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Neither “Skinny Repeal” nor “Clean Repeal” Will Fix our Healthcare

By entering the marketplace and determining winners and losers, the government has thrown our current healthcare situation into an absolute turmoil, which only a fully market-based solution will fix.

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By Ryan Lau | USA

In just a few days, we will reach the one-year mark since President Donald Trump assumed office. In that time, the topic of Obamacare has been discussed and voted on time and time again. From “Obamacare lite” to “Diet Obamacare” to “RINOcare”, Republicans and Democrats alike have given many names to the various Obamacare replacement bills. However, it appears that none of these bills would do a very good job of caring for the health of American citizens. Healthcare as a whole is defined as the maintenance and improvement of physical and mental health, especially through the provision of medical services. The Affordable Care Act, championed by former President Barack Obama and passed in 2010, attempted to increase overall coverage and quality of healthcare for American citizens, but it has been a complete failure. Aspects of the plan, such as denying a business’s right to deny any customer service, as well as the individual mandate to purchase a plan, have absolutely failed. But ultimately, the simple fact of the matter is that any form of publicly-operated healthcare will fail, and simply repealing Obamacare is not enough. The Affordable Care Act absolutely should be repealed, but there is no possible public replacement that could ever successfully manage the all-too-important market of American healthcare.

First and foremost, there is a partisan interest within the government, when creating any bill of any kind. It is frankly astonishing how quickly the majority of Senate Republicans will stamp their name on a piece of legislation for the simple fact that it opposes a law previously instituted by the opposing party. Though the Obamacare replacements have all fallen far from the alleged principles of limited government conservatives, nearly all of them have voted for each and every plan. Some of the few dissidents have even claimed that these plans take away from a valuable piece of legislation, proving that even the party that allegedly represents limited government and economic responsibility is beginning to lose its sense of both.

To truly fix the American healthcare situation, GOP lawmakers should have focused less on repudiating specifically the Obama administration while stamping their name on another disastrous bill, and instead looked towards undoing decades of government meddling in the healthcare industry. This market restriction has resulted in an expensive, inflexible, and often monopolized healthcare system, and further replacements would only take us another step away from undoing this. No, a clean repeal is not enough. Our healthcare problems date back to the source of government involvement in the once market-driven industry.

Ultimately, many of the misconceptions about free market healthcare ultimately boil down to a misunderstanding of the system in place before 2013. Many individuals believed that what we had then was an example of market-based healthcare, but this could not be farther from the truth. Prior to Obamacare, the United States government was already spending, per capita, $4047 (WHO) on healthcare, the third highest in the world. That’s government spending, not per capita total spending. Factoring in individual spending, this figure would increase considerably further and rise well above the Netherlands, the highest in the world at $5,198. What’s more is that the Netherlands does have a form of universal healthcare, and still, they manage to spend less than our hybrid system did before the implementation of an individual mandate. Where does this spending all come from, if our plans were so limited prior to the Affordable Care Act?

The healthcare disaster ultimately originates from a number of pieces of poorly written legislation passed throughout the first half of the twentieth century. In 1910, the American Medical Association lobbied President Taft to significantly strengthen the regulation on medical licensing. Essentially, the President of the United States allowed a for-profit company to decide who can and cannot become a doctor. Anyone with any sort of economic sense can recognize that this will lead to favoritism on behalf of the AMA, and a restriction against qualified professionals who do not meet the subjective criteria of the AMA. The results of this bill were astonishing. State AMA offices over the following several decades oversaw the merging and closure of almost half of all American medical schools. By restricting the supply of future doctors, the AMA had a direct role in increasing the demand and subsequent price of seeing a doctor for any reason whatsoever.

Not long after, another crucial bill was signed into law by none other than the alleged free-market champion, President Calvin Coolidge. In 1925, right in the middle of one of America’s biggest economic booms, the Coolidge Administration took a major step in counteracting this economic success: by allowing the patent of drugs, they created a system of corporate monopoly that would cripple consumers in the industry for almost a century. If one company holds a patent over a particular drug, and they refuse to sell the rights to it to any other companies, they will hold sole possession of it. Despite anti-trust laws and anti-monopolist legislation that the government had by then instituted to fight monopolization, they spun on their heels with this bill, encouraging monopolization of the drug industry. With no competitors, pharmaceutical companies could charge exorbitant prices for simple lifesaving medication. Without this patent protection, other companies, in attempts at luring business, would come in and sell the same product for less money. To draw their customers back, the initial company would be more likely to further reduce prices, lowering them to the point of market equilibrium. Clearly, without this legislation, Americans would be able to receive prescription drugs at a fraction of the cost that they do today.

Without a doubt, corporate special interests play a huge role in the astonishing level of this number. Following the Hospital Survey and Construction Act of 1946, hospitals favored by the US government were given federal subsidies, eliminating their need to succeed in order to still make a profit. By passing this bill, government artificially restricted the supply of hospitals and doctors available, thus artificially increasing the demand. Healthcare rates then increased over the next several decades, especially after the passing of Medicare and Medicaid at double the natural rate of inflation. As a few large companies with vested interests lobbied politicians to reduce competition, demand became more heavily subsidized, further raising prices. As the House Budget Committee states, this shift in our healthcare plan throughout the second half of the twentieth century can be described as “free enterprise given way to government control in partnership with a few politically well-connected companies”. By picking winners and losers, the government allowed for a very small number of companies to thrive and ultimately monopolize the industry. In fact, these factors have been a part of our market for so long now, that many consider them to be natural market forces, when in fact they are anything but.

It is also worth noting that when any form of public health insurance is implemented, it will inherently be overused. Insurance, by definition, is meant to cover an individual for an emergency procedure, rather than becoming the mainstay for all procedures. Use of insurance to pay for a common procedure, something that public healthcare inherently allows due to its third-party nature, creates over-utilization. This causes insurance companies to spend more covering regular affordable procedures, and to counteract this, they need to raise prices in order to make a profit to stay in business. Furthermore, inserting the middleman of the government subsidized insurance company obscures the true price of procedures from the end consumers, which in turn leads to them choosing potentially unnecessary options that will ultimately reduce supply and increase the price for all users. By entering the marketplace and determining winners and losers, the government has thrown our current healthcare situation into an absolute turmoil, which only a fully market-based solution will fix.

All human beings, including healthcare workers, act in self-interest. Yet, one of the main distinctions between a market-based health care plan and a government-based healthcare plan is how that self-interest manifests itself. The former has a profit motivation, while the latter does not. Essentially, this means that in order for a private healthcare provider or insurance company to remain in business, it needs to run a profit so it can continue paying its employees and providing its services. In order to run a profit in a truly free market, the company needs to appeal to a consumer base and convince the consumers to spend their money at their particular company, as opposed to a different one. If they fail to attract the consumers, they will go out of business, creating more space for a more efficient company to fill the gap. To attract profit and avoid bankruptcy, a company can either create a new product, sell an existing product at a lower rate than all nearby competitors, or improve upon a current product in order to provide it in a way that is preferable to consumers. All three of these actions benefit the consumer. For the consumer to make any voluntary decision in the marketplace, he must feel that he will be better off with his purchased product, than he would with unspent money. At the same time, the company must feel better off with the collected money than they do with their unsold good or service.

Government subsidized healthcare, however, does not carry any of these natural market forces in order to attain success. As the government controls the treasury and the rate of inflation and monetary production, any tangible losses can be offset by literally printing their way out of debt. By heavily regulating the industry in favor of vested special interests, they can limit the supply and increase the demand, which will once again raise the price of insurance and procedures. If a public healthcare option, or even a private yet subsidized option, fails to meet the needs of the consumer, they do not go out of business but stay afloat due to subsidies coming from the taxed money of the people. That’s right, even though the company is doing a less than adequate job with the service it promises to provide, it continues to provide the same inadequate product to consumers over and over again, never going out of business despite a large number of market failures that would doom a company that does not have the assistance of the government. In maintaining this state, it has absolutely no motivation to improve its practices or treat patients any better, as it will remain in business either way.

Though this already is a bad scenario, specifically the healthcare industry has an even more ominous potential. The lack of profit motivation may very well lead to a great number of individuals who are not treated properly for a curable disease. As an example, take a man who has been diagnosed with a mild case of bronchitis, or any other easily curable disease. In the business of satisfying the consumer, the market-driven company is more likely to immediately cure the man’s ailment with a dose of antibiotics and send him out the door healthy, satisfied, and willing to return the next time he is ill. This is not the case in a publicly run system. In this case, the doctor has been guaranteed a job by the government, but he cannot maintain a job if all of his patients are cured quickly since a good performance by a public company would not lead to any increase in revenue or staffing. As all humans inherently act in self-interest, in the interest of preserving his job, the public or subsidized doctor has an interest in taking his patients and making sure they stay his patients for a very long time, so he does not work himself out of a job.

Clearly, the government cannot be trusted in the healthcare industry. There are millions of lives at stake, and these lives cannot be subject to the corruptible government, which simply has no profit motive and thus no real need to satisfy patients. Though government officials have been attempting for over a century to improve the quality of American healthcare, each and every new law passed only takes us another step away from liberty, and in doing so, also takes us another step away from a system that will work for all Americans. Only a return to a true market-driven healthcare system will finally allow American healthcare to become the best system in the world.

 

 

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