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The United States of America, a nation that was founded on principled individualism, seems poised to expand government intervention into the health care sector. A rowdy debate has been joined in newspapers across the country: one side condemns the failure of the free market to provide Americans with affordable care, while the other warns against Canadian-style waiting lists and doctor shortages.
The American health care system, however, is far from a free market. As I wrote here three months ago , its problems are exaggerated and are actually due to high costs brought about by sundry government interventions. As for the other side of this debate, the Canadian system does have some serious problems. Despite what Michael Moore claimed in his “documentary” Sicko, Canadians often do wait many long hours in emergency rooms, and many long months for diagnostic tests and treatments. Practically every Canadian knows someone who has skipped across the border to pay out of pocket for a more timely MRI or surgical procedure in the U.S.
At the same time, claiming that the Canadian system’s very real problems are inevitable ignores the far better results achieved in certain European countries. Of course, the best of these systems, such as France’s and Sweden’s, are more successful than Canada’s precisely because they do a better job of imitating the free market. But then, if imitating the free market delivers better results, why not let the free market provide health care directly, the way it provides clothing, cars, computers, and countless other goods and services?
Behind the conviction that governments should ensure universal access to health care is the notion that health care is somehow different from other goods and services. If someone cannot afford an automobile, that’s one thing; but someone who cannot afford health care may die. According to this line of argument, the fact that health care is essential to survival is what makes it necessary for governments to guarantee universal access.
Now, food is also essential to survival, but food is perfectly adequately provided by the market. Certain agricultural products are subsidized, of course, but this is for political reasons, to protect favored farmers from international competition, not to protect the food supply. Many other food products—the ones actually suited to a given climate—are produced profitably without government handouts. Genuine government attempts to guarantee access to food by collectivizing farmland led to massive famines in the 20th century, notably in the U.S.S.R and Maoist China. Most recently, such an attempt led to the collapse of agriculture in Zimbabwe. As a general rule, markets do a better job of providing affordable and high-quality goods and services than governments do, so actually, the more essential a good or service, the more important it is to rely on the market to provide it.
If health care markets were allowed to function freely in the United States—if barriers to interstate purchase of health insurance and tax preferences for employer-provided health insurance were eliminated, to name just two salient government distortions—prices would come back down to earth. Far fewer Americans would find health care unaffordable, and innovation would race ahead even faster than it already does.
If health care’s importance to survival is not an argument for government intervention, perhaps health care’s inherent uncertainty is. After all, we can fairly easily predict how much it will cost to feed ourselves over the course of a week, a year, and even a lifetime. We can therefore plan for those future expenses. Health care expenditures are far more difficult to predict because we cannot be sure when or if we will fall ill or injure ourselves. This is a good argument for health insurance to cover expensive treatments one is highly unlikely ever to need. But is it an argument for government insurance?
There is no market failure in health care. The shortcomings of the current American system are government failures.
Some people do argue that markets do a poor job of providing insurance—that insurance suffers from market failure. Canadian philosopher Joseph Heath, a supporter of Canada’s “single payer” health care system, is one such person. He argues in his recent book, Filthy Lucre, that private insurers sometimes suffer from adverse selection problems that make it impossible for them “to offer a particular form of insurance at a reasonable price, because they have no way of separating the bad risks from the good ones.” The worry is that only the bad risks will find it worth their while to buy insurance, which will force prices up higher and higher in a spiral that will make insurance markets collapse entirely. Heath argues that this is “the primary rationale for ‘single payer’ health systems.”
If this is the primary rationale for “single payer” systems, then those systems stand on weak ground indeed. In point of fact, private insurers have plenty of ways of separating the bad risks from the good ones. They can ask questions, and they can make it clear that coverage is dependent upon honest responses. They can also simply consult actuarial tables that identify different rates of risk for different groups of people. As economist Alex Tabarrok points out, adverse selection only really becomes a problem when insurers are forbidden by law from doing these things —as they are in some U.S. states like New Jersey, where rates for health insurance are almost three times the national average.
Tabarrok also points out that propitious selection may in fact be more likely than adverse selection. The person who lives a safer life is, after all, probably more risk averse than the person who lives a more dangerous life. It may very well be the case that being more risk averse actually makes one more likely to purchase insurance, not less likely.
What private insurance cannot do is provide affordable insurance to someone who is already sick. This is not a failing of private insurance, however. It is built in to the very concept of insurance. Risks can be insured against; certainties cannot. (This is different from someone having an existing insurance policy cancelled when he or she becomes ill, which should not happen unless a person lied when applying for the policy.)
Providing medical care to those who become sick while they are uninsured is not insurance; it’s charity. There’s nothing wrong with charity, but why not call it what it is? When governments force some people to be charitable to others, though, it’s called “theft.” There is something wrong with theft.
We humans are funny. We generally acknowledge that it is wrong for an individual or small group to steal from others. Most of us do not change our minds even if that individual or small group claims to have philanthropic motives. Theft is wrong, good intentions or not. Why do so many of us lose sight of this profound truth when the group of people reaching into others’ pockets is really big and the effort is laundered through the “legitimate” channels of government?
There is no market failure in health care. A true free market would not be perfect, but the shortcomings of the current American system are government failures, pure and simple. As usual, though, failed government interventions beget more government interventions. If no one can provide a coherent explanation of why health care is different from all of the other goods and services that markets do such a good job of providing, why not try freedom instead?
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