Government and Medicine

Time and time again we see the same results from socialized medicine. In fact, there has never been a socialization of medicine that was not accompanied by the familiar shortages and rationing and long lines and inferior service and other such tragedies. Rather than go through each case of socialized medicine, though, a more Austrian approach is in order. Let's look at the fundamental forces at work to see why these effects we always see are inescapable if a system of medicine is socialized.

1) As the price of a commodity goes up, producers are encouraged to sell more, while consumers are encouraged to reduce their consumption of it, or to switch to another commodity. As the price of a commodity goes down, the inverse is true: producers are less encouraged to produce, consumers demand more.

3) The greater the supply, the lower the price. The greater the demand, the higher the price.

The above are economic realities, built into the very nature of mankind. No serious economist could dispute them. While you may find a single anecdote that runs counter to them, over an entire society they will prove true. These above economic realities explain why socialized medicine will never work as well as free market medicine.

In a socialized system - we cannot say free system, because any half-wit knows that socialized medicine must still be paid for - medicine is prepaid by taxes whether you use the service or not. Therefore, at the time of service, the only cost associated with health care is the expenditure necessary to get to the health care professionals (driving time, gas consumed, etc…). According to #1, we should expect to see greater demand for health care, and this is exactly what happens.

According to #3, this greater demand will cause prices to rise, and that also is exactly what happens. Consider that in 1961 an appendectomy cost $149, which, adjusted for inflation, is still under $900 today. This procedure, which is performed in the exact same manner with the exact same equipment and personnel, today costs many thousands of dollars.

But should not the higher price stimulate producers to produce more health care in some way or another, thus reducing the price again? Unfortunately no, because the increased cost does not necessarily represent a profit. Of necessity, lest the cost of health care become truly monstrous, the state is given a budget for the year to which they are supposed to adhere. Now what is going to happen with this greater demand and higher prices for services matched against a yearly budget? Customers in a socialized health care system do not represent a profit to be made, as in a free market system, they represent costs that are incurred. In other words, the money was taken in already through taxes. Each customer treated is now an expense instead of a potential profit. And with costs skyrocketing against a yearly budget, what do bureaucrats do? You guessed it: they cut expenses.

This is why waiting times for service are so incredibly high in countries which have socialized their medicine. In Canada, the average waiting time between visiting a general practitioner and receiving service from a specialist is now 17.7 weeks. That’s right: if cataracts blind your eyes, you can wait over four months to see again.

Another problem that contributes to the ungodly mess that is socialized medicine is the manner in which money is spent. For the bureaucrats spending the money, it falls into category D: other people’s money spent on other people. The bureaucrats do not have the same incentives to look for quality and bargains. From the perspective of the patient at the time of service, since a vanishingly small fraction of total taxes is actually their money, it falls into category C. We should, according to #2, expect to see a voracious demand for expensive service but little concern for the cost. After all, who would eat at Wendy’s if Uncle Sam picked up the checks?

Socialized medicine is simply a system in which an artificial increase in demand is paired with reduced incentives to hunt for bargains and keep prices down. Health care should be treated like anything else in a free society. It should be provided by private citizens and regulated only by market forces. US health care used to do this, and it used to be a thing of beauty.

As we march towards socialism, we can expect to see our health outcomes deteriorate as they have in other nations. The survival rate for breast and prostate cancer victims, for instance, is around 80% in the US. In some western European countries it gets as low as 50%. The closer we get to a fully socialized system, and government spending on health care as a share of all spending surpassed the 50% point a few years ago, the more our health care will resemble the mess that other nations are dealing with.

What a shame.