Thomas J. DiLorenzo of the Ludwig
Von Mises Institute has captured the
essence of the debacle we know as government
health care and why it will not work in America.
As the Obama adminsitration continues to play
the race card in the hopes of salvaging a milder
version of socialized government health care,
please know we are watching and Americans of
all ethnic and age groups have a lot at stake.
CORE-Chicago will go on record in support of
continued private-sector health insurance and
less government intervention with health
care GSE-cooperatives. A new federal
bureaucracy for more Chicago-style patronage
jobs and rationing of health care by disinterested
health nannies is not the future America voted
for in November. My musing is followed by the
best analysis on health care from an economic
and a black perspective. Enjoy!
Letter to the Editor: Chicago Sun-Times
Date: August 14, 2009
Health Care Burning on The Back Side
Down in Mexico, President Obama said immigration reform was on the back burner since his health care overhaul and financial bailout strategies deserve priority (“Immigration overhaul will have to wait, Obama says”.)
In a continuation of the Hispanic affirmative action celebrations post-Sotomayor’s confirmation, Congressman Lamar Smith (R-Texas), observed that the proposed health care legislation has “gaping loopholes that will allow illegal immigrants to receive taxpayer-funded benefits .”
Since the Federation for American Immigration Reform (FAIR) has estimated the health care burden of treating illegal immigrants is $11 billion a year, and President Obama is confident Americans will resort to “sensible and reasoned arguments”, citizens may suggest that the president consider taking immigration reform off the backburner. Nationalizing health care just because the system is broken is no rationale for creation of additional unsustainable health care entitlements for citizens or immigrants.
Ralph W. Conner, Chairman CORE-Chicago
By Thomas J. DiLorenzo
August 20, 2009
Socialized Healthcare vs. The Laws of Economics
The government’s initial step in attempting to create a government-run healthcare monopoly has been to propose a law that would eventually drive the private health insurance industry out of existence. Additional taxes and mandated costs are to be imposed on health insurance companies, while a government-run “health insurance” bureaucracy will be created, ostensibly to “compete” with the private companies. The hoped-for end result is one big government monopoly which, like all government monopolies, will operate with all the efficiency of the post office and all the charm and compassion of the IRS.
Of course, it would be difficult to compete with a rival who has all of his capital and operating costs paid out of tax dollars. Whenever government “competes” with the private sector, it makes sure that the competition is grossly unfair, piling costly regulation after regulation, and tax after tax on the private companies while exempting itself from all of them. This is why the “government-sponsored enterprises” Fannie Mae and Freddie Mac were so profitable for so many years. It is also why so many abysmally performing “public” schools remain in existence for decades despite their utter failure at educating children.
America’s Healthcare Future?
Some years ago, the Nobel-laureate economist Milton Friedman studied the history of healthcare supply in America. In a 1992 study published by the Hoover Institution, entitled “Input and Output in Health Care,” Friedman noted that 56 percent of all hospitals in America were privately owned and for-profit in 1910. After 60 years of subsidies for government-run hospitals, the number had fallen to about 10 percent. It took decades, but by the early 1990s government had taken over almost the entire hospital industry. That small portion of the industry that remains for-profit is regulated in an extraordinarily heavy way by federal, state and local governments so that many (perhaps most) of the decisions made by hospital administrators have to do with regulatory compliance as opposed to patient/customer service in pursuit of profit. It is profit, of course, that is necessary for private-sector hospitals to have the wherewithal to pay for healthcare.
Friedman’s key conclusion was that, as with all governmental bureaucratic systems, government-owned or -controlled healthcare created a situation whereby increased “inputs,” such as expenditures on equipment, infrastructure, and the salaries of medical professionals, actually led to decreased “outputs” in terms of the quantity of medical care. For example, while medical expenditures rose by 224 percent from 1965–1989, the number of hospital beds per 1,000 population fell by 44 percent and the number of beds occupied declined by 15 percent. Also during this time of almost complete governmental domination of the hospital industry (1944–1989), costs per patient-day rose almost 24-fold after inflation is taken into account.
The more money that has been spent on government-run healthcare, the less healthcare we have gotten. This kind of result is generally true of all government bureaucracies because of the absence of any market feedback mechanism. Since there are no profits in an accounting sense, by definition, in government, there is no mechanism for rewarding good performance and penalizing bad performance. In fact, in all government enterprises, exactly the opposite is true: bad performance (failure to achieve ostensible goals, or satisfy “customers”) is typically rewarded with larger budgets. Failure to educate children leads to more money for government schools. Failure to reduce poverty leads to larger budgets for welfare state bureaucracies. This is guaranteed to happen with healthcare socialism as well.
Costs always explode whenever the government gets involved, and governments always lie about it. In 1970 the government forecast that the hospital insurance (HI) portion of Medicare would be “only” $2.9 billion annually. Since the actual expenditures were $5.3 billion, this was a 79 percent underestimate of cost. In 1980 the government forecast $5.5 billion in HI expenditures; actual expenditures were more than four times that amount — $25.6 billion. This bureaucratic cost explosion led the government to enact 23 new taxes in the first 30 years of Medicare. (See Ron Hamoway, “The Genesis and Development of Medicare,” in Roger Feldman, ed., American Health Care, Independent Institute, 2000, pp. 15-86). The Obama administration’s claim that a government takeover of healthcare will somehow magically reduce costs is not to be taken seriously. Government never, ever, reduces the cost of doing anything.
All government-run healthcare monopolies, whether they are in Canada, the UK, or Cuba, experience an explosion of both cost and demand — since healthcare is “free.” Socialized healthcare is not really free, of course; the true cost is merely hidden, since it is paid for by taxes.
Whenever anything has a zero explicit price associated with it, consumer demand will increase substantially, and healthcare is no exception. At the same time, bureaucratic bungling will guarantee gross inefficiencies that will get worse and worse each year. As costs get out of control and begin to embarrass those who have promised all Americans a free healthcare lunch, the politicians will do what all governments do and impose price controls, probably under some euphemism such as “global budget controls.”
Price controls, or laws that force prices down below market-clearing levels (where supply and demand are coordinated), artificially stimulate the amount demanded by consumers while reducing supply by making it unprofitable to supply as much as previously. The result of increased demand and reduced supply is shortages. Non-price rationing becomes necessary. This means that government bureaucrats, not individuals and their doctors, inevitably determine who will get medical treatment and who will not, what kind of medical technology will be available, how many doctors there will be, and so forth.
All countries that have adopted socialized healthcare have suffered from the disease of price-control-induced shortages. If a Canadian, for instance, suffers third-degree burns in an automobile crash and is in need of reconstructive plastic surgery, the average waiting time for treatment is more than 19 weeks, or nearly five months. The waiting time for orthopaedic surgery is also almost five months; for neurosurgery it’s three full months; and it is even more than a month for heart surgery (see The Fraser Institute publication, Waiting Your Turn: Hospital Waiting Lists in Canada). Think about that one: if your doctor discovers that your arteries are clogged, you must wait in line for more than a month, with death by heart attack an imminent possibility. That’s why so many Canadians travel to the United States for healthcare.
All the major American newspapers seem to have become nothing more than cheerleaders for the Obama administration, so it is difficult to find much in the way of current stories about the debacle of nationalized healthcare in Canada. But if one goes back a few years, the information is much more plentiful. A January 16, 2000, New York Times article entitled “Full Hospitals Make Canadians Wait and Look South,” by James Brooke, provided some good examples of how Canadian price controls have created serious shortage problems.
- A 58-year-old grandmother awaited open-heart surgery in a Montreal hospital hallway with 66 other patients as electric doors opened and closed all night long, bringing in drafts from sub-zero weather. She was on a five-year waiting list for her heart surgery.
- In Toronto, 23 of the city’s 25 hospitals turned away ambulances in a single day because of a shortage of doctors.
- In Vancouver, ambulances have been “stacked up” for hours while heart attack victims wait in them before being properly taken care of.
- At least 1,000 Canadian doctors and many thousands of Canadian nurses have migrated to the United States to avoid price controls on their salaries.
Wrote Mr. Brooke, “Few Canadians would recommend their system as a model for export.”
Canadian price-control-induced shortages also manifest themselves in scarce access to medical technology. Per capita, the United States has eight times more MRI machines, seven times more radiation therapy units for cancer treatment, six times more lithotripsy units, and three times more open-heart surgery units. There are more MRI scanners in Washington state, population five million, than in all of Canada, with a population of more than 30 million (See John Goodman and Gerald Musgrave, Patient Power).
In the UK as well — thanks to nationalization, price controls, and government rationing of healthcare — thousands of people die needlessly every year because of shortages of kidney dialysis machines, pediatric intensive care units, pacemakers, and even x-ray machines. This is America’s future, if “ObamaCare” becomes a reality.
Thomas J. DiLorenzo
Peter Kirsanow: “Health Care Rationing And Minorities – A Curious Silence”
The member of the U.S. Commission on Civil Rights and conservative Republican attorney opines: “If, under Obamacare, the federal government allocates health-care expenditures on a utilitarian basis — i.e., on a cost/benefit analysis driven in part by the life expectancy of the patient — then certain groups could be affected more than others. Obviously, the elderly who’ve shown up at town-hall meetings have concluded that they will suffer the biggest impact. But studies also show that blacks, Hispanics, and Native Americans often have lower projected survival rates than whites and Asians for various diseases. Accordingly, it’s possible that under Obamacare patients from the former three groups would be denied the more expensive (but only marginally more effective) treatments granted patients in the latter two groups. This wouldn’t be [intentional] disparate treatment; rather, there may be a disparate impact on blacks, Hispanics, and Native Americans based on survivability rates. Since, e.g., blacks (for numerous reasons, including finances, diet/lifestyle, seeking initial treatment much later than whites, etc.) are more likely to die within five years of certain cancer diagnoses than are whites, there may be a greater probability that the more expensive interventions will be withheld from blacks in the aggregate.”
More: “Typically, the Left is alert to any possibility, however remote, that a governmental policy or piece of legislation may have a disparate impact on protected classes (‘Administration Fails to Act on Asteroid Threat: Minorities and Women Hardest Hit’). Yet thus far there’s been absolutely no discussion of whether rationing may have a disparate impact on certain minority groups. Does anyone doubt that such discussion would be loud and vigorous if, say, Newt Gingrich were the primary sponsor of the health-care bill?”
Magic Negro Watch Blog: “Health Care Becomes A Racial Issue: ‘We Are Talking About Taking From Hard-Working White People And Giving To Lazy Black Folks”
The conservative blog in Lawrence, Kansas takes issue with white liberal writer and activist Tim Wise’s comments on CNN contending that the government-run health care reform debate is all about race: “I’m reading all of these liberal blogs and I’m seeing in written form what this video points out. They are working so hard to sell the race baiting card that they are failing to realize that even people sympathetic to Obama are starting to say ‘stop the insanity.’ I believe that liberals/Democrats are beginning to see that Obama is a f___g disaster. When they had Bill Clinton at least they had a great charismatic b___r who could string together coherent thoughts to get his point across. Obama is just a dumbass and an arrogant one at that and people like this dude are trying their best to cover for his stupidity.”
Kevin Martin: “Playing The Race Card Without A Full Deck”
The conservative Republican argues that it’s not surprising that the Obama administration began pulling out the race card as his policies have grown increasingly unpopular, but rather how quickly it has happened: “In a change from the Bush years, however, it appears liberals no longer consider dissent to be patriotic. A Washington Post reporter wrote that town halls have ‘transcended their original purpose and become a kind of professional wrestling for the civically engaged.’ More cynical critics suggest those exercising their constitutional rights are racists. The leftists who selected Obama saw him as a vessel to pass the most radical agenda in decades. They seem to have strategized that, once public opinion shifted away from them, they would use his race to try to silence his detractors. In an interview with the Huffington Post, Representative James Clyburn (D-SC) – a member of the congressional leadership – likened disgruntled constituents to mobs opposing the civil rights movement. Clyburn said about current protests: ‘This is an attempt on the part of some to deny the establishment of a civil right.’ Representative John Dingell (D-MI) told MSNBC: ‘[T]he last time I had to confront something like this was when I voted for the civil rights bill… At that time, we had a lot of Ku Klux Klan folks and white supremacists and folks in white sheets and other things running around causing trouble.’ Speaking of MSNBC, host Carlos Watson worried on-air ‘whether or not ’socialist’ is becoming the new n-word for, frankly, for some angry upset birthers and others.'”
More: “People speaking out at town halls are genuinely concerned about the direction our nation is being pushed. They are frustrated because they feel they are removed from governing. They are not racists. What about their opposition? The White House suggested supporters ‘punch back twice as hard.’ At least one Obama follower took this literally in Missouri when Kenneth Gladney, a black man, was roughed up and reportedly called the n-word while handing out ‘Don’t Tread on Me’ flags at Representative Russ Carnahan’s (D-MO) August 7 town hall meeting. The actions. The disfranchisement. The hate speech. When all the facts are on the table, it’s clear who’s bringing race into all this: Obama and his team.”