Tuesday, July 28, 2009

The Destruction of Private Sector Healthcare

Thomas DiLorenzo details the suffocation:

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.

His full column is here.

2 comments:

  1. And don't forget the perverse interaction of the FDA drug approval process and patent laws.

    A free market solution to this problem would be full tort (mitigated by the principle of due diligence), and trade secrets.

    As a Canadian resident I can affirm that Canada's health care system is incredibly lousy. Curiously enough, though, Germany's insane system of public and private health provision seems to work quite well - at least based on my experience visiting the country.

    Any hard data available on that?

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  2. The Australian health care system has repeated the Canadian experience. Increasing costs, more bureaucrats, fewer beds. And America wants to repeat the failed experiment.

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