Fixing Healthcare in a Free Market

The diagnosis is clear: the healthcare system in the United States is in terrible shape. Of the 301 million people living in the country, 47 million, or 16 percent of the population, do not have health insurance. Out of those 47 million 8.7 million are children ("Health Insurance Coverage"). At the same time, health insurance premiums and the cost of prescription drugs are increasing while the quality of care seems to be declining.

Some people will point to these rising costs and say that greedy drug companies cause them. This, however, is far from the truth. The real reason for the rising costs is government intervention into the healthcare market.

The rising cost of pharmaceuticals, for instance, can be traced to the Food and Drug Administration (FDA). The FDA forces companies to put their drugs through multiple years worth of research and testing. They also charge the companies huge fees to allow the drugs into the marketplace. These fees do not allow for smaller startup companies to compete with the larger, established companies.

The government also makes the healthcare situation worse by passing laws that have good intentions, but fail miserably. One specific example of this can be seen in the 1974 ERISA law. This law grants tax benefits to employers who provide healthcare to their employees. On the surface, this seems like a good idea. Give the employers an incentive and they will cover their employees, but it has had adverse consequences. Since that law was passed, less and less individuals have decided to cover themselves. So now, instead of catering to the individual, health insurance companies cater to the needs of big businesses. Thus, as wealthy corporations have pumped more money into the healthcare system the prices have artificially risen out of the range of most individuals (Paul).

It seems clear that the current level of government intervention into the U.S. healthcare market is not working for the average healthcare consumer. There is no doubt that a major change in the system needs to occur in order to solve the crisis. Some people will claim that more government intervention, via Universal Healthcare or Socialized Medicine, will be the cure. The United States is, after all, the only developed nation that does not have a form of government funded health insurance available to all individuals. These plans give the government even more control and power over the healthcare system.

In Great Britain they have a form of Socialized Medicine known as the National Health Services (NHS), which is the world's largest publicly funded health service provider. They claim that the health services are free when it is clear that someone has to pay the doctor's and hospitals. Proponents of Socialized Medicine will tell you that the government pays for it, but where does the government get the money? It comes from the taxpayer, to the tune of 78.5 billion dollars per year and that money is forcibly taken from every individual in the country.

Lets look at it this way. Imagine my grandmother was dying from a treatable form of cancer, but she was too poor to be able to pay for the chemotherapy. She lacks health insurance and no one in my family has the money to pay for the treatment. Would it then be permissible for me to steal money from someone else in order to fund her treatment? What if I had fifteen other people with me? Or 100? Or 20,000? Of course it would never be appropriate for me to steal to get her treated, even with a gang of 20,000 supporters, but that is what the government does in the case of Socialized Medicine. They take from every individual, even the healthy ones, to pay the medical bills of those that are sick.

Not only is the organization funded through theft, but they can also refuse to treat any individual that they choose. Take the case of John Nuttall as a stark example. Two years ago Mr. Nuttall broke his ankle in three places, but it had not healed properly with a plaster cast. He now lives in constant pain from the feeling of his bones rubbing together. The pain is so excruciating that the doctors have prescribed him a daily dose of the strong painkiller morphine. Nonetheless, NHS doctors refuse to operate on his ankle to fix the problem. Why? Because he is a smoker and he is unable to kick the habit. Nuttall makes a great point about the absurdity of their denial, "I want to warn other smokers that they could be denied medical treatment and there is nothing we can do about it. I have paid my dues as a taxpayer and now the NHS won't treat me" (Brooke, "Hospitals").

Since more government regulation and intervention makes the healthcare situation worse, there is only one solution left to consider: deregulation of the healthcare market. This is the only to decrease the price of healthcare, increase innovations in the healthcare market, and improve the quality of care, solving the healthcare crisis.

A Right to Food

Food is a basic substance that every human being needs to survive. Since such is the case, then does it not seem logical that all human beings have the right to food? As a result of this right, people without enough money to pay for their food should be allowed to enter a supermarket and take whatever they need to survive at the expense of everyone else. And, since food is such an important product to sustaining human life, then, in a free-market system, consumers are at the mercy of the greedy food producers who could artificially raise prices to whatever obscene amount they pleased. At the same time, people in higher income brackets are able to afford better quality food than those in the lower income brackets, creating a two-tier food market.

So what is the solution to this horrific problem in the food market? Well, it seems obvious that everyone should have equal access to food via government funded grocery insurance. That way anyone could walk into a grocery store and pick up whatever food they wanted. Soon shopping habits would change and most people would walk past the ground beef and head straight for the prime rib, not worrying about the cost. The two-tier food system would be eliminated, and everyone would be equal.

Of course, this scenario is not the reality of the current food situation in the United States. Food, like most consumers goods, is provided by a free-market system. Prices are actually in the range of most individuals because there is competition in the marketplace. This competition leads to quality food and low, competitive prices that benefit every individual. This is because the food market actually operates under economic principles with little government intervention.

According to the basic economic principle of supply and demand there are only two ways for a product or service to become cheaper in the market place. One of those ways is if the demand for that product or service decreases. Since the population of the world is constantly increasing, this seems very unlikely to occur in the case of healthcare. The other way for prices to decrease is if the production of the product or service increases. This means that the only economically feasible way to decrease prices in the healthcare market is to increase the supply of doctors, hospitals, medical supplies, and prescription drugs.

Herein lies one major fault of Universal Healthcare. Proponents of such plans assume that the current supply of doctors and other important medical supplies and facilities is a fixed number and they only aim to redistribute these products in a manner that they deem to be more just. In other words, they are not striving to increase the supply to make healthcare services more affordable for every individual. Instead, they are taking healthcare services from some people and giving them to others. How fair is that?

Looking back at the fictitious example of government-funded grocery insurance reveals how to make healthcare costs decrease. Current government interventions into the healthcare market through arbitrary licensing of doctors, hospitals, prescription drugs, and other medical goods actually cause the supply of these goods to decrease. This decrease causes the prices of the products to artificially inflate out of the reach of many individuals. Just imagine if every grocery clerk, stock boy, grocery store, and store manager had to be licensed by the government. This would undoubtedly cause the price of food to skyrocket.

Loosening, or even abolishing, the restrictions in the medical field would allow more competition into the marketplace. This would cause the prices of healthcare services to dramatically decline. If we can allow such an important product as food to be offered without such arbitrary licensing, then why not allow healthcare to do the same?

The Market Leads to Innovations

Under a free-market healthcare system more innovation would occur than a situation with high levels of government control. This is because governments do not have the same incentives as individuals to invest in new technologies or try new approaches to healthcare.

In countries that have Socialized medicine, for instance, we typically see fewer innovations in medical technology, leading to a decrease in the supply of these important medical tools. In these systems the healthcare budgets are usually very tight, and bureaucrats and politicians often see investing in new technology as too costly and risky. Take the Socialized system in Canada as an example. A study by the Fraser Institute has found that among the countries that make up the Organization for Economic Cooperation and Development, Canada ranks fifth in terms of total amount of healthcare spending. Yet, at the same time, they rank 21st out of 28 in CT scanner availability, 19th out of 22 in lithotriptor availability, and 19th out of 27 in the availability of MRIs (Matthews 41). This shortage in accessibility is a huge problem in Canada.

Take, for instance, the case of a hospital in Guelph, Ontario that has decided to admit animals for CT scans. They are motivated by profit, charging the pet's owners $300 per visit for access to the machines. At the same time, people like Greg Moulton, who was suffering from excruciating headaches, were on a two-month waiting list to use the same machine. In Canada, however, it is illegal for an individual to pay out of his or her own pocket for medical expenses covered under the government-controlled plan -- that would be unfair after all -- so he had to wait. A dog, however, could use the same medical technology immediately (Matthews 41).

This situation has essentially put the value of the life of a human being lower than that of a dog, or any other animal for that matter. The problem is that the doctors are forced, by law, to only provide an MRI at the scheduled times for the people on the waiting lists. A person cannot go in unscheduled to get the procedure done, but an animal can. This is an egregious violation of the basic human right to life, and it has been perpetrated by the government of Canada.

Not only does the free market allow for improvements in technologies, but it also breeds innovation in the way that healthcare is distributed. One example of this can been seen in the idea of "boutique" medicine that has been appearing in the United States. In this healthcare model, patients agree to pay primary-care physicians an annual fee. In return, these doctors agree to be available on a 24/7 basis, while limiting the number of patients they will have. The fee can also cover other expenses such as medication, diagnostic testing, and exams, along with the guaranteed easy access (Bailey).

Another one of these innovations can be seen in the idea of SimpleCare, which is also becoming popular in the United States. In this program, patients agree to pay doctors in full on the spot. This drastically cuts out paperwork that would normally be needed to send to insurance companies, or government agencies in the case of Universal Healthcare. This reduction of paperwork allows the doctors to cut spending by not needing to hire as many secretaries or other individuals to handle the paperwork. This process has allowed the doctors to cut their prices by 30 to 50 percent (Bailey). These organizations would likely be illegal if there were more government control in the healthcare market.

Innovations are already occurring in the United States where there is restricted free-market in healthcare. In places like the United Kingdom and Canada, where there is more government control of the industry, many of these innovations are less likely to occur. In fact, in most countries with a typical national healthcare plan, many of these advancements would actually be illegal. It is important to note, however, that the United States is not a complete free market. Only when the market is allowed to operate without restrictions, such as those from the FDA and the ERISA law, will we see true innovation in healthcare.

Quality of Care

Let's, once again, look at the case of government-run grocery insurance. Under that program, most people would be taking the more expensive food items, like prime rib and lobster, instead of ground beef and canned tuna. This would cause an artificial demand for those products, which would inevitably lead to a shortage due to an inability to keep up production. This shortage would lead to long waiting lines for those expensive and rare foods.

Imagine planning a large dinner party, that is going to take place in one week, but the waiting time for one of the menu items is nearly thirty weeks. What recourse could be taken to obtain that food? The black-market could be looked at, but that can always be dangerous and it can never be known whether or not you are getting what you asked for. A more logical solution might be paying a visit to a neighboring country that does not have government-funded grocery insurance to purchase the food, at full price, in a free-market environment.

Why is it that people from all over the world come to the United States when they need major medical operations? The above scenario answers this question quite clearly. In countries that have one form of Socialized Medicine or another there are often long waiting lines for treatment. In Great Britain, for example, 900,000 people are waiting for admission to government run hospitals at any given time. In Sweden, there is a twenty-five week waiting period for heart surgery, and a one-year waiting list for hip replacement surgery. Twenty-five weeks is a long time to wait for a heart, and if someone on that list has enough money to pay for the surgery on their own, then they are likely to come to the United States, the only developed nation with a semblance of free-market medicine, to get the procedure done (Cannon). Otherwise, they might just die waiting.

In Canada, a country whose Socialized Healthcare system is often propped up on a pedestal by American politicians, there are also long waiting lines to receive treatment. Access to new technologies is also restricted, and sometimes people are rejected treatment altogether (Matthews 35). These problems, especially the lack of new technologies, have driven Canadians across the border to gain access to the healthcare system of the United States. As the New York Times points out, "Canada has moved informally to a two-tier, public-private system. Although private practice is limited to dentists and veterinarians, 90 percent of Canadians live within 100 miles of the United States, and many people are crossing the border for private care" (Brooke, "Hospitals"). Many Canadians are choosing to cross the border and pay for treatment instead of waiting for admission into the government-funded hospitals.

If the healthcare system in the United States were allowed to operate under a true free-market, then the quality of care would increase even more. Without restrictions from the FDA that drive the cost of developing new medications to $800 million, smaller companies would be able to compete with the larger companies. This would allow more, potentially life saving, medications to be produced. More medical technologies would also be developed allowing for better care for the consumer. Even family practices could work with a far better outcome in a free-market system.

Take, for instance, the case of James W. Brook, a practicing family physician in Idaho Falls, Idaho. He has decided to only accept cash in his practice, thus eliminating the paperwork needed to deal with insurance companies and the government, through Medicare and Medicaid. By doing so, he was able to reduce his average charge to $37 per patient. That fee also included some antibiotics, lab fees, medications, and house calls (Brook).

This has saved his patients a great deal of money, while also increasing the quality of their care. According to Brook, "I calculated that if I charge $30 for something now, in order to come out the same, I would need to charge $107 if I had the same financial constraints as most doctors. I would have an extra $34 in overhead per patient, raising the fee to $64. Then to collect that $64, I would have to charge $107" (Brook). At the same time, he offers same-day services, flexible hours, and substantial time with his patients, all of which are in stark contrast to the waiting lines, strict hours, and rushed care that is present in Socialized Medicine.

The Walter Reed Tragedy

The way the political winds are blowing seems to indicate that the United States is, in fact, headed for some sort of Universal Healthcare. Both Democratic candidates for president want some type of national health plan and even the major Republican candidate has proposals that will increase government involvement in the healthcare industry.

The government of the United States, however, has a bad track record when it comes to implementing types of Socialized Medicine. Take, for instance, the case of the Walter Reed Army Medical Center (WRAMC), located in Washington, D.C. The United States gives military personnel free health coverage and the center is one of the places where they can get the care. An article in the Washington Post has recently been published exposing the hospital for keeping its patients in terrible conditions. One of the buildings that are part of the WRAMC has been described as being infested with cockroaches and rats. Reports from some of the soldiers there have described cases of black mold, stained carpets, cheap mattresses, and living conditions with no heat or water.

In addition, the level of bureaucracy at the hospital is absolutely atrocious. More than twenty documents are required for a soldier to access to the hospital. Sixteen different information systems are required to process the information, but few of them are actually capable of communicating with each other. The army does have personnel databases, three of them in fact, but they are not able to communicate with each other, or interface with the hospital's record keeping databases. These problems have led to soldiers needing to prove they were in a war in order to even gain access to the facility, because employees are often unable to locate the records (Hull).

If the United States government is not even able to take care of the veterans that fought in their name, then how could they ever provide healthcare for the entire nation? The answer is simple: they cannot, and any attempt will surely fail. The United States government needs to deregulate the healthcare market and allow individuals to be responsible for the decisions they make in the healthcare market. Only then will the healthcare crisis be solved.

Works Cited

Bailey, Ronald. "Free Market Health Care." 28 May 2003. Reason Magazine. 17 Mar. 2008. .
Brook, James W. "Free Market Medicine." 4 Aug. 2006. LewRockwell.com. 3 Mar. 2008. .
Brooke, Chris. "Doctors Refuse to Fix Builders Broken Ankle Unless He Quits Smoking." 14 Sep. 2007. Daily Mail. 23 Mar. 2008. .
Brooke, James. "Full Hospitals Make Canadians Wait and Look South." NYTimes.com. 16 Jan. 2000. The New York Times. 26 Mar. 2008. .
Cannon, Michael F. and Michael D. Tanner. "Universal Healthcare's Dirty Little Secrets." 5 Apr. 2007. Cato Institute. 17 Mar. 2008. .
"Health Insurance Coverage." The National Coalition on Health Care. 23 Mar. 2008. .
Hull, Anne and Dana Priest. "Soldiers Face Neglect, Frustration At Army's Top Medical Facility." Washintonpost.com. 18 Feb. 2007. The Washington Post. 15 Apr. 2008. .
Matthews Jr., Merrill. Market-Based Plans Would Be Superior to a National Health Insurance Policy. Healthcare. Ed. Nancy Harris. Farmington Hills, MI: Greenhaven Press, 2006. 35-46.
Paul, Ron. "Diagnosing Our Health Care Woes." 26 Sep. 2007. LewRockwell.com. 15 Oct. 2007. < http://www.lewrockwell.com/paul/paul345.html>.