Daydream Believers: Libertarians and Healthcare

My old pal Joe Paduda responds to a Cato Institute editorial opposing universal healthcare measures. As the Irish used to say in bar brawls, “Is this a private fight or can anyone join?”

Joe takes on one claim in the Cato piece, which is this: If insurance companies were permitted to charge people according to their expected medical costs, the free market would take care of the rest.

In a sense, the libertarians at Cato are right. The market would take care of one problem – it would blow their ivory-tower ideas about insurance out of the water. Here’s what would happen under a truly libertarian health care policy:

1. Insurance would become prohibitively expensive for many people who currently have coverage.
2. The cost/benefit of acquiring that insurance would be such that even some people who could afford it would elect to take their chances. The wave of medically-related bankruptcies would come later, forcing many businesses to accept pennies on the dollar for monies owed.
3. Insurance companies would undergo significant downsizing.
4. The resulting chaos would lead to overwhelming support for a single-payer system, which would be implemented shortly thereafter.

While that might be a happy outcome for many, there would be a lot of avoidable suffering beforehand.

Cato authors Michael D. Tanner and Michael F. Cannon get themselves into big trouble before they even get to the pricing issue, however. Here’s what they say early on:

What these politicians and many other Americans fail to understand is that there’s a big difference between universal coverage and actual access to medical care.

Simply saying that people have health insurance is meaningless. Many countries provide universal insurance but deny critical procedures to patients who need them.

In other words, because universal health care systems have occasional failures they are a fundamentally flawed idea. That’s like saying murder should be legalized because so many people get away with it.

Waiting times in the countries they cite are sometimes acceptable and sometimes excessive. Waiting lists can be a form of rationing, but it’s far more humane than denial of treatment through systematic exclusion from most of the health system (which is what lack of coverage means). And while the authors observe that some people on waiting lists are in chronic pain, they fail to note that few if any universal coverage advocates believe that is anything other than a flaw that needs to be corrected.

As always in these arguments, the Cato authors cite the fact that all uninsured Americans effectively have access to emergency care. What they fail to note is that many of Americans would not have needed emergency care had they received proper treatment. That would have saved many of them ongoing pain beforehand, too – the same “chronic pain” the authors lament among Europeans – and would often save money in the bargain.

And let’s not forget that a study by the National Academies’ Institute of Medicine (warning: pdf) estimates that at least 18,000 people die each year from inadequate health coverage. That’s the the equivalent of thirty World Trade Center bombings in the years since 9/11.

Or, to put it another way, that’s the equivalent of a Virginia Tech shooting every day of the year. The market’s not going to fix that. So the question then becomes: Do you care about that, or not?

The authors’ response? “Covering the uninsured comes about as a byproduct of getting other things right.” How, exactly? “… [E]nacting a standard health insurance deduction, expanding health savings accounts and deregulating insurance markets — that could truly expand coverage, improve quality and make care more affordable.”

Wait. It would “expand coverage?” It wouldn’t make it universal? Do you mean the market can’t do everything?

The authors fail to cite a single credible study to suggest that “deregulating insurance markets” or any of their other proposed solutions will work. Until they do, it’s impossible to give any credence to their position. If something sounds too good to be true, it usually is.

The Invisible Hand does many wonderful things, but the notion of the free market as a Universal Solution Machine is closer to theology than it is to economics. The United States has the most deregulated and privatized health system of any OECD country, and we also lag in virtually all major health measures. Don’t think there’s a correlation? Then you have an argument to prove. The Cato authors don’t succeed.

We Americans are a freedom-loving people, which makes Libertarianism is an attractive dream. (You know – don’t fence me in, etc.) But dreams don’t become reality without evidence, and that’s sorely lacking in this Cato editorial.