Monday, January 30, 2006

The New York Times on Health Care Costs

On page 1 of today’s New York Times, there is an article titled “Health Care, Vexing to Clinton, Is Now at Top of Bush's Agenda.” Typical of The Times and the Left, the article treats the continuing rise in health care costs as a phenomenon of the free market and presents government intervention as the solution.

The article is an illustration of the massive ignorance and evasion that prevails on this subject. The truth is that the rise in health care costs is exactly what one should expect from the government’s long-standing policy of collectivizing the cost of medical care. This is a policy it has carried on since World War II, when it first began to foster medical “insurance.”

Under so-called medical insurance, the typical insured patient pays little or nothing of the cost of any medical treatment, however routine it may be. Such medical “insurance” is comparable to “insurance” for food purchases. It simply means that there is little or no cost to the individual when he buys medical care.

I used to ask my students to imagine that one night the class would go to a restaurant for dinner, on the understanding that everyone would be free to order whatever he liked but that the bill would be evenly divided. Thus, if there were thirty students in the class and someone ordered a $20 steak instead of a $5 hamburger, the additional cost to him would be 50 cents. Under such an arrangement, it's clear, everyone would have the incentive to order anything he wanted, because he would bear very little of the cost. But since everyone would soon do this, the cost to everyone would end up being far higher than it would have been had everyone had to pay his own way.

Now think of the consequences of the check being split a million, ten million, or a hundred million ways and you can see what’s actually wrong with our present system of collectivized medical care.

This is a subject I’ve written about at much greater length, in a pamphlet titled
“The Real Right to Medical Care Versus Socialized Medicine” and in my book Capitalism: A Treatise on Economics. I’ll return to it in future posts.

This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book. (Email notification is requested). All other rights reserved.

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