A total health care monopoly

When a single corporation maintains a 100% market share in its industry, most of us would consider it a monopoly, free of competition and thus detrimental to economic progress, innovation, and human needs. In California, State Senator Sheila Kuehl proposes such a system. The Democratic lawmaker seeks to force all the state's health care sector under the authority of the state government. Doctors' fees and pharmaceutical prices would be set by the state. Health care would be rationed. Private insurance would be illegal. Kuehl's plan, SB840, also known as the California Health Insurance Reliability Act, would be financed by a new 12% payroll tax imposed on workers and their employers.

Proponents of socialized medicine believe that government-controlled health care will cut costs and make medicine more available. But if it would indeed run more smoothly and inexpensively, why is it necessary to forbid-by threat of fines and imprisonment-private insurance? Kuehl and her supporters might realize that the market would provide something that the state-rationed health care system won't. Why else seek to use the violence of the state to crush market competition?

When top executives collude in smoky rooms to set prices, to strong-arm their competitors, to ration their services in concert, it is considered monopolistic. If the government is among the corrupt players in that same smoky room, offering the force and color of law to the collaboration, it is considered "single-payer health care."

Indeed, government is the greatest monopoly of all, the protector of all others. It gives favored companies special benefits and punishes less politically connected firms. It uses regulation to stifle small businesses and innovation and entrenches economic power in the hands of the few.

The most prominent private interests don't go away-they are only further absorbed into the protectionist system. It was Ted Kennedy's HMO Act in 1973 that empowered HMOs, by forcing employers who offered health insurance to their workers to include HMOs as an option. It is the Food and Drug Administration that protects Big Pharma from competition by erecting formidable barriers to entry-a small company cannot afford the hundreds of millions of dollars in bureaucratic expenses to bring a new, potentially life-saving drug to the market. It is no surprise, then, that such regulatory bodies are typically headed by former and future CEOs of the industry that they are legally empowered to police.

The most recent example is President Bush's gargantuan Medicare prescription drug benefit-at once the largest expansion of the welfare state and one of the biggest giveaways to Big Business in recent decades.

A steady move toward corporate socialism has propelled the exorbitant rise of medical costs in America. The proposed solution, even more consolidation of money and power in the hands of the politically connected, cannot solve the problem.

Small businesses, doctors who wish only to help their fellow humans, patients, and alternative medicine practitioners will suffer. Countries with socialized medicine are learning all this the hard way: surgeries are doled out according to crude predictions of how much patients will pay in taxes before they die, patients must wait two years for a routine hip replacement, and desperate refugees flee to buy in foreign nations what is prohibited in their own country. The answer is to deregulate, desocialize, decorporatize health care, to allow consumers to make their own decisions, to strip away the privileged status that the health care establishment enjoys from discriminatory licensing laws and regulatory agencies.

Fifty years ago, America had the best health care system in the world, until the federal government moved in, pushing out the free, voluntary health clinics that had graced nearly every city and major town in the country. Today's politicians recognize the problem that they've created, and yet instead of walking away and allowing the market to achieve the same magic as it does in the other relatively unregulated industries-such as computers, electronics, grocery stores, and the various wonders of the modern economy-they propose more centralized regimentation. Only a free market can liberate the people to serve one another's needs, through the market and charity.

Monopoly is inefficient and inhumane, as liberals recognized throughout the 19th century as they battled against the Big Business-Big Government partnerships in railroads and industry. Nowadays, monopoly is considered the salvation of the common man. Just because ideas change doesn't mean economic laws do. Socialism and monopoly create inefficiency, rationing, shortages, and higher costs. We must reject the total monopoly in California's medicine that Kuehl wishes to impose upon us-for the sake of our health.

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The case against mandatory coverage

Writing in the Washington Post on January 18, business columnist Steven Pearlstein argued, "the president must acknowledge that there can be no credible reform without extending health insurance for every American--every employer should be required to pay half the cost of basic health insurance for every employee." The same week, Humana co-founder and retired CEO David Jones told a Naples, Florida audience that government should mandate health coverage because the uninsured "are simply taking a free ride."

Like many other conservatives and Republicans, they call for mandating that every individual have at least "catastrophic" insurance coverage. I know a lot of physicians and insurance brokers who support this policy, and Republican governors in at least Massachusetts and Minnesota have proposed similar ideas. Here's a quick check list of a dozen reasons why mandatory coverage isn't worth the effort:

1. "Free riders" are not really much of a problem. In a June 2003 report for Health Affairs, Jack Hadley and John Holahan reported about 3.5 percent of total health care costs are for uncompensated care. That is a trivial amount of money, far less than most stores lose to shoplifters.

2. Granted that some facilities are hit harder than others, I would venture these tend to be in areas where there are large numbers of illegal immigrants. Mandatory coverage will do absolutely nothing to solve that problem.

3. Health insurance mandates are often compared to mandatory auto insurance coverage, but the comparison falls short for several reasons. Auto mandates don't work very well and certainly don't solve the problem of uninsured motorists. And with an auto mandate you are required to insure against what your two-ton vehicle will do to other people, not to get your own car repaired.

4. In order to have a mandate, we would have to have substantial subsidies and assurances of access (you can't force people to buy what they can't afford or can't find). But once you have those provisions, you probably don't need the mandate. Very few people will absolutely refuse to carry an insurance card no matter what.

5. In order to have a mandate, the government has to decide what it is that is being mandated. Even with "catastrophic" coverage, someone has to decide what expenses go towards meeting the deductible--chiropractors? abortions? sex-change operations? herbal therapy? and on and on and on. Imagine the debates in Congress.

6. Once you've decided what to mandate, you must ensure such coverage will be available to everybody. What happens if no company wants to offer it in Montana? What if a company does offer it in Montana, but provides lousy service? Consumers will have no choice but to buy it, no matter how poor the service.

7. Once you force people to buy a product, you have to make sure the providers of that product aren't ripping them off. That means federal control over premiums. That means federal scrutiny of carrier efficiency. That means examination of administrative expenses to make sure they are "reasonable."

8. As far as I know, nobody has ever looked at the macroeconomic consequences of this idea. Having a mandate means every single individual must be insured (and pay premiums) at all times, regardless of their circumstances. I will be a witness that if I had had to do that in the early 1990s, I would never have been able to leave Blue Cross to start four different businesses, three of which are still in operation and employing 45 people in Northern Virginia. In every case, I had to tighten my belt in a whole lot of ways to get these ventures launched. Going uninsured for a while was just one of them.

9. There are much better ways to address the problem. I would note, for instance, that there were far fewer uninsured 20 years ago, before the states went crazy with mandates and small group "reforms" that dried up the market for coverage and raised costs dramatically.

10. Equalizing the tax treatment for people who buy their own coverage would also help a great deal. That way people wouldn't have to rely on their employer in deciding whether to get coverage.

11. Encouraging innovation in insurance offerings would help, too. We have already seen that HSAs are changing people's minds about the value of coverage. There may also be other approaches that would appeal to other segments of the market. Part of the reason people don't buy coverage is because they don't see much value in what is available. We need to reduce the barriers to entry, to make it easier for new approaches to be tried.

12. I know many physicians (and others) support a mandate (the California Medical Association is on record doing so), but they haven't really thought it through. If carriers are scrutinized as described above, it won't be long until physicians get the same treatment. If people are forced to buy a product and companies are forced to sell it at "reasonable" rates, it isn't much of a leap to start looking at the inputs that drive those rates. Could it be that doctors are price-gouging their patients? My goodness, we can't have that! And it's off to the races.

Mandatory coverage is an idea that won't solve the problems but will create a whole host of new problems and have serious negative consequences throughout the economy.

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation. Both Australia and Sweden have large private sector health systems with government reimbursement for privately-provided services so can a purely private system with some level of government reimbursement or insurance for the poor be so hard to do?

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