Socialised medicine - ideology or pragmatism?

America is supposed to be the land of opportunity, where people have the ability to experiment with different ways of doing things, where companies, forced by business pragmatics, make creative and intelligent decisions.

Well - it's not that way at all. America, like Soviet Russia, is losing out because of decisions based on ideology rather than pragmatism. The best example of this is America's health system.

In recent days, it has become obvious that many car makers, like General Motors, are now shackled with the health care costs of current and past employees. Since Americans rely upon the provision of private health insurance as part of their employment package, it has been businesses and corporations that have generally borne the costs of keeping their people healthy. Now, however, it has become clear that health care costs are becoming an intolerable burden for such corporations. The health care costs for current and past employees at General Motors, I read recently, costs about $1500 per car. That's $1500 that could have gone in profit, or been used to compete more effectively against other brands.

Many Americans - and most non-American westerners - are amazed that America still does not have a universal health care system that is available to all citizens regardless of their race, social status or relative wealth.

One of the biggest reasons for this was The RAND Health Insurance Experiment, which was done in 1971. The RAND Corporation, in an effort to examine the effects of differing health insurance payments, created their own insurance company for the purpose of the experiment. The results of the experiment appeared to show that when people were given the opportunity, they would seek medical help when, in fact, they did not need any, thus leading to overconsumption. Higher copayments also meant that people were more judicious in their seeking of medical help.

What this influential study appeared to prove is that, when health care becomes cheaper or is free for the individual, then there is more likely to be overconsumption. As a result, health care costs would naturally increase.

Well, that's what the 1971 RAND study appeared to prove. The problem is that it doesn't seem to fit the facts as they stand in relation to western nations that have a universal health care system (or "Socialised medicine" as some in the US call it).

The United Nations Human Development Report has some stark figures that Americans really should consider. The first is that the US spends around 50% more on health than the average western nation. While countries like Norway, Germany, Canada and others have health spending that hovers between 9-10% of GDP, health care spending in the US hovers between 14-15%. Yet despite the huge spending on health, America has a higher infant mortality rate, a higher AIDS infection rate and higher rates of death due to preventable diseases than any comparable nation.

So America spends 50% more and has comparatively dismal health outcomes. Health care costs for people with long-term illnesses has led to huge amounts of bankruptcies - sick people just can't afford to pay their costs. Not only is this bad for society, it is also bad for the economy. The more healthy an society is, the more productive the economy can be.

This is one of those situations in which the free-market cannot compete. Relying upon the natural actions of the marketplace when it comes to health care shows that the free market cannot make correct decisions. Universal health care - which is essentially the government planning part of the economy (and is thus socialist) - is shown to have better health outcomes and at a lower expense that what the free market can provide.

Socialism in its historical form is not what I am defending here. Socialism and central planning has made ghastly mistakes in the past, and in most areas of the economy it has been proven that a free market system is more efficient in allocating resources. But we also need to learn from Socialism, and we should always seriously consider areas in which Socialism has proved to be more productive and more effective. I'm not for turning America into a Socialist state, but I am for advocating Universal Health Care. Why? Simply because it works. After all, isn't this attitude what America is supposed to be about?

From the Osostrian School Department

© 2005 Neil McKenzie Cameron, http://one-salient-oversight.blogspot.com/

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