John Jay Myers: Health Care Libertarian Style

With the health care debate on everyone’s mind, this quote has been floating around some of my friends on the social networks:

“No one should die because they cannot afford health care, and no one should go broke because they get sick. If you agree, please post this as your status for the rest of the day.”

To that I say “of course”.

The question is, by what means do you want to establish affordable healthcare? Do you want to use the magical fairy dust method, which somehow brings about great service and better care, covers more people, and doesn’t cost a dime? Or, do you want to endorse the only method of reducing costs that has ever worked in the real world, the free market?

Some will say, “wait a minute, isn’t it the free market and the greed of corporations that caused ridiculously high prices in the first place?” No, it is not. There is no free market in health care right now, so the free market cannot be the cause of the high prices. Here’s an example to illustrate the point.

Let’s talk about a simple commodity: food, specifically fast food. Right now as consumers we have nearly limitless choices of places to go, and a broad variety of menu options at each restaurant. If prices at one place get too high, we go across the street. If the deluxe meal is too pricy, we forego the fries and drink, or choose from the dollar menu instead. Fast food is therefore inexpensive because of a relatively free market.

But if government regulated fast food like it does health care, it would be a very different story. We would first be forbidden from crossing the street to buy our lunch. We would be forced to take the one on our side of the street. Next we would be unable to choose among the various menu items and would be compelled to take the standard meal. Government mandates would require us to purchase the fries and drinks even if we didn’t intend to eat them. Prices would skyrocket due to few alternatives and coerced food purchases. This is the way health care is handled now, and this is why there is no free market in health care.

This situation came about due to building government intervention over many decades. During World War II the government engaged in wage and price fixing. This forced businesses to offer health benefits to attract employees, since they could not offer higher salaries. Prices rose as a result of ever increasing demand as more and more employers provided coverage. Higher prices led to a problem where retired people who didn’t work could no longer afford health care costs. The government’s solution was to institute Medicare, another program where artificial demand grew exponentially because there were no market controls. Then came Medicaid. Due to lobbies from various groups like big pharma and the AMA, government regulations restricted supply just as demand was ballooning, and this soon created a very un-free market that only helped to super inflate prices.

This was great for insurance companies, because if health care prices become unreasonable then it means you will have to purchase insurance. So the two industries have driven prices almost off a cliff. But instead of understanding that the solution would be to remove government involvement in health care, there are people who want to just build a higher cliff.

The $20 Snickers Bar

Okay, so here is the situation we’re in right now. There is a Snickers bar in front of you. You go to grab it, and I say, “hold on there big fella, that will be $20″. You say, “$20 for Snickers bar!? That is way, way too expensive!” That’s when I get a big grin and say, “that’s right, and I am with the government and I am here to help”. When you hear these words, it’s always a good idea to run.

Now, here come the solutions.

The Bigger Government Solution: Regulations and barriers to entry removed the supply of many colorful choices that used to be available. They then realize it’s now too expensive for you (notice the addition of “for you”) so they now propose to charge each of your friends $1, and then you can get that $20 snicker bar for only $1. Your friends are a little upset, and you have not actually changed the ridiculous price, but in some strange logic it has now been made “affordable”. In fact the $20 Snickers bar will become even more expensive as the government collective increases demand while even tighter regulations strangle supply.

The Free Market Solution:We realize it’s too expensive, so we remove the barriers to healthy competition and consumer choice. By keeping the government out of it and opening the free market, the next thing you know people are offering you Snickers bars for $10, then $5, then a Three Musketeers for $2, then a Milky Way for $1 and some guy shows up offering you a Snugget bar for $.50 (I have no idea what a Snugget is…but it sounds delicious).

The people in need, the ones who absolutely cannot afford it, are few enough, that just the donations of doctors and charity would cover them.

This isn’t about saving lives. It’s about the fact that people were about to revolt against high prices, and the government has been lobbied to get involved and force everyone to pay, which will allow the prices to stay artificially high.

Our hospitals are flooded with people that are receiving free health care right now. They are not dying. But the thing is, they are not happy and neither are the hospitals that have to provide it, nor are the taxpayers that get billed the cost of “free” emergency room visits at five times the rate of a normal doctor visit.

Whereas little clinics like the one by my house are popping up and people are flocking to them. The care is not free. It costs $80, but these folks are willing to pay $80 to avoid paying $1600 and waiting 8 hours in a congested emergency room.

Some say we have to do something, else insurance premiums are going to jump up to 3 times their current level in the next few years. No they wont. Do you know why? Because no one is going to pay it. That is unless we get locked into some sort of universal government plan, then I guess we will be forced to pay it.

The only reason the government wants to be involved in health care is because they want to maintain high drug prices, high insurance prices, and high care prices for their lobbyist friends. It also gives them a reason to justify their existence. Most problems the government tries to solve, are problems it created.

The more government gets involved in health care, the more we head towards potentially limitless price increases. Do we currently have unlimited pricing for fast food or candy bars? No, because the free market offers a multitude of choices. But since government is involved in health care, it now uses the problems it created as justification for even more intervention.

Specific Proposals

– Allow people to purchase insurance anywhere giving consumers many more health care options. This measure alone will make health insurance available to so many more people.
– Allow Doctors a dollar for dollar tax rebate for serving patients unable to pay for services, during a transitional period.
– Allow competition from clinics staffed by nurses to handle small medical needs.
– Encourage individual insurance plans by giving them the same tax advantages of employer insurance. We should initially discourage government and employer based health care plans, since this is the source of outrageous costs.
– All people are then free to purchase their own insurance, but, since it is their own money they will be much more thrifty and competition will be increased.
– Phase out Medicare and Medicaid over 20 years. They are bankrupt institutions that have bankrupted this country. Encourage buyouts, right now.
– Encourage personal medical savings accounts that are tax free, and unused portions are passed on to families.

– Any type of government health care is done using “health stamps”. Like food stamps these would allow people to understand exactly what they are spending. When you have transparency of costs, you have desire to control them. This would also encourage people to shop around to get the most bang for their buck.
– Tort reform to make payments more realistic will further bring down health care costs.Make health care bills easy to understand so customers have a better idea of what they pay. – Allow a place on tax forms so quick donations to the needy can be made voluntarily.
– Finally, any other health care measures should be left to the states according to the 10th amendment of the constitution.

If we enacted some of these changes to actually create, rather than further prevent, a free market in health care, then we would greatly reduce costs. Additional regulation and artificial demand leads to waste and fraud, and gives consumers the false impression that their health care is “affordable”. Health care is a commodity like any other because of its scarcity. Now, let’s treat it like one and give people the freedom to make their dollars work in the most efficient and effective way possible.

By John Jay Myers, edits and assistance from Jordan Wagnon.Credit to the Cato Institute, Advocates for Self Government, John Mackey, the Mises Institute, and common sense.

John Jay Myers

11 thoughts on “John Jay Myers: Health Care Libertarian Style

  1. Michael H. Wilson

    Tort reform? I don’t know John. There are something like 100,000 to 180,000 deaths from medical errors annually. And the injury numbers are high while only about 6% of those injured every collect anything.

  2. John Jay Myers

    I was actually surprised to see this article, I wrote it a long time ago. I posted it on my blog recently though in effort to consolidate.

    @Michael, I agree, you would need to tread lightly on tort reform, my idea of tort reform is trying to inform juries of what is “reasonable”.

    Sometimes, $5 million dollars is reasonable…. other times not so much.

    If we could free our courts of non-violent or victimless crimes we may have some available to more quickly (and successfully) handle cases in regards to health care.

  3. Michael H. Wilson

    Oops! I injured my own comment. The last should read only about 6% 0f those injured ever[y] collect anything. That damn “y”.

    I think we may have an agreement John.


  4. wolfefan

    Thanks for this, John. Many criticize, but few offer well-thought solutions that go beyond maxims. I’d tread lightly on tort reform too… data from states that have enacted tort reforms shows it’s had no affect on costs. I’m not sure that all that these ideas would work in the real world – data on quality and outcomes to compare providers is very hard to come by, and the imbalance in knowledge between providers and consumers is vast – but some of it is surely worthwhile and can be the start of a helpful conversation.

  5. AroundtheblockAFT

    Those stats – 100K to 180K deaths per year due to medical errors and only 6% collect anything – are truly unbelievable. If a D.A. only secured convictions in 6% of arrests, one would conclude either the d.a. is grossly incompetant or the vast bulk of arrests are bogus. I suspect that trial lawyers, paid on commission, are not bringing that many bogus cases and wasting their time. I suspect that the 6% figure is for those who go all the way to trial and win and it doesn’t include all those who settle for darn nice amounts long before trial.

  6. David Colborne

    I also suspect there’s a conflation between “guess that didn’t work” medical errors (i.e. not diagnosing the problem on the first try) and “Hi, Dr. Nick!”-grade medical malpractice. Using those numbers above, he’s claiming that 7.5% of all deaths in the US are due to medical malpractice. That seems a little high to me.

    As for the content of John’s article – good stuff. Unfortunately, we’ve engineered this “solution”, both at the private and public level, that’s supposed to pass all health care costs… somewhere. No idea where. Just somewhere. If we applied the same funding model to retirement, it’d look something like this:

    1. Give me about 10-30% of your annual pay each year. I’ll keep 15% of that as administrative overhead and profit; the rest you’ll get to retire off of when the time comes, unless I find a good reason to force you to continue working, or if I decide you didn’t work hard enough at some point in your life or you failed to disclose a brief period of unemployment in your teens. If I decide that, by the way, I get to keep everything.


    2. Give me about 10-30% of your annual pay each year. I’ll only keep 5% of that as administrative overhead, but benefits will vary depending on political season and public mood. Also, the people you elect into office will periodically pull money out to pay for things, with the promise that it’ll be made back after a strong poker run, the successful application of a “system” against the slots, or a mythical 10% return rate on the stock market. Oh, and if those same public officials spend too much money somewhere else, which they will, all of your retirement money will get “cut” from the budget to pay for that. They’ll claim this “cuts” government spending somehow.

    Given those options, wouldn’t anybody with an ounce of sense choose “money in mayonnaise jar, buried deep underground, defended with mean, nasty dogs and an old guy wielding a scary-looking shotgun”? Unfortunately, the government seems to be doing everything within its power to prevent medical savings accounts from actually doing something about this. My personal favorite clause is the requirement that everything in the “savings account” has to be spent at the end of the year, otherwise it just disappears. So much for compound interest or consuming less health care.

  7. Michael H. Wilson

    re Aroundtheblock the 6% number is from a NEJoM article on some time ago, but I am told the number is still fairly accurate.

    And David @ 6 there is a legal difference between an error and malpractice. Lots of errors don’t rise to the level of malpractice.

  8. paulie Post author

    Posted by Roderick Long at Unfortunately, it seems some of the internal links don’t work anymore….

    Those who see government power and corporate power as being in conflict, and those who seem them as being in cahoots, each have a point. The alliance between government and the corporate elite is like the partnership between church and state in the Middle Ages: each one wants to be the dominant partner, so there’s naturally some pushing and shoving from time to time; but on the other hand the two parties have a common interest in holding down the rest of us, and so the conflict rarely goes too far. The main difference between “left-wing” and “right-wing” versions of statism, as I see it, is that the former generally seek to shift the balance a bit farther in favour of the state (i.e., toward state-socialism) while the latter generally seek to shift the balance a bit farther in favour of corporatism and plutocracy. (In the U.S., the reigning versions of liberalism and conservatism are arguably both more corporatist than state-socialist; but the liberals are still a few notches farther toward state-socialism than the conservatives are.)

    But whether the special interests who are the primary beneficiaries of state power are mainly within the state apparatus or mainly outside it, the actual application of state power remains much the same. Hence it is a mistake to suppose that the corporatist-plutocratic version of statism is in any interesting sense less statist than the state-socialist version.

    But it is an all-too-common mistake – and this tendency to underestimate the chasm between free markets and corporatism is enormously beneficial to the state, enabling a slick bait-and-switch. When free markets and government grants of privilege to business are conflated, those who are attracted to free markets are easily duped into supporting plutocracy, thus swelling the ranks of statism’s right wing – while those who are turned off by plutocracy are likewise easily duped into opposing free markets, thereby swelling the ranks of statism’s left wing. (These are the two tendencies that Kevin Carson calls “vulgar libertarianism” and “vulgar liberalism,” respectively.)

    As one of the villains in The Fountainhead explains in a moment of frankness, talking about the choice Europe was then facing between communism and fascism:

    “If you’re sick of one version, we push you in the other. We’ve fixed the coin. Heads – collectivism. Tails – collectivism. Give up your soul to a council – or give it up to a leader. But give it up, give it up, give it up. Offer poison as food and poison as antidote. Go fancy on the trimmings, but hang on to the main objective.

    The largely (though not completely) illusory conflict between state-oriented Palpatine and corporate-oriented Dooku in the Star Wars prequels is a nice dramatisation of the same principle.

    This dynamic applies in particular to the debate over health care policy. The contrast between, say, the Canadian and American approaches is frequently described – by both sides – as a contrast between a “governmental” or “socialised” system on the one hand, and a “market-based” or “free enterprise” system on the other. But the American health care system bears little resemblance to a free market; instead it represents massive government intervention on behalf of private special interests, from insurance companies to the medical establishment. The choice between the American and Canadian models is simply a choice between different two different flavours of statism – each with somewhat different vices, it’s true (e.g., do you prefer higher prices or longer waits?), but ultimately coming down to a matter of the percentage to which control of your healthcare is exercised by people sitting in government offices as opposed to being exercised by people sitting in governmentally-privileged “private” offices – but in either case by ambitious, avaricious apparatchiks who aren’t you.

    So what would a libertarian approach to health care policy look like? At a minimum it would have to include:

    1. Repealing laws that have the effect of cartelising the medical industry (e.g., the licensure monopoly granted to the A.M.A.), thus artificially boosting the cost of medical care.

    2. Repealing laws that have the effect of rendering the labour market oligopsonistic, thus artificially lowering people’s ability to pay for (and collectively negotiate for) medical care.

    3. Repealing laws that shift healthcare funds from the 25%-devoured-by-overhead voluntary sector to the 75%-devoured-by-overhead coercive sector, thus decreasing the amount of healthcare that gets to needy recipients.

    4. Repealing laws that transfer the power to make medical decisions for individuals from those individuals to centralised bodies, thus increasing the impact and scope of fatally bad decisions and suppressing the competitive signals that allow the identification of better and worse policies.

    5. Repealing laws that wiped out the old mutual-insurance systems (basically HMOs run by the patients instead of by corporations) and empowered insurance companies at the expense of patients.

    6. Repealing laws that suppress innovation and distribution in the pharmaceutical industry in the name of “intellectual property.”

    Until the unlikely day when the Republican Party embraces this program, let’s hear no more of their favouring a free-market approach to health care.

  9. Aaron Anderson

    The fast food analogy is more like this:

    A person walks into the fast food restaurant that has no visible menu. The clerk asks for a credit card and if one is not provided or is unapproved the person is asked to immediately leave. The clerk goes behind a closed door and returns with a meal consisting of food of the clerks chooses. The meal is consumed and a month later the credit card statement is delivered. Various charges are listed on the bill incurred by a variety of vendors, such as the farmer who produced the corn on the plate, the bakery that produced the bread on the plate, etc. Each vendor charges what they feel is a fair charge for their services which of course is hundreds of dollars. The consumer complains to their credit card company about the costs. The credit card company reduces some of the charges based on their agreements with the vendors but the bulk of the charges remain.

    This “blank check” health payment system is in my opinion the leading problem with US health care. Health care corporations have every incentive to perpetuate the existing system and pay lobbyists billions of dollars to make sure politicians vote in their favor. As George Washington said, government is like fire, a dangerous servant and a fearful master. Instead of blaming the government for everything it is important to pull back the curtains and see who is really pulling the strings and then adjust government policy to maximize Liberty and Justice for all.

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