Thursday, February 27, 2020

The Disastrous Healthcare Plans of Sanders and Warren

The ideas for healthcare reform of the statist and left-wing politicians in the USA are so disastrous and so foolhardy, that they should be severely and frequently criticized. In particular, the healthcare plans of Bernie Sanders and Elizabeth Warren reflect quite well what a lot of economically and politically uneducated progressives in the USA think should be done about healthcare. They want change the current system in order to lower the costs of healthcare and provide "free" or almost "free" healthcare. It is true that the healthcare system in the US must be dramatically transformed and that its costs to end-users (patients) should go down significantly, but not at all in the interventionist way these people think. The way to go, as usual, is to expand the free market.

Elizabeth Warren and Bernie Sanders want to go in precisely the opposite direction. Sanders wants a single payer system and Warren wants to implement a healthcare program with federal government funding estimated in the range from a low of $13.5 trillion to a high of $34 trillion over ten years. To put it into perspective, this is around the size of the entire US economy. The other part of the financing is supposed to come from wealthy people, which, if possible, is even more shocking: she wants to charge “two cents for every dollar of net worth above $50 million and three cents for every dollar on net worth over $1 billion” and for “billionaires to pitch in six cents on each dollar of net worth above $1 billion”. This is close to confiscatory taxation; it cannot be described in any other way than petty theft by the State; there is really no other word for it. Not only is it highly unjust, but it would also have significant consequences for entrepreneurship in the US, with money fleeing the country in billions. This would mean much less money left for investment, and also a clear disincentive to entrepreneurship and business generally in the country, leading to general reduction of wealth for people with average incomes. The consequences for the US would be quite dramatic.

Who says that all the 331 million people of the United States need or want health insurance with "total" coverage? The plans of people like Bernie Sanders and Elizabeth Warren are simply top-down socialist plans like the ones many Europe populations have been subjected to over the XXth century. What is amazing is how many people in the US - the US! - support this kind of preposterous thinking. Warren thinks that magically, "The $11 trillion in household insurance and out-of-pocket expenses projected under our current system goes right back into the pockets of America’s working people." Economics does not and cannot work like that. This is just electoral politics. There is no money “going right back” into any pocket. Her plan, if she even were to attempt to implement it, completely changes the insurance landscape in the US, with consequences that would last for years and that cannot clearly be predicted. Ironically, she even admits herself that “nobody can see the future”.

To go back to basic principles: why must one be forced to be insured for anything at all against one's will It is probably unconstitutional for the federal government to force insurance on people, though that argument hardly means anything to US people nowadays. Shouldn't insurance be a choice that each individual in a free country should be able to make on his or her own? The question answers itself. There are lots of medical procedures in the US that do not cost much more than a nice dinner in a restaurant, and which can be paid out of pocket. There are now many clinics (like this one) in the US which provide private affordable healthcare without going through an insurance company. They cover all standard procedures which involve a majority of all hospital visits (including many standard and routine surgical procedures). These clinics now are popping up in the US and people are flying from across the country to be treated there, even many people who do have health insurance but do not use it in this case.

This is clearly the way to go, and there is of course nothing at all about this in the healthcare plans of B. Sanders and E. Warren. But there is of course much more to do than that, because these private clinics outside the insurance circus are operating in a strictly regulated environment, such as the regulations on medical schools and on doctors. These regulations on healthcare have existed for decades so many people have simply forgotten that they exist or they have simply assumed they are part of the capitalist landscape, when they most certainly are not. They can and should be abolished in order for the free market to provide affordable quality healthcare.

One key aspect of US healthcare regulation that needs to be mentioned and that Warren does not mention at all in her plan, and which even Trump mentioned during his presidential campaign in 2016, is letting all insurance companies compete with each other in all states. This is not the case today and this is one of the key factors hindering true competition in this area and helping the established and protected insurance companies keep costs high at the expense of the average patient. Indeed, insurance firms in each US state are protected from interstate competition by the federal McCarran-Ferguson Act (1945), which grants states the right to regulate health plans within their borders. This is one main reason why the insurance companies defend the existing system tooth and nail. But like most politicians, B. Sanders and E. Warren are regulators by nature, by instinct, not deregulators.

Obviously for all bigger health problems that can happen to an individual, an insurance is the right thing to have of course. Even in a free market (and especially in a free market, actually) where costs would be far lower for treatment than they currently are in the US, insurance is perfectly normal for serious or long-term illnesses. But obviously people with preexisting conditions cannot be put into the same risk pool as people that are healthy, as is the case today. Today, healthy people bear costs of that part of the population that is less healthy, e.g. who have what is often called "preexisting conditions". It is simply unjust to let those healthy people carry those healthcare costs. People with preexisting conditions should be dealt with separately in a free market and should be risk pooled together. This is the way insurance works. Reckless drivers pay much higher premiums on car insurances than standard safe drivers, and nobody thinks this is strange. Cooperative and charitable organizations would certainly pick up the slack for such people whose premiums would be too costly for them, just as in the past in the US, in order to alleviate some of their healthcare costs. But these people must of course adjust their lives in ways that they do not always do today, by taking less risks that could trigger, or increase the likelihood of, specific health issues.

As long as the healthcare market in the US is as highly and tightly regulated as it is, the dire situation with high and even exorbitant prices will continue; what is needed is full deregulation and letting the free market provide the best and most advanced solutions at the lowest price, as it always does. It is true that such a free market for healthcare would be just as difficult to implement politically as "Medicare for All" or a single payer system, since such freedom would severely hurt the protected insurance companies. But it should be done and it would cost nothing at all to the US tax payer, contrary to the E. Warren’s and B. Sanders' gargantuan plans. On the contrary, it would save money and make high quality healthcare finally affordable to the entire population of the United States. 

The healthcare diagnosis of E. Warren is correct when she starts with the following two points: 
"One: No American should ever, ever die or go bankrupt because of health care costs. No more GoFundMe campaigns to pay for care. No more rationing insulin. No more choosing between medicine and groceries.
Two: Every American should be able to see the doctors they need and get their recommended treatments, without having to figure out who is in-network. No for-profit insurance company should be able to stop anyone from seeing the expert or getting the treatment they need."
But that is about the only correct part of her healthcare plan, as Warren decries that “private interests to profiteer off the health crises of the American people” : again, the real problem is too much regulation. Warren's and Bernie Sanders' solutions are not less government, which has created all these price and access issues in the first place; no, her plan is even more government interference in the market! Her points 1 and 2 above can be corrected quite easily with a free market for healthcare, which, as mentioned above, already exists to some degree. One can only imagine what kind of healthcare could be available for all the people of the USA, if such services became wide spread and could benefit from economies of scale.

Where Warren is completely wrong, like Bernie Sanders, is when she says “Health care is a human right, and we need a system that reflects our values.” This couldn’t be more wrong. It is even more serious : it is a lie. Healthcare is most certainly not a "human right"; healthcare, like all services, is not free; it needs to be paid for, always. When people will start understanding that healthcare is absolutely no different from any other sector, like when going into a garage and getting one's car serviced, then there will be a possibility for change. If healthcare were a human right, everybody should logically and morally, get the best treatment that exists, or else these persons’ rights would be violated. But this never happens; most people never get the best possible care in a State regulated healthcare system, and it cannot happen since resources (whether machines or doctors) are scarce by definition and need to be allocated, always. The people of the USSR experienced that in a very harsh way, when the Soviet State centrally tried to allocate almost all goods and services that the entire population wanted or needed. The point is, there are always people (patients) that needs to be prioritized over others; if one cannot see that this is the case with healthcare as well, then one has no business discussing this topic. 

In the UK, Canada and Sweden, which have single payer systems, they all claim that healthcare is a human right. But these systems offer mostly of average quality, if not sub-par healthcare service. This leads to people dying prematurely because they have to queue for months in order, for instance, to get access to cancer treatment or a surgical operation. Often these systems do not propose the latest technologies or procedures that would be available in a truly free market. And it is often not possible to meet a medical specialist directly in these countries; one needs to go to the healthcare central office and meet a GP first. This is just because the State prevents these people from getting access to free market health care by proposing a Soviet-style healthcare system. Sweden has one of the lowest number of hospital beds per capita in Europe, and now employs more administrative employees than doctors and nurse. Many Canadians go across the border to the US to get healthcare because they can’t get the treatment they want in Canada even with payment. And as if this were not chocking enough, people in these countries have become so indoctrinated that they believe that they have the best healthcare system in the world. Boris Johnson, the UK PM, has to go out his way to assure the British electorate that he will not touch the NHS (National Health Service). To want to implement State-funded healthcare by claiming it is a “human right” is therefore simply a macabre sort of joke. It is simply a political slogan meant to fool a lot of naive and economically ignorant voters. 

There needs to be more education about the free market in the US, in order for people to reject these frankly dangerous socialist and interventionist ideas that are so prevalent and popular today, especially among the young. This is particularly true in the healthcare sector which many people think, absurdly, is too important to leave to the free market. In fact, it is too important to leave in any way to the State.

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