Health Care: one Libertarian’s view

Michael H. Wilson at Evergreen Libertarian:

Comparing medicine as practiced in the U.S. with that of other nations is like comparing the Catholic Church with the Protestant ones. They all profess to be Christians, but from there they all diverge.

It is nice to be able to talk about health care when you are healthy. It is an entirely different issue when it is you who is experiencing the problem. That being the case how do we Libertarians deal with the issue and I certainly won’t say solve it, because we are not going to solve the problem any time soon and by that I mean in the next fifty years.

Ironically the American Medical Association has been one the most vigorous opponents to change in the American medical system. That doesn’t mean to suggest that they have supported an open market, or what we might call a free market. They have not. To be sure doctors may talk about free markets, but when it comes right down to it, that is the last thing they have wanted if history is any guide.

They have done everything they can to run the competition out of town and that includes chiropractors, osteopaths and midwives; especially midwives. They opposed advertising, and anything that let the patient know beforehand what the costs were going to be. The AMA opposed prepaid care in the late 1800s and they opposed it until recently. Pre-paid medical care was first seen in a big way amongst the immigrant fraternal organizations in the late 1800s and pre-paid care is what the HMO are all about today.

Western medicine especially as practiced in the U.S., had and continues to have a bias against alternatives of the types of medicine practiced in other parts of the world such as India and China where for a few thousand years information was collected about which solutions worked best. Those biases often became enshrined in our legal code.

Here are a number of things that we need to think about, but there certainly is more.

Midwives – midwives deliver most of the infants in our world and do so with better results than MDs. Generally speaking they have lower infant mortality rates, better birth weights, and lower rates of intervention and do so at lower costs.

Medical research – about 85% of the world medical research is paid for in the U.S., and many of these studies are questionable. The government should reduce its spending on medical studies and leave that to the private sector.

Occupational licensing we are told is there to keep the unqualified physician from working, but in reality licensing has been a tool that the established medical profession used to keep those who worked as pre-paid physicians in line. All too often the local medic al society would threaten doctors with the loss of their license if they were caught working with a pre-paid program. When Henry J. Kaiser started Kaiser healthcare during WWII that was one thing, but when Kaiser sought to expand and keep the program going after the war the local medical societies fought his doctors with everything they had just short of slander. The doctors working at Kaiser lost opportunities to consult, they were denied referrals a, they were threatened with loss of the medical license and denied acceptance to the local medical society. That last issue may have been the most damaging because the local medical societies often provided malpractice insurance at a discount. Doctors outside of the society were not able to get the insurance at a reduced price.

Paul Starr in his book The Social Transformation of Medicine mentions that if doctors offered to back up midwives they might be threatened with the loss of their medical license.

The McCarran-Ferguson Act – this law has allowed the states to regulate the insurance industry and has resulted in the balkanization of the insurance industry. The industry loves it because in many states the insurance commissioner or state board does not have the expertise to deal with the industry

The way we die – we spend much of our medical dollars in the last few month of life, but much of those dollars could be saved if all of us filled out advance directives and filed them with our doctors.

Corporate practice of medicine laws- prohibited doctors from working as employees of corporations in some states. What the status of these laws at present is up for debate. The laws were used by the AMA to slow the development of HMOs

Certificates of need – these certificates which are required in 36 states and are intended to reduce the duplication of services amongst medical care providers. Instead they reduce competition and require that those who wish to compete must spend money to prove their case. Sometimes it amount to millions of dollars in questionable spending required by the government.

State Medical Boards – the groups are a benefit for the profession rather than doing much to protect the patients.

15 thoughts on “Health Care: one Libertarian’s view

  1. Brian Holtz

    Health care is subject to a superfecta of market failures:

    However, health care is also subject to massive government failure such as

    • tax preferences that artificially bind health insurance to employment, hide costs from consumers, and encourage over-insurance,
    • price controls dictated by a bloated mandatory insurance program that (thanks to high senior voting propensity) is funded via inter-generational income transfers,
    • laws against interstate competition in health insurance,
    • rent-seeking through legislated preferences sought by unions and hospitals and insurers and pharmaceutical patent holders,
    • artificial barriers to entry via professional licensure and excessive safety/efficacy regulations, and
    • laws preventing insurers and consumers from agreeing on lower-cost lower-coverage insurance.

    America’s healthcare market has for so long been so distorted by government interventions that it’s hard for most people to see how a free market in healthcare would work.  Piling on more government interventions is not a smart response to the situation.  Instead, we need to replace the federal government’s centralized tangle of health care bureaucracy and regulation with a decentralized market-based system in which government intervention is restricted to just correcting market failure at the most local possible level.

    The market failure of free-riding on healthcare charity — i.e. of under-donating to the safety net because you worry others will under-donate — can be corrected at the state level or lower.  There is no state in the union so poor that it cannot afford to finance health insurance vouchers for its poorest citizens if its voters don’t think they would be charitable enough to the sick among them.

    The remaining market failures — adverse selection, moral hazard, and asymmetric information — are all knowledge problems, and only require tax incentives to correct.  Adverse selection by insurees can be corrected by tax incentives for insurees to join age-based risk pools (instead of our current brain-dead system of pooling risk by employer).  Moral hazard to over-rely on the safety net can be corrected by tax penalties for those who under-insure themselves against health catastrophe.  Asymmetric information held by doctors and hospitals can be corrected by tax preferences for providers who practice transparency. All these tax incentives could probably be done at the state level (even with interstate insurance competition), but even if initially implemented at the federal level this policy regime would be much smarter than any “single-payer” mandate — no matter how messianic the leader whose armed henchmen would be enforcing it.

    For more on market-smart health care policy, see

  2. Sludge Puppy

    The above original piece is subject to a manufactures recall because of faulty writing errors.

    The author is now in a re-education camp to help him understand how to write a proper sentence.

    Sludge Puppy; cleaning up messes everywhere.

  3. Tom Blanton

    The notions that a little bit of the correct wonkery at the state level can correct “market failures” and the “free rider” problem are certainly novel.

    But, I’m not sure I understand why these issues cannot be dealt with at the national or even the international level if only the correct wonkery is applied.

    The world is waiting for neolibertarian central planners to prove that central planning works. Once they have dealt with health care, I hope they will tackle the asymmetric information crisis in the area of automobile repair.

    Perhaps when all the correct neolibertarian algorithms are applied, government can then correct all market failures. Oh, the future suddenly looks so bright.

    I dream of the day when neolibertarian planners can correct the market failure regarding the inability to purchase one-size-fits-all clown shoes.

  4. Tom Blanton

    Asymmetric information held by doctors and hospitals can be corrected by tax preferences for providers who practice transparency.

    I just had a crazy radical idea. Maybe patients could actually correct this asymmetric information market failure situation by only dealing with providers that practice transparency.

    There is another solution to all the asymmetric information problems creating market failures all over the place. I realize this solution is extremely radical and could potentially cost thousands of policy wonks, planners, regulators and enforcers their livelihoods, but consumers could ask trusted friends and relatives to recommend service providers of all types who they have found are competent, reasonably priced, and produce good results. This approach could work with doctors, auto mechanics, and distributors of clown shoes.

    I realize that only radical anarchists are likely to consider this solution preferable to serious neolibertarian planning, but perhaps one day in the distant future, society can be persuaded to adopt this solution.

  5. Brian Holtz

    The best way to kill the nanny state is to divide it into 50 nanny states.

    Only through trial and error will we ever find out that all the economics textbooks are wrong, and that market failure can be wished out of existence by anarchists clicking their heels together.

    Anybody who thinks that any part of my prescription above is “novel” just demonstrates his ignorance of decades of market-oriented healthcare policy advocacy, to which a remedial reading guide is already provided above.

  6. Tom Blanton

    Anybody who thought I wasn’t being sarcastic in my use of the word “novel” just demonstrates a foolish belief that there is such a thing as a market-oriented policy. All policy is government-oriented.

    Is there a neolibertarian reading guide on market failures that occurred in a free market that weren’t self-correcting?

    A bit of advice for barefooted central planners: if the clown shoes fit, wear them.

  7. Tom Blanton

    A bit of CATO humor posted above by Holtz:

    After stating that Medicare should be liberalized, the CATO screed goes on to say:

    “A widely accepted premise in health policy discussions is that health care is a special case of market failure and that government intervention is, therefore, necessary.”

  8. Thomas L. Knapp

    “The best way to kill the nanny state is to divide it into 50 nanny states.”

    And the best way to get rid of dogs is to breed puppies.

    I agree that market failure can’t be wished out of existence. In order to be wished out of existence, it would have to, um, exist.

  9. Tom Blanton

    The best way to kill the nanny state is to divide it into 50 nanny states.

    This sounds like a Republicrat pundit explaining why Obamacare is bad but Romneycare is good.

    The best way to kill the nanny state is to advocate for no government policies and no government role in every facet of life.

    Actually the best way to kill the nanny state would be a massive tax revolt and widespread civil disobedience, but the Stockholm Syndrome prevents Americans from such behavior. Fealty to the state has become the American way, requiring tacit acceptance of the policies dictated by government planners. A nation of zombies looking to their masters for protection from evil hobgoblins and market failure has rejected freedom.

    People who seek freedom should quit feeding the zombies.

  10. Tom Blanton

    TK – market failure does exist. Whenever I go to a store and they have sold out of what I wanted to buy, a market failure has occurred. After careful consideration of various policies, I was able to develop a policy to correct this market failure. It is the policy of going to another fucking store.

    Perhaps, in the future, a brilliant neolibertarian central planner will formulate a policy to correct this sort of market failure. Maybe a tax break for stores that never run out of the shit I want.

  11. Brian Holtz

    @1 hasn’t been published on any site like IPR before, so feel free.

    BH) “The best way to kill the nanny state is to divide it into 50 nanny states. (BH

    TK) And the best way to get rid of dogs is to breed puppies. (TK

    The federal nanny state is already a $3.5 trillion/year monster, and it’s silly to use such a breeding analogy to suggest that cutting it into 50 pieces would help it grow to a larger total size. Since you presumably would argue against a global UN nanny state, I guess you have a theory why the federal nanny state is sized Just Right for application of your anarchist nanny-state disappearing cream, and why the ability to vote with one’s feet against nanny substates would be counterproductive. Can’t wait to hear it.

    TB) The best way to kill the nanny state is to advocate for no government […] (TB

    Right, just like the best way to advocate against gun crime is to advocate against guns.

    TB) I was able to develop a policy to correct this market failure. It is the policy of going to another fucking store. (TB

    Economics knowledge FAIL. Simply having unmet consumer demands does not indicate the existence of systematic Pareto inefficiency.

    I suppose next you’ll tell us that the market failure of negative externality could be solved just by e.g. boycotting polluters.

  12. Thomas L. Knapp

    BH@12,

    “Since you presumably would argue against a global UN nanny state”

    Actually, I proposed a project called “Libertarians for One World Government” a few years back.

  13. Pingback: Brian Holtz: Health Care policy reform | Independent Political Report

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