March 03, 2004

Health Care in Prison

William L. Anderson on socialialized medicine:

To justify his claims that government medicine would be a social panacea, Krugman cites "a recent study" which claims "that private insurance companies spend 11.7 cents of every health care dollar on administrative costs, mainly advertising and underwriting, compared with 3.6 cents for Medicare and 1.3 cents for Canada's government-run system." (Of course, Krugman does not tell us who authored the study, or the criteria used to arrive at such conclusions, but we can be assured that whoever wrote it is not an advocate of private medical care.)

From there, Krugman's reasoning is quite simple. If we were to go to socialist medicine, it would be cheaper than what exists right now and nothing else would change. All of us would receive the same care we do now - or perhaps even superior care.

In economics, we call this the ceteris paribus assumption, that is, "everything else being equal." Unfortunately, Krugman's assertion that the only thing that would change if government took over the entire medical apparatus here would be lower costs is more reminiscent of the many economists' jokes that appear on Internet sites. (An economist and two others were stranded on a deserted island when a case of canned goods washed up on shore. While the others fretted about how to open the cans, the economist declared, "That's easy. Just assume that we have a can opener.")


The reason is that for all his rhetoric, Krugman's ceteris paribus standard cannot hold in this case. If Krugman were correct, then it would make sense for government to supply all scarce goods, since it would be able to deliver them at lower costs (using Krugman's calculus) and, thus, save consumers money. Product quality would not change and everyone would be better off.

However, no one but the most diehard socialist would make the argument I have made. Not even Krugman will advocate something akin to what we see in North Korea of the former Soviet Union or China before it began to cast off its Maoist "heritage." Yet, we are now left with a perplexing question: If socialism does not deliver the goods like bread and automobiles in large numbers and in high quality, why does anyone believe that the practice of medicine is an exception?

One thing to remember is that when government becomes the monopoly provider of services, then people who receive those services are going to be subservient to the state. (After all, Krugman, for all his protestations that he is against monopolies - calling them "market failures" - is advocating a government monopoly over medicine.) People who have no choice must be satisfied with what they receive - or else receive nothing at all. This is a prescription for abuse, and those who have been on the receiving end of government abuse know clearly of what I write.