Government’s Role in Health Care Only Creates and Aggravates
Problems: To Solve the Problems, Eliminate the Role
School economist and libertarian/anarcho-capitalist
philosopher; Professor Emeritus of Economics, University of
Founder and President,
The Property and Freedom Society;
Journal of Libertarian Studies.
Timely truths expressed during the Hillarycare episode in
the history of statist arrogance. Intoler-ably
truths for champions of
who want another welfare benefit financed by taxation and
central bank inflation and the social control it brings.
From The Free Market, April 1993. I have replaced
Dr. Hoppe's original title (“A Four-Step Health-Care
Posted September 9, 2009
while Obama's “make or break”
for (even more) intrusive government
commandeered an hour of primetime television.
It’s true that
the U.S. health care system is a mess,
but this demonstrates not market but government failure. To
cure the problem requires not different or more government
regulations and bureaucracies, as self-serving politicians
want us to believe, but the elimination of all existing
It’s time to get serious about health care reform. Tax
credits, vouchers, and privatization will go a long way
toward decentralizing the system and removing unnecessary
burdens from business. But four additional steps must also
Eliminate all licensing requirements for medical
schools, hospitals, pharmacies, and medical doctors and
other health care personnel.
Their supply would almost instantly in-crease, prices would
fall, and a greater var-iety of health care services would
appear on the market.
Competing voluntary accreditation agencies would take the
place of compulsory government licensing—if health care
providers believe that such accre-ditation would enhance
their own repu-tation, and that their consumers care about
reputation, and are willing to pay for it.
Because consumers would no longer be duped into believing
that there is such a thing as a “national standard” of
health care, they will increase their search costs and make
more discriminating health care choices.
Eliminate all government restrictions on the
production and sale of pharmaceutical products and medical
This means no more Food and Drug Ad-ministration, which
presently hinders inno-vation and increases costs. Costs and
prices would fall, and a wider variety of better products
would reach the market sooner.
The market would force consumers to act in accordance with
their own—rather than the government’s—risk assessment. And
competing drug and device manufac-turers and sellers, to
safeguard against product liability suits as much as to
attract customers, would provide increasingly bet-ter product
descriptions and guarantees.
Deregulate the health insurance industry.
Private enterprise can offer insurance against events over
whose outcome the in-sured possesses no control. One cannot
in-sure oneself against suicide or bankruptcy, for example,
because it is in one’s own hands to bring these events
about. Be-cause a person’s health, or lack of it, lies
increasingly within his own control, many, if not most
health risks, are actually unin-surable.
“Insurance” against risks whose likeli-hood an individual can
systematically influ-ence falls within that person’s own
respon-sibility. All insurance, moreover, involves the
pooling of individual risks. It implies that insurers pay
more to some and less to others. But no one knows in
advance, and with certainty, who the “winners” and “losers”
will be. “Winners” and “losers” are distributed randomly,
and the resulting income redistribution is unsystematic. If
“winners” or “losers” could be systema-tically predicted,
“losers” would not want to pool their risk with “winners,”
but with other “losers,” because this would lower their
insurance costs. I would not want to pool my personal
accident risks with those of professional football players,
for in-stance, but exclusively with those of peo-ple in
circumstances similar to my own, at lower costs.
Because of legal restrictions on the health insurers’ right
of refusal—to exclude any individual risk as uninsurable—the
pre-sent health-insurance system is only partly concerned
with insurance. The industry cannot discriminate freely
among different groups’ risks. As a result, health insurers
cover a multitude of uninsurable risks, alongside, and
pooled with, genuine insur-ance risks. They do not
discriminate a-mong various groups of people which pose
significantly different insurance risks. The
industry thus runs a system of income
re-distribution—benefiting irresponsible actors and
high-risk groups at the expense of re-sponsible individuals
and low risk groups. Accordingly the industry’s prices are
high and ballooning.
To deregulate the industry means to re-store it to
unrestricted freedom of contract: to allow a health insurer
to offer any con-tract whatsoever, to include or exclude any
risk, and to discriminate among any groups of individuals. Uninsurable risks would lose coverage, the variety of
insurance policies for the remaining coverage would
increase, and price differentials would reflect genuine
insurance risks. On average, prices would drastically fall.
the reform would restore individual responsibility in health
Eliminate all subsidies to the sick or unhealthy.
Subsidies create more of whatever is being subsidized.
Subsidies for the ill and diseased breed illness and disease, and promote
carelessness, indigence, and de-pendency. If we eliminate
them, we would strengthen the will to live healthy lives and
to work for a living. In the first instance, that means
abolishing Medicare and Medi-caid.
Only these four steps, although drastic, will re-store a
fully free market in medical provision. Until they are
adopted, the industry will have serious problems, and so
will we, its consumers.