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Socialism is a failure in every area of life except health care, where Washington seems to be convinced that more socialism is the answer to all our health care problems.

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Drug Bill is Socialized Medicine

Socialism is a failure in every area of life except health care, where Washington seems to be convinced that more socialism is the answer to all our health care problems.

Strange, but, on the pending drug bill, this is the logic of many in Congress and the Bush Administration: Socialism is a failure in every area of life except health care, where Washington seems to be convinced that more socialism is the answer to all our health care problems. That is why Congress is rushing to enact the Medicare prescription drug bill for seniors, which will nationalize another large portion of the health care industry.

This bill has seemed to be headed for easy passage all year long, but now it appears in some trouble as Congress and economic analysts are finally awakening to the astronomical cost of this Medicare expansion. As USA Today, hardly a bastion of free-market thinking, said in a recent editorial: “The last thing seniors need is for Congress to take the country down a familiar legislative path that leads to a new benefit seniors don’t want and taxpayers can’t afford.” Even the New York Times, which has been cheerleading for this legislation for years, says the bill might be in trouble.

As HUMAN EVENTS reported in the cover story of the August 25 issue, opponents on the right are now mobilizing to mount a campaign to derail this runaway train. Congressional Republicans are having second thoughts. It is about time. Passage of this bill is no longer a fait accompli. Hooray.

My contention is that this debate is about much more than providing low-priced drugs to seniors who cannot afford them. Assuming it is the government’s business to subsidize pharmaceutical purchases for low-income seniors-an assumption that any strict constitutionalist would flatly reject-the price tag for paying for drugs for those who can’t afford them is at most $60 billion. But the President’s plan would cost six times that amount, and the congressional plan seven times that amount. The Ted Kennedy Democrats have flatly rejected any attempt to target this benefit to only low-income seniors.

Vision of Utopia

Why? Because they want all Americans to be eventually brought under a government-run health care system. Their vision of utopia is a universal health care program that has a single payer: Uncle Sam. Perhaps this was best expressed recently by Robert Kuttner, an economist and editor of the liberal American Prospect magazine, who recommends: “The best way of cutting avoidable costs (but not cutting care) and also insuring every American is to put everyone in the same universal system. There would still be difficult choices, but nothing like the insecurity, cost shifting, waste and profiteering of the present system.”

In short, the left has seen the future of efficient health care in America: It is the Postal Service.

These are obviously incredibly dangerous ideas. The left is not just hoisting upon us ideas that are dangerous to our wallets, but also at stake here is our physical health. A government-run system of health care would provide Americans with an inferior quality of care to a market-based system.

Conservatives need to make the case that the free market can and will work in the health care arena. Our health care system provides high-quality care-would you want to go to a hospital anywhere else?-but it is too expensive, and highly inefficient. But that is a result of too much government interference in health care, not too little. In other words, liberals have created a system where the government now runs about half the health care system, and poorly, and then they blame the resulting inflationary costs and the increased numbers of uninsured on the free market system that they themselves shredded.

Forty years ago the government accounted for about one-sixth of the health care system. Now it accounts for half. We are not inching toward health care socialism, we are moving in Michael Jordan-sized leaps. The Medicare prescription drug bill is just the next big advance for the health care socialists.

Where is the conservative free market counter-offensive? Our government interventions in health care violate virtually every sound law of economics: We impose price controls, we make the services essentially “free” to consumers through over-insurance, we regulate entry and exit into the market, we have forced patients into managed care programs that are socialistic institutions, and we have government subsidies paying for more and more of the costs. The pricing system that in every other industry relies on Adam Smith’s “invisible hand” of the market place to equilibrate supply and demand is simply inoperative in the health care industry.

The result is that the health care industry is virtually the only sector of the economy today where prices are rising. In most industries, prices have been falling and there is a fear of deflation. Inflation has risen as third parties (insurance companies, HMOs, or government) have paid a larger share of health care bills. In 1960 about 75% of health care expenditures were paid for out-of-pocket by the patient. Today, only 17% of health-care expenses are paid for by the consumer-patient.

Sen. Phil Gramm (R.-Tex.) once said that “if we paid for pet food the way we pay for health care, my dog would have a steak for dinner every night.” That is an apt analogy for why the health care industry is characterized by runaway costs: the consumer is not the payer. Some readers may object to my calling this system socialist. But really what we have is from each according to their ability, to each according to their need.

To call what we have today “health insurance” is really a misnomer. Most Americans have prepaid health care, not “insurance.” Insurance is supposed to be for rare, major expenditures in order to spread risks among large populations. But most Americans’ insurance coverage has a low deductible and therefore covers minor, not major expenditures.

In fact, what is really cockeyed about the health insurance system is that many Americans are “insured” for routine health expenditures, but not the major costs. That is precisely the opposite of how insurance should be provided. The over-insurance in the medical industry is largely a result of the tax code which makes employer coverage tax deductible.

Medicare has been the real socialist breakthrough for the left, and that is why Democrats like Ted Kennedy are so fiendishly hell-bent on expanding it. More than any other program in the budget, Medicare is probably most responsible for the large federal budget deficits of the past 20 years. Yet, we now have Republicans heaping lavish praise on the program. President Bush recently called Medicare “the most compassionate program of the last century.”

This kind of statement merely validates the bipartisan support for health care socialism.

Doesn’t the White House know that the financial black hole of Social Security is going to get even more ominous in the next decade as baby boomers begin to retire? In 1970, Medicare accounted for about 1% of gross domestic product (GDP). Today it accounts for about 2.5% of GDP. By 2030 that will rise to 5% and eventually up to 8%.

The Medicare trustees report indicates that Medicare spending will double, relative to the size of the economy, over the next 20 to 25 years-and then double again by 2070. And that is based on Medicare’s current benefits package, so this cost growth will accelerate further if Congress enacts a prescription drug benefit.

Free-market-oriented groups such as the Cato Institute and the Heritage Foundation have long argued for a system of Medical Savings Accounts as an alternative to the current health care insurance system. MSAs would inject more consumer choice, more competition and more market discipline into the medical industry. That approach is strongly opposed by liberal Democrats who view the idea of empowering individual patients with more control as an assault against socialized medicine. And they are right.

This is a time for a call to arms among conservatives. In health care we have hit an unavoidable crossroads. Within the next ten years America will either have a system of MSAs and a more rational and competitive pricing system in health care or we will have a largely government-controlled system, in which only the very wealthy can afford to “opt out.”

There is no middle ground here. This is a fight the conservative movement cannot afford to lose to Ted Kennedy, whether he has George W. Bush in his corner, or not.

Written By

Mr. Moore is HUMAN EVENTS' economics correspondent and an economist at the Cato Institute.

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