Published in The Tennessean, Sunday, November 29, 2009
Government intrusion is not the American way
by Richard J. Grant
When talking to Canadians about the drawbacks of their universal healthcare system, I often heard the retort, "But I sure don’t want an American-style system!" My honest response was, “Don't worry, Americans don’t have one either.”
“American-style” used to connote “free and prosperous.” Respect for economic freedom has always been associated with the American way of doing things. Now, although this association persists in our minds, it does not persist in the reality around us.
Government is already the largest medical "insurer" in the country, and pays at least half of all US medical expenditures. It is also the most wasteful. The Medicare program is an actuarial disaster that, within five years, will begin running deficits that will increase rapidly over time, leaving it no way to cover its trillions of dollars of unfunded liabilities. Attempts to save it will require benefit reductions and tax increases.
Federal tax breaks for health insurance are applied unevenly, and give company group plans an advantage, which tends to bid up prices for everyone else. State regulations chop up the medical-insurance market into separate, non-competing segments, thereby reducing the choices available to consumers. Worse still, each state imposes mandates that require insurance companies to include in their health insurance coverage items that customers don't need and don't want. This forces customers to pay for coverage combinations that they would never choose in a free market.
Private insurance companies produce real benefits. In contrast, the government has grown so far beyond its competence that it is an unambiguous destroyer of wealth. Private companies provide services that, in a free market, people pay for voluntarily. Each customer has a choice. But most government services, and the corresponding tax burden, are not voluntary. If you don't like the service, you have nowhere else to go; but you are forced to pay anyway.
The health-care glass is now less than half full of private initiative, the portion that sustains the life of the system. Politically rigged incentives have gradually shifted control of resources away from producers and patients, and have increased the decision-making role of government agencies and third-party companies. It was predictable that this shift would lead to problems, but too many critics misunderstand the direction of causation and accuse the government of not interfering enough.
We need to ask some fundamental questions:
1. What makes us believe that government is competent to tell us who is, and who is not, qualified to practice medicine – or to decide for us which drugs, diagnostics, and treatments we should have available to us?
2. Why do we allow government, whether state or national, to interfere with our right to enter into private contracts with private insurance companies, or any other kind of company?
3. Why do we allow government entitlement programs to tax the charitable and crowd out private social initiatives?
The answer to all three questions is, "We shouldn't." If we and our ancestors had always asked such questions, then we would now have an “American-style” healthcare system. We would look to private experts and accreditors for advice on whom to consult on medical matters. We would see that private insurance companies, by showing us the cost of our actions, help us reduce the risk that is natural to our lives. This improves our standard of living. Bailouts do not reduce risk: they are not true insurance.
We would also recognize that government is a barrier to innovation in pharmaceuticals, diagnostic techniques, and treatments. Politicians have perverse incentives, so they stifle us in the name of safety, and they create monopoly at the expense of inventiveness.
Most government programs have the sad effect of moving resources from higher-valued to lower-valued uses. Through taxes and regulations, governments reduce our ability to undertake private, and better informed, acts of service.
The Senate, the House, and the President are pushing us in exactly the wrong direction.
Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column will appear on Sundays.
Copyright © Richard J Grant 2009