President Obama wants sweeping “reforms” to the American health care system that will lead down the dark path to socialized medicine. But it's not more government we need to reform health care—it's more freedom. The thought of nationalizing healthcare is tantalizing for many Americans. Yet socialized medicine would cost hundreds of billions of dollars, create lengthy, life-threatening wait lines, push out private industry and result in inferior care. Not to mention that nationalized healthcare is not truly free because somebody is going to pay for it—and that somebody is you, the taxpayer. In order to compensate for the costs, our taxes would have to go up, violating the President's pledge against raising taxes on the middle class.
Consequently, private healthcare operations would be crowded out. Those who are paying for their own health coverage would also be paying for those who are under the new government program, eventually discouraging them from maintaining private coverage and, inversely, encouraging them to switch to the cheaper government program. Additionally, the government could initiate regulations and policies to benefit its program over competitors, and many employers will determine that it is more economical to drop their health insurance plans due to the increased financial strain the new program would force upon them.
As with the U.S. Postal Service, any entity run by the government has a striking advantage over private industry. The USPS posted a record-breaking loss in the second quarter of this year of 10.5%, or $1.9 billion—the largest drop in 38 years. Assume for the moment they were to lose more and more money over the course of this year as they lose business, and assume that the very same thing is happening to competitors such as FedEx. USPS, unlike FedEx, has the benefit of taxpayer money to back it up. This has the potential to stifle competition significantly were this hypothetical to play out.
Take Fannie Mae and Freddie Mac. While it was never written down on paper, everyone understood that should something happen to either financial institution, the government would be there to back it up. As these examples prove, government programs and government-sponsored enterprises have a unique advantage over their private sector counterparts that, as inefficient as they may be, allows them to continue irrespective of the negative results of their activities. There is no risk when the government is backing you up.
And as the CATO Institute’s Michael Tanner put it, “Government would compel Americans to purchase health insurance, controlling its content, how much we pay, and the relationships between insurers, doctors, and patients. Government bureaucrats would determine whether Americans received certain medical services.”
To the President’s argument that the program would serve as a sort-of support system only for those who can’t afford it, look at Social Security. When FDR began that program in the 1930s, it was intended as a supplement to personal retirement plans, not the primary source of retirement income that it is today. In this case, a program meant as only a support system has grown to be the primary source for retirement funds.
But it doesn’t have to be this way. The United States' healthcare system contains the greatest innovations, the highest-quality care and some of the best doctors in the world. The problem with our healthcare system is the disparity between those who can afford it and those who cannot.
President Obama is right that we need reform. The status quo is unacceptable. But his nationalization answer to “cutting costs” does not address the fundamental reasons healthcare outlays are so great. The plan will do little more than inject more government spending and bureaucracy into the industry. The way to fix this is not with greater government control or a new government program, but through more freedom in the marketplace.
The healthcare industry is one of the most heavily regulated industries in the country, with the net cost of regulation estimated by Duke University Professor Chris Conover to be $169 billion a year. As with any industry, in order to pay for the dictates of the government, institutions of health are forced to raise costs, which extends to consumers in the form of higher prices.
Government regulations and policies have essentially mandated a third party-based system that forces the consumer to work through health insurance companies, HMO's, employers and other middlemen that pay the supplier. 84% of all personal healthcare spending is made through private health insurance, the government or other private expenditures that are not directly from the patient.
Simple human nature tells us that when someone other than the consumer is doing the paying, demand will rise. Why? Because when an individual is separated from the spending and someone else is paying the costs, consumers are encouraged to use the service more as the incentive for individuals to save for themselves diminishes. After all, the mentality goes, if someone else is paying for it, why should I care?
Likewise, basic economics tells us that as demand rises and supply remains stagnant, prices (premiums) will inevitably go up, which in turn disadvantages those who pay directly, such as the self-employed.
Encouraging the third-party system are tax exemptions for employer-provided health insurance that the millions of self-employed and small business owners and workers who pay on their own do not receive. The government incentives, policies and regulations put in place, in large part by the federal tax code, serve to do nothing more than exacerbate the problem.
The layman's prescription for health reform is increased competition and market freedom. Not a day goes by where we don't see commercials for Geico, AllState and other car insurance companies competing over who provides the best service at the lowest price—competition absent from healthcare because of the third-party system. Insurance companies aren’t competing for individual consumers—they’re contending for large corporations.
To fix this, the healthcare tax exemption needs to be equalized across the board so that everyone, not just the middlemen and large corporations, will benefit from it. That means small businesses as well as individuals. Tax-free health savings accounts need to be expanded, thereby helping individuals to purchase their own health insurance or pull from a pool of money when they need to.
Adjusting the policies and regulations perpetuating the third-party system, like the tax exclusion, would increase competition by allowing consumers to shop around on their own, decreasing costs substantially while maintaining high quality. Furthermore, due to the high cost of regulation, deregulation is critical to opening up the market.
Of course these are just a few starting points that only scratch the surface, but one thing is undeniable: The question is not one of government versus status quo or big business versus government, as the President is trying to frame it. It goes well beyond that.
It's not more government we need to solve healthcare—it's more freedom.
Jimmy Sengenberger is a political science student at Regis University in Denver, a 2008 honors graduate of nearby Grandview High School, a national organizer for the Liberty Day movement, online radio host, and a columnist for the Villager suburban weekly. His website is SengCenter.com. He is also College Liaison for BackboneAmerica.net, working through the Backbone Americans group on Facebook.