A Spontaneous Order: Healthcare Abolish all state interest in healthcare
The perseverance of one's life and health is the the most important driving forces of man. Many statists will preach that because of this it should be generously supplied at the hand of the state; however this portrays a grey scale, as then should water, food, shelter are just as important to the preservation of life. But yet these goods are mostly supplied through the forces of the free market. Just like every other industry in existence, the free market notion for healthcare will always be more ethical, and more effective in providing in providing the scarce resources needed to produce the highest quality and most accessible treatment, at a low cost. More so than any state regulated or given healthcare system.
First let me clear up some information regarding insurance in the free market. Health insurance in the free market will play a much smaller role. To quote Hans Hermann Hoppe:
“The first thing we can say is that sickness is insurable only insofar as the health risk for a particular group is purely accidental. Such is the case with certain forms of accident insurance, or even for events such as cancer. But for most health risks, we would have to say that they fall into the province of individual control, and very little in this field is actually insurable. Such risks must be assumed individually and must be paid for out of individual savings.”
I'm not going to get to deep into insurance now, will save that for another post, but for now: Insurance is most effective when it can pool together individuals who share a common risk level. The coverage extends to events that are largely unforeseeable and are random when occur. There are many healthcare practices that are well within mans control and can be easily predicted. To insure such events would undermine the purpose of insurance. Insurance is intended to act as a lottery, that individuals (clients) are uncertain to future events regarding the degree of how much insurable damage is to be claimed. So if the damage cannot be funded by my savings, then I may perhaps purchase insurance.
Lets first examine the case of largely foreseeable health risks. Wouldn't everyone just buy into insurance just prior to the occurrence? Individuals not affected by such an occurrence would not buy insurance. Any insurance company insuring largely foreseeable events would quickly go bankrupt as they are attracting those who expect to profit, and detract those who would simply pay for the profiteers. Without actual virtual unforeseeable risks, insurance has no purpose.
On the free market individuals who will be eligible for high quality coverage will be required to take on some behavioral standards. Just like through car insurance, some rules of entry may apply---Seat belts must be worn or that drivers must drive under X speed to receive any kind of reimbursements for a possible collision. These behaviors may lead to smaller premiums because of their decreased risk.
In the current day state managed healthcare industry we see some form of minimum mandated coverage requiring clients to pay for unwanted/unneeded coverage. This drives up the cost of the insurance provision altogether. Added to this, much of the mandated coverage includes actions that should not be insurable: Alcoholism, drug addiction, routine check-ups. These are self inflicted or specifically in the case of pre-existing conditions are obviously foreseeable. Drug addiction and alcoholism are fully restrainable within the will power of man. Remember the only things insurable are those risks unpredictable and beyond the control of the client. Laws prohibiting the discrimination of such pre-existing conditions force the insurance companies to pool higher risk client with lower ones, completely throwing out the point of premiums. Now the lower risk individuals are to subsidize the higher risk clients. The mandated coverage of other not insurable events creates disincentive for clients to shop around because the insurance companies will have little varied services. Not allowing out of pocket costs to serve as a deterrent for not needed medical care will artificially raise the demand, along with the insurance costs. To quote Hoppe:
“This is a lesson in the logic of interventionism. The first interventionist act brought about a big mess — insurance premiums always go up because insurers are no longer allowed to discriminate correctly and are even forced to include uninsurable risks. So now the problem arises of more and more people dropping out. For those who remain insured, premiums have to be raised to adjust for the fact that so many are dropping out. The next step, which we in the United States are on the verge of taking, is to make health insurance compulsory. No More Dropping Out! If this step is taken — compulsory health insurance, with all the other mandates remaining in place — then of course premiums will skyrocket even more than they have in the past.”
So, will consumers generally pay for most healthcare directly in the free market? Yes, and the alternative choices will be quite obvious. Let's take the example of group insurance, individuals can outsource risk in this manner. This has the advantage of being able to apply social pressures on anyone who seeks to abuse the coverage. This could be through fraud or using it it for perhaps going to the hospital for trivial ailments. This was actually a norm in the early 20th century, usually pursued by fraternities comprised of impoverished working class individuals. It was called “lodge medicine”. To quote David Beito:
“The leading beneficiary of lodge practice was, of course, the patient of modest means. He or she was able to obtain a physician’s care for about $2.00 a year, roughly equivalent to a day’s wage for a laborer. For comparable amounts, some lodges extended coverage to family members. The remuneration the lodge doctor received was a far cry from the higher fee schedules favored by the profession. The local medical society in Meadville, Pennsylvania, was typical in setting the following minimum fees for its members: $1.00 per physical examination, surgical dressing, and daytime house call and $2.00 per nighttime house call. Such charges, at least for ongoing service, were beyond the reach of many lower-income Americans. Hence it was not coincidental, an editorial in the Medical Council pointed out, that lodge practice thrived in communities populated by the working poor.”
As communities grow, the need for group insurance will actually fall as the individuals will become more wealthy and productive. More healthcare service will be paid for by direct cash payments, like most goods and services.
Which brings us to another to the economic processes of direct payment models. Under these models the consumer is strongly incentivized to shop around for the lowest priced/highest quality goods/services. More rivalrous competition results throughout providers. The consumer now is much more involved in the selection process of their service provider which leads to your classic market forces and divers- higher demand for new technology, better medical procedures, safety, effective, affordability. In the absence of regulation and taxes as cost liabilities, lower prices will come to be which will free up access to their choosing. In the absence of Intellectual Property and licensure requirements will result in a far greater supply of services. Increased supply (supply curve shift to the right) will lower prices.
Now for some skeptics criticism. It seems obvious that skeptical individuals may be worried about the quality or suspect of the free market care providers, since they are not forced to submit to state mandated minimums. Standards in the free market will be verified by private accreditation firms or third party rating firms. In the free market, reputation is vital for the success of every firm. The current day supplier of this function rests in the hands of the monopolistic state bureaucrats. Without the state involvement in this function, the demand for transparency among service provider will ever increase. Reputation markets help inform mass consumer choice, those who do not submit to such accreditations will be pressured. Firms that do submit to the rep firms will show quality medical service to have them distinguished from competing firms. Or we can have a competitor who does not submit to such a rep firm, they will be seen as suspect and will be socially pressured. Who would you rather purchase from: The former or the latter?
Individuals fear that rating firms will be easily bribed. Let us see that bribery is present in all human institutions, but this fraud will be shackled by the competitive market. If a rating/rep firm were to engage in such a fraudulent exchange, would run the risk of its own reputation and possible loss in future profit including the care provider. Competitors would investigate every and all claims of foul play to make public of any condemning evidence.
Now to look at different levels of care. Obviously different healthcare firms will hold different standards for care. This is easily determined by price, by all prices in the free market, where supply and demand are not exploited always convey reality. Quality diversify is very important to the market, since not all consumer will want to or be able to pay for the most high quality service. In the free market, absent of taxes and regulation costs, all quality will always be increasing on quality and decreasing on price. Let’s take this analogy: New Toyota cars will be much higher quality than the Mercedes Benz from 75 years ago. Now let us remember that ALL value is subjective, but for this i'm referring to increases in perhaps safety, acceleration, efficiency, etc.
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