By: Joey Salvin and the College Republicans  | 

Leave Health Care Alone: Capitalism 101

The other day, I was speaking with someone about Obamacare, and I was told that healthcare is a fundamental human right. Of course, it’s easy to spread that belief, since it makes a fantastic bumper sticker, and objectors can easily be labeled nasty people who don’t care about poor citizens, as I know from personal experience. Therefore, it’s important to explain the opposing approach to healthcare and the markets in general.

Few things are worse for a market than unneeded government intervention. For example, politicians constantly deem the healthcare market “special” and therefore in need of some form of drastic government involvement. In the hopes of radically rewriting the current system of healthcare, a team of Democrats have decided that they and their colleagues from Harvard could write a law that defies gravity. They set out to write something so complex and ingenious that only they and their esteemed contemporaries could cause something so abstract to actually work.

In December 2009, Obama hauled America along on a major step towards centralization of the American healthcare system. Obamacare, or the Affordable Care Act (ACA), is regarded as the first step toward single-payer universal healthcare. However, Obama made the critical error in assuming that the government can write a law complex enough to account for all the variables in the market and thus the world. This law is also decidedly socialist, in that it makes the fatal assumption that citizens can be deceived, or are willing to pay for their neighbors’ healthcare. In theory, this law would work if it operated in a universe where individuals are motivated by altruism and not the current universe where people are motivated by personal goals and incentives.

Obamacare insurers are required to ignore age and sex, as well as preexisting conditions. These are key predictors of cost, and therefore the pricing system disconnects from the value of the goods being sold, a reality that should make any economist red in the face . The ACA is engineered to account for this price problem by enforcing an individual mandate, where people who would otherwise buy cheaper health insurance  are forced to buy ACA insurance. There is a principle called the ‘adverse selection problem’, which insists that enrollees are more aware of their current (costly) health conditions than their providers. Thus, recently, disproportionate numbers of enrollees have joined health plans because their benefits outweigh their costs. People who see a bargain run to join Obamacare, while people who see an overpriced product shy away. Obama thought this effect wouldn't occur in the amount that it has, wrongly assuming  that government coercion could reduce or eliminate human nature. However, many people opted out, paying a fine and avoiding the individual mandate.  Also, fundamentally, promises of free goods incentivize individuals not to save. Why should we save for an emergency when someone else will pay for it? Is it your responsibility to pay for your health or is it your neighbors’?

To bring proof of Obamacare’s inefficiency, currently, three of the largest healthcare companies, Aetna, UnitedHealth, and Humana, are either dropping out or making major pullbacks from the Obamacare health insurance exchange markets. In order to correct for losses, these health insurance companies needed to raise premiums (monthly payments), averaging at a 25% increase nationally, and in some states up to 100%. Obama is not a magician, and as the healthcare industry tilts off balance, plans become more expensive.  

Defenders of the failed government program insist that only more government involvement can solve the problem. Obama saw problems in the healthcare markets and, rather than liberalising and deregulating the industry and allowing market forces to fill demand, he decided more government subsidies and regulation was necessary. Now that Obamacare is failing, we see mistaken politicians campaigning for a single-payer approach. The idea that socialism works is a deadly myth that ignores the grueling history of socialism and other market-restricting ideologies. Therefore, we must ask the question of which healthcare system provides the cheapest and most practical plans for everyone. There is no doubt that healthcare is fundamentally important, so when conservatives plead to repeal the ACA, it’s because they understand that it’s only part of the problem.  

Adam Smith, the founder of modern economics, conceptualized the invisible hand, where, so long as individuals pursue their dreams and passions, and trade is voluntary, markets become more efficient, while progress and innovation produce extraordinary achievements. Free market competition has resulted in all the outstanding services and gadgets we consume every day, and has brought the Unites States to the pinnacle of success, where the standard of living is greater than anywhere in the world at any time throughout history.

However, the great achievement of the United States is the idea that the people can use government as a means to protect individual freedoms and opportunity for the pursuit of happiness. In economic affairs, government is meant to be an umpire protecting individuals from harm, not a player in the game itself. This is based on the fact that free markets achieve what government mandate cannot, ultimately working through the principle that people operate due to incentives for personal gain. In a free market, the best way to become wildly successful is to maximize utility of resources and provide fantastic goods or services, filling the needs of fellow citizens. In a socialist society, the way to become wildly successful is to con the system, or become politically powerful enough to coerce the general population. When government centralizes, the initial redistribution may seem beneficial. However, investment is greatly reduced, innovation is killed, progress flat-lines, entrepreneurship is destroyed, and then more government is needed to bear down on the freedoms of its citizens in order to account for its overbearing costs.

As much as it might offend your progressive cousin at Yale, healthcare is a commodity and must be treated as one. Competition and innovation is necessary in order to provide the best possible utility out of the healthcare market. When unnecessary government mandates and regulations enter into a free market, personal responsibility is greatly decreased, leading to costly inefficiency and stagnant innovation and growth.  

Healthcare is an important human need; however, insisting that it’s a human right, one that individuals are coerced into purchasing even against their will, is deceptive and wrong. By painting a misleading picture of greedy capitalists, many on the left have pushed a false fantasy: an all-caring, benevolent government that can solve everyone’s problems, so long as taxes are increased on “the rich.” This type of thinking is detrimental to those worst off in society. Replacing a competitive healthcare market with a government monopoly that uses coercion to enforce its objectives is tyrannical, counter-economic, and dangerously counterproductive.

The claim that we need to be more like Denmark or Canada is a stretch that ignores several key differences between them and the USA. The Frasier Institute, a Canadian think tank, recently published that it takes, on average, 18.3 weeks between referral from a general practitioner and receipt of treatment in Canada. The study also insisted that everything about the Canadian system is slower and weaker than it could be. We need to end the myth that something can be “free.” Nothing in the universe is free. Everything comes at a cost. Where that cost is hidden is another question entirely.

A single-payer system uses the logic of cutting down a tree that repeatedly feeds the townspeople in order to take all the fruits in a faster manner. It may be good in the beginning, but eventually you run out of fruit. Obamacare has run out of money and will continue to bleed. Right now, people can’t buy cheaper and less inclusive plans because health insurers aren’t offering them. If you gave free reign to insurers to innovate as they like, they would make less inclusive, yet cheaper plans for those who can’t afford a more luxurious plan. You can buy a meal from McDonalds for $5.00. This isn’t because the government decided we needed to create meal plans for cheaper. It’s because its founders saw market opportunity in feeding lower income individuals.

With cheaper healthcare comes cheaper insurance, and right now there are many steps Trump could take to liberalize the market and reduce regulation in healthcare. For example, it costs on average $2.75 billion to get a drug on the market. Most of these costs come not from creating the drug, but from overreaching FDA regulations regarding drug application. Overbearing patent laws also make drug companies safe from competition, essentially increasing prices of drugs. Scaling back these regulations enforced by the FDA would drastically decrease the price of medicine. Competition would effectively create better and cheaper drugs at a faster rate. We must be extremely skeptical of any organization, especially with federal power, which has control over a particular market, such as the FDA.

The effects of the free market have made America the richest country with an incredibly high standard of living. In the USA, we have the ability to fulfill our dreams and aspirations, while becoming wealthy. As long as government does not pick winners and losers by redistributing money to inefficient institutions or implementing unfair tax systems riddled with loopholes, society is best off. Survival of the fittest in a free market should apply to businesses who compete to create the best, cheapest, highest quality products and services for consumers. Healthcare is very important, and Donald Trump has the opportunity to fix the current mess by cutting regulations and liberalizing the healthcare and insurance market, thus letting market forces fill the health care/insurance needs of all citizens.