Health Care Markets Aren’t Special

The laws of economics are universal.  Socialists often try to dispute them, or to muddle the issue by injecting questions of morality into debates over economics.  Previously, we debunked several myths regarding the economics of labor markets.  Today, we address an area of the economy where moral judgments are passed off as sound economics on a regular basis:  health care.

One simple fact that the moralists (typically on the left) refuse to admit is that medical care (whether we’re discussing physical goods such as medications or services such as the diagnostic expertise of a skilled professional) is a good available for exchange just like any other.  The fact that this good has a dramatic effect on the length of one’s life is not relevant, from an economic perspective.  Many other goods can also affect the length of one’s life, such as food, transportation, machinery, etc.  Let’s review some of the fallacies surrounding the economics of health care:

1.  Length of life is the absolute.  This one is pretty easy to disprove.  We can easily imagine a scenario in which case quality of life takes precedence over length of life.  Let’s say you are visited by a genie who offers to extend your life by one year, but in exchange, you must live the rest of your days in concentration camp-like conditions.  Does anyone accept this deal?  Probably not.  On a similar token, we make such decisions on a daily basis.  The decision to smoke cigarettes, or eat unhealthy foods, for example.  Virtually everyone who smokes or eats poorly knows that doing so threatens their health and decreases their potential life-span.  Yet, many choose to engage in these activities anyway, because they’d prefer to live a shorter life full of pleasures than a longer life of austerity.  The same decisions can be made financially.  Someone may choose not to purchase a particular medication or treatment (which would enhance their length of life), because they would rather spend the money on taking a vacation (which would enhance the quality of their life).  Generally speaking, length of life and quality of life are competing forces, if for no other reason than the fact that medical care costs money (regardless of whether you pay directly in cash, or indirectly through employer or government provided insurance).  Occasionally, medical care addresses quality of life issues independent of length of life.  Severe headaches, for example, might lessen one’s quality of life tremendously but not present any substantial long-term health risks.  In this case, the decision comes down to a simple financial weighting of choices like any other.  Would you prefer to spend your money reducing your headaches, or on other goods and services you might enjoy?  Simple economics applies.

2.  People “need” medical care, but not other things.  Usually you see this concept brought up by those who like to refer to medical care as a “right.”  The classic spin goes:  Someone’s need for medical care supersedes someone else’s need for “luxury” items (entertainment, electronics, travel, etc.).  Therefore society is justified in taking the money of anyone who already has everything they “need” and spending it on the medical care of those who cannot afford it.  This is most easily disproved by pointing out that “need” is completely and totally subjective.  Aside from that, we must keep in mind the point of the previous paragraph.  It is entirely possible that someone is making a conscious decision to go without medical care, because they would prefer other things.  By declaring medical care an absolute right that cannot be denied, you incentivize people to refuse to spend any money on it, regardless of whether they can afford to.  Why should I sacrifice my vacation to receive medical treatment when I can just spend the money for my vacation, claim poverty afterwards, and receive the treatment anyway?  I suppose we could set up some elaborate means-testing program to determine who really “needs” medical care and who is just deciding not to purchase it, but such a program would be difficult to manage, incredibly inefficient, and likely a huge target for massive fraud.  Nobody has a right to decide what someone does and doesn’t “need” but the individual themselves.

3.  Ability to pay should not restrict access to medical care.  This is essentially a subset of the last point.  Another way to put this (but nobody in favor of socialized medicine ever does, because they recognize how ridiculous it sounds) is that cost should be completely irrelevant to medical decisions.  Spare no expense!  Money is no object!  People’s lives are in the balance here!  Of course, paragraph #1 demonstrated that when faced with the decision personally, money absolutely is an object, and we can further prove this through a hypothetical scenario.  Imagine a 75-year-old homeless person with no friends or family who suffers from cancer and is in a lot of pain (to prevent this from becoming a question of assisted suicide, let’s assume that despite the pain, they are adamant that they want to live) is admitted to a hospital and is on the verge of death.  There is an operation that can save the person from immediate death, but the odds of survival for any longer than six months are less than 10%.  This operation costs $500 million.  Should the government pay for this operation?  If you had to think about this at all and you are willing to even entertain the thought that the answer might be no, then congratulations:  you officially support death panels, and you acknowledge that traditional cost-benefit analysis can in fact be applied to medical care.  For another hypothetical scenario, imagine you walk into a restaurant.  The waiter attempts to give you a menu, but you refuse it.  Instead, you hand him your credit card and say, “Good man, you are the expert here in matters of food, not I.  Since food is vital to survival, no expense is too great!  Bring me your absolute finest food, in whatever quantity you believe I need, and feel free to tip yourself whatever amount you deem appropriate.”  Do you expect to get a good value from this restaurant?  Does this sound like a wise plan?  And yet, this is essentially the exact plan that socialized medicine embraces.  Empower the doctors to do whatever they want, with the full knowledge that nobody involved cares about the expenses at all.

There are probably more fallacies out there regarding the economics of health care, but this is all that comes to mind at the moment.  If you’d like to dispute some of my analysis, or if you have a fallacy I may have forgotten, please let me know on Facebook or in the comments.

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About Dude Where's My Freedom?

My name's Matt and I love Freedom.
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