It is evident that we have entered the "full court press" phase of the struggle for socialized medicine (and cap and trade as well, but that is another post).  The reasons are interesting (mainly Obama's plummeting popularity), but those too are the subject for another post. What I want to examine here are the arguments being used, or, specifically, a single argument, one I have addressed many times before ("High Cost of Medical Care", "Government Efficiency", "Misunderstanding Profits", "The Devil is in the Definitions (And Assumptions)", "Two Examples of "Inefficiency" in Capitalism"), but one that keeps getting reincarnated in many new forms. That is the argument that the free market in health care simply has too many "costs" that can be safely eliminated through either government subsidized insurance, or, more often, a single payer system.

These arguments usually take the form of the following comment I saw on a Brent Bozell article:

Here's a copy of my letter to Dr. NO, from Oklahoma.

Dr. Coburn,

If citizens and the Congress insist that there be a single-payer health plan, here is an idea that should be looked at. This is page one, of a 5,000 page document, but it must start somewhere.

I’ve talked to several doctors and pharmacists and to economists, PhDs and others, and they all think it sounds great.

Health care would be free to all, except all would pay taxes and a co-pay, rather than for health care insurance.

The way to reduce Health Care costs is simple. Just eliminate all insurance companies, their buildings, computers, and employees, and get rid of all Government health care employees. That would also eliminate the people in each and every doctor’s office and hospital, who spend their day filling out insurance forms.

I understand that there is a list of the procedures and the cost of each, for various parts of the Country.

Give every qualified doctor, hospital, and pharmacy a blank checkbook so they could write a check each evening for all the services they had provided that day.

Find the right line on every income tax form, multiply that number by a percentage that would equal the total cost of health care. Based on that number, issue a card that would tell the co-pay (a progressive number, based on income). No one would get in for free, with maybe at least a dollar for those who can prove they had little or no income.

Just hire a bunch of auditors to randomly check and made sure they aren’t stealing any more than is being stolen today. And on and on.

And I bet the cost would be cut in half.

Health costs in this country are so high because these days, a $5,000 funeral, is delayed by a much more expensive medical procedure.

Those costs could be reduced if the doctor was not permitted to use a medical procedure, or prescribe a pill that the patient can not pronounce.

This may be a bit longer, and a bit less coherent than most, but it hits on all the high points, so let me use it to tear apart the many erroneous arguments being raised.

Let us start with a very popular argument, that there are now people whose sole job is filling out insurance forms, people whose salaries could be saved were we to switch to a single payer system¹.

Now, I have to chuckle a bit at the premise of this argument. Yes, large hospitals and firms with several doctors probably do employ a person whose single task is paperwork, but having a lot of contact with the medical profession, I can tell you that small practices DO NOT each have a paperwork person. Yes, paperwork is onerous, and ti takes time, but not nearly as much as some would have you believe.

Still, let us grant their contention, for the purpose of this argument. Each and every doctor has his own private paperwork amanuensis, whose whole life is given over to IDC-9 codes, UB92 and MEDPAR forms. How will socializing medicine resolve this? Oh, the commenter above suggests doctors just "write a check", but does ANYONE think the government will work like that? Really?

Why do insurance companies have such extensive forms? And that includes the government "insurance" through Medicare/Medicaid? So that they can be sure what they are paying and why. Does anyone think the government will be any less concerned with the reason behind billing? The government created the DRG system, from which the private sector derived the hated HMO. The government has been at the forefront of both tedious information gathering and denying services. So, yes, we can clearly get rid of the people who fill out private insurance forms, but under a single payer system they will be replaced with an equally numerous army of people filling out government compliance forms. Same task, different name.

Which brings me to a second argument often heard, that the insurers, the big health care conglomerates, doctors, and whoever else is the currently favored villain, is getting rich off our health care, a problem which will be eliminated by socialization. And I will concede that, under a government regime it is likely none of those will be getting rich. Government is very good at bleeding the private sector dry². However, the fact that they will manage to keep people from getting rich leaves a big question unanswered. What will that do to the medical industry?

Barring total government takeover, draining off profits will serve to pretty much cripple the medical industry, as I described in several earlier posts. Profits serve several purposes, but mainly serve to tell the market where needs are most strongly felt. By taking profit out of the medical industry, the government will guarantee investment will flow elsewhere, no matter how strongly felt the need for medical care. And by reducing the pay of doctors, they will also serve to direct students away from medicine. Again, though many think it is "greed", salaries serve to tell students where we most desperately need people. Where salaries are high, we need more workers, and students respond to that by going into those fields. They do so out of self-interest, but in the end it works out to the benefit of everyone. At least, until the government short circuits the profit mechanism³.

And finally, we have the argument about all "them new fangled medicines and gizmos"⁴. The argument si often made that we find medicine so costly because of all the new technology.

If you want a simple refutation, just look in front of you. That big glowing thing in front of you used to cost tens of thousands of dollars (when we adjust for inflation) while having maybe one millionth of the capacity. It did not become cheap by being regulated or having access restricted. It became cheap by being bought by those who could afford it. And as computer technology went so went most discoveries. Cars were the toys of rich men once. So was air travel. So were most developments. The rich provided the massive profits needed to improve technology and production methods sot hat they could become generally accessible.

In medicine, we have short circuited this process in three ways.

First, because of government meddling in insurance, we have put everyone int he position of the rich man. Thanks to government mandating insurance cover certain procedures, insurers are often prohibited from excluding some costly technologies. And as tax law makes insurance the first choice of payment for many consumers, cost is no obstacle tot hem. Where a middle class person wanting a computer or VCR int he early days of the technology would have to decide to either save up or skip it until price came down, in medicine we all have a bottomless credit card in the form of insurance. By making insurance so common, the state has made the market full of rich men.

Second, because of that viewpoint, and changes in how torts are viewed⁵, doctors are prohibited from making decisions about which technologies are too costly. At one time, they would have had to ask the patients what they could afford. Now, not only do the patients no longer care, but the threat of a lawsuit makes doctors wary of denying any treatment for fear of future liability. Thanks to our very liberal view of standard of care, we have made it impossible to deny anyone anything.

Third, the state has decided to "save money" by limiting access. Though they created expansive insurance and liberal torts, they clamped down on new technology, forcing hospitals to prove a "need" before buying new technologies. As I described in "Government Efficiency", this prevents the new technologies form establishing economies of scale and keeps new technologies expensive.

All of which means the costs associated with new technologies are not a force which would inherently drive up costs. Were we not in our current circumstances thanks to past government intervention they would simply allow more choices to those who chose to pay for them, with those choices eventually bringing down costs and making new technologies available to everyone at a reasonable price over time.

And that is the answer here. As with the economy and many other problems, the solution to our problems is not more government (see "The Endless Cycle of Intervention"), but rather the removal of all the old interventions. It may be painful for a time, but as I argued in "Hair of the Dog?", the alternative is to impose even more regulations which will make the eventual collapse much more painful than any discomfort we will feel fixing things now.

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1. Strangely, the same people who paid over $100,000 per employee in tariffs to save steel worker jobs, or who endorsed a bailout to save non-economic companies, preserving jobs at the cost of several million per job, have no interest in preserving these jobs. Maybe we should use their own logic to argue for the free market. If they socialize medicine, all these jobs will be lost! The free market is good as it preserves jobs! (It is an absurd argument, but it is no more absurd than the ludicrous arguments for the bailouts, tariffs and other interventionist schemes.)

2. On the other hand, government is also good at patronage, so favored groups in favored districts may still get rich. And they also have a tendency to overlook potential for fraud or other exploitations of the system, so they often allow scam artists to get quite rich as well. But at least insurance executives will be impoverished! And doctors! Doesn't that make you feel better?

3. This argument does not apply to full government takeover of the medical industry. I assume that Obama lacks the political capital for such a brazen move. However, should it ever come to pass, the harms of that particular evil would be far worse than  described here. However, I lack the time to go into a full description of allt he harms inherent in socialism. That will have to wait for another time.

4. No the comment writer's words, but a fair characterization of many people's attitudes towards medical technology.

5. This was accomplished through three stages. As I plan on writing about this int he future, I will be brief. First, the laws were changed to remove the concept of caveat emptor, placing the burden on the seller to inform of any risk ( a dangerous principle, as all goods have countless "potential risks", making this almost impossible to fully fulfill). Second, contracts were gutted to prevent any possibility of the parties assigning risks and liabilities independent of the courts. Third, in fields such as medicine,t he standard of care was increased to near perfection to make it almost impossible to meet. Granted, 9 out of 10 cases common sense overcomes this absurdly high standard, but that 10th case is costly enough it keeps lawyers funded and doctors scared.

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POSTSCRIPT

For a more complete discussion of the forces which are behind my arguments about profits and salaries, and their roles in assigning resources, see my article "Greed Versus Evil".