingular, Verizon, and other companies compete against each other for customers, which requires spending money on advertising, and all of them make profits. So why not cut them out and have the government provide our cell phone service? No profits and no advertising means lower bills. Why stop there? What about air travel? Do we really need all these different airlines when they all do the same thing of getting you from point A to point B, albeit some better than others. Then your frequent flier miles will work for any flight. I could keep listing examples, but I think you get the idea. So, when we carry this idea through to its logical end, what do we end up with? The USSR. The USSR failed though. But why, they don't have advertising costs and profits to make?

Supply and demand. Ceteris paribus, price determines the quantity demanded and price determines the supply provided. Communism failed to realize this. They couldn't set the right price, the right supply, and they definitely couldn't set the right demand. There's either surpluses or shortages. But under capitalism, competition sets the right price, the right supply produced, the right quantity demanded. (Not perfectly, but better than communism.) Now capitalism only works for the consumer when you have competition. Competition keeps the price down because you can't charge too much because another company will undercut your prices, stealing your customers. When there is no competition you have a monopoly which can set the price much higher than consumers would like, hence anti-trust laws. Socializing health care would result in a government monopoly, not any better than a corporate monopoly.

John Edwards has said that he would be create government insurance packages that people could choose to buy modeled on medicare. "American health consumers will decide which works best. It could continue to be divided. But it could go in one direction or the other, and one of the directions is obviously government or single-payer. And I’m not opposed to that." He should be opposed to that. Sure, initially a government system would be able to cost less by foregoing profits, etc., and drive private insurance companies out of business. Its the after the private insurance companies are driven out of business that concerns me. Just like we don't allow corporate monopolies because they're bad for consumers, we shouldn't allow a government monopoly of health insurance. After the private insurance companies are put out of business because they like every other business in America must make a profit to survive, what will set prices when the government doesn't have a target to beat, private insurance prices? What will determine the level of quality that can be provided when there is no target to beat? Need I remind you of how good the USSR was at setting prices without competition? In a few years the government will fail to invest in new innovative technologies that could lower costs and raise quality since they don't have to respond to competition. We will have a stagnant and then decaying health care system. I might point out that corporations take profits and reinvest them. If the government plan doesn't take profits then they won't have money to reinvest and that will either not happen or the costs will be added to your tax bill.

If anything is wrong with our private health care system with competing companies then it is that there is not enough competition. Employers choose health plans, not the consumers who have to use them. If we had a system that gave consumers choice and information (definitely lacking today) then I think we would see costs lower and quality rise. I've already addressed this issue so I will refer you to my health insurance plan that would introduce more competition while putting people in the system, not pushing out the sick. (Reforming Health Care - Part 1 - Evil Insurance Corporations, Reforming Health Care - Part 2 - Preventative Measures and Insurance)

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