Socialized medicine is not the cure

Paul Hsieh with an op-ed, giving the TennCare disaster as an example of government intervention failing:

The Tennessee government initially offered a generous benefits package. Predictably, costs skyrocketed because patients had no incentives to spend prudently. In response, the government attempted to control costs by slashing payments to doctors and hospitals.
Hospitals closed and doctors left the state in droves. Many doctors who remained stopped seeing TennCare patients since they lost money on each one. Families with sick children often had to drive long distances to find a doctor who would see them. And they had no alternatives to TennCare because the state regulations had all but destroyed the insurance market. Ironically, TennCare ended up causing the most harm to the very people it was intended to help – the working poor and rural patients.
Nor did TennCare save money. Instead, it nearly bankrupted the state budget.
The problems of TennCare are not aberrations that can be fixed with a few minor reforms. They are inherent in any system of government medicine. Under such systems, bureaucrats and politicians decide what care individuals can receive, not doctors and patients. This has long been the case in Canada’s “single-payer” socialized medical system, with its infamous waiting lists for critical medical tests and treatments. For the sake of my patients and myself, I don’t want this to happen in Colorado.

Comments

Anonymous
No surprise at all. Tenn-Care was a political bone, thrown by pandering politicians trying for votes to slavering citizens who wanted to believe in infantile fantasies that something could be had for very little, if not nothing.
The plan did nothing to regulate demand. In fact it was stopped only by supply-side management: payments were lowered to the point that the markets for services failed.
What it was was an object lesson in human behavior and selfishness. Instead of promoting responsibility, accountability and thrift, it gave persons absolutely no reason to exercise restraint.
Even guaranteeing people 100% reimbursement of all medical expenses, provided they first pay for the services themselves and then submit claims for reimbursement would have worked better. In fact, it almost always works better. People bargain and shop better, seek comparative pricing and act as better stewards if there is even a nagging doubt they will end up paying themselves.
The politicians of Tennessee did their constituents a disservice, but it is a good cautionary lesson (at TN’s expense) to those who dream these ugly dreams elsewhere.
Anonymous
Socialized medicine will never work on a state-by-state basis. It will simply attract too many deadbeats and it is too easy for a provider to pick up the tent and move across state lines. There is little that can be done for the former – put out the fecal matter and the flies will be attracted to it. For the latter, each state would have to revamp the training and licensing system such that providers trained in a particular state would only have the ability to practice in that state (no comity with other states). Following the California state only licensed law school model (letting the USMLE do the removal of the wheat from the chaff in a similar manner to the bar exam) without national accreditation would be a solution but would require decoupling of any new supply generating facilities from large research institutions.
~Criminallopath~
Anonymous
Restricting doctors from practicing in other states if they meet state licensing requirements might be challenged as a violation of the commerce clause of the Constitution. No one state could prohibit another state from licensing a doctor if it chose. Restricting licensing to doctors educated and trained in that state is a surefire ticket to higher-cost services, as almost every state now relies on a substantial number of IMGs to meet its communities’ professional services demands. Your idea, criminallopath, would be either a bonanza or a disaster, depending on whether you were selling or buying medical care. I don’t think anyone would be so crazy to try anything that blatantly anti-competitive.
Anonymous
I put the idea out there for consideration and am glad that it can reasonably be discussed in the context of the post. Clearly, for state-by-state socialized medicine to work, the state would have to control the supply. We see the results of the lack of state control on the intergovernmental stage when it comes to providers fleeing Canada, Europe and the Third World to practice in the states.
From the legal standpoint of competition in the marketplace, I do not see a problem if the California legal model is followed. The state currently has both ABA approved and non-ABA (regionally accredited) approved schools. I don’t see any a priori evidence, from the design perspective, that the non-ABA accredited schools were put together with non-comity in mind. I think that the powers that be in other states simply refused to grant comity. I could see a similar situation occurring if states that wished for socialized medicine followed the California legal model. Unless the state can control the supply it is inevitable that the supply will move to states that offer greener pastures. The problem of the deadbeats from the patient side, however, would still remain.
Richard Watts
“What it was was an object lesson in human behavior and selfishness.”
Selfishness did not cause the problems in Tenn Care – government interference in the market caused those problems. In a free market, governmment would not seize what belongs to one person and spend it on another, but instead each person would pay his/her own way. Self-interest would cause each person to use only those health care services which are personally important enough for that person to pay for out of his/her own budget. The same principle would apply to each person’s choices regarding his/her purchase of health insurance.
Self-interest (“selfishness”) is actually a good thing, and it is essential to personal responsibility. One has a moral responsibility to provide for one’s own well-being, and that of one’s own children. One does not have a responsibility to provide for the well-being of others – who have a moral responsibility to provide for themselves. But any government interference in a market defeats personal responsibility – by the very nature of government and of markets.
“Socialized medicine will never work on a state-by-state basis.”
Socialized medicine will never work on any basis. Only a free market results in the best good or service at the lowest cost. Only a free market truly rewards innovation – which cuts costs and improves the quality of health care. Hence, a free market would make better quality health care possible at higher profit margins for providers. Only a free market allows the provider and the patient to voluntarily agree on the price of services, and thus respects the individual rights of all parties involved. Socialized medicine violates everyone’s rights and wrecks the market – it is immoral and impractical.
Anonymous
No, TennCare was indeed an object lesson in selfishness and greed, the most corrupt and destructive kind. It was depleted by rampant abuse, wanton extension of benefits beyond payment for medical care to payment for all sorts of goods and services–and quite a few payments for nothing at all it turned out– that really had nothing to do with the insuring of theretofore uninsured Tennesseans. Companies that did provide medical insurance benefits were incentivized by TennCare to reduce or eliminate coverage and dump their employees and their employees’ families on the state dole. The program was abused in the extreme, so its failure was assured.
No, TennCare was a solid lesson in graft, greed, corruption, peversion of goods and an example of why programs that divorce those who consume from those that must pay will never succeed.
Richard Watts
I agree with you on one point only – which is “programs that divorce those who consume from those that must pay will never succeed”. In a free market, the payer and the consumer are one and the same (assuming the consumer is an adult, and leaving aside voluntary charity, with which I have no quarrel). But any form of socialized medicine presupposes divorcing those who consume from those who must pay. The whole point of socialized medicine is to force some to pay in order for others to consume what is not theirs. Thus socialized medicine is evil at its very root – in its intended purpose. What could be more of a “perversion of goods” than that? How does one “abuse” or “corrupt” a system that is so inherently unjust and destructive that there is no way to implement it that will not do harm to mankind? It was socialized medicine as such that caused the TennCare disaster, not the “abuse” of socialized medicine. TennCare failed to provide high quality, accessible, affordable health care. But TennCare has succeeded in its fundamental purpose – to forcibly transfer enormous amounts of wealth – taking it from those it belongs to, giving it to those it does not belong to. Whether the expropriated wealth is distributed to the poor, or to those who are not poor, or any combination of the two, it is the same injustice.
The cause was not selfishness. A truly selfish person is someone who is primarily concerned with his own well-being, concerned with what is in his own best interest. It is not in one’s self-interest to perpetrate insurance fraud or to otherwise try to live as a parasite on others. That type of behavior is not self-interested, it is only self-destructive and short-sighted. A human being deeply needs, for his own sake, to be rational and independent, honest and just, productive and proud. And he needs integrity. A person who is truly selfish, someone who puts his own well-being above all other things, will value these qualities, which are necessary to his self-esteem and his happiness. He will not destroy his character, his mind, his *self*, to gain some unearned money.
The companies which reduced or eliminated employee health insurance benefits did so because the actions of the state government made it unaffordable for those companies to continue the benefits. It is unfair to blame those companies for this.The blame rests solely with the State of Tennessee.
Anonymous
Richard, you are arguing for a notion of selfishness that exists only in the abstract, which is fine as long as everyone is clear about what you are meaning. But this is not a discourse on economic theory or social modeling in the fashion of objectivist thought a la Ayn Rand and her followers.
I think any discussion of transfer programs pretty well understands that there are those drawing from the benefit pool in excess of their contribution. That is to be expected in any true insurance scheme, whether operated by private business or by a state government. For the sake of simplicity, we should leave out the issues of risk rating and actuarial consideration, which are important in making viable risk-sharing enterprises work.
Tenn Care was a politically-inspired state government benefits program that was presented as a “solution” to a perceived problem of lack of affordable insurance for state residents. What it quickly became was an un-tamable feeding frenzy on the state treasury, as none of the interested parties, politicians making promises, “services” sellers wanting to be paid with state funds (and I use that term loosely, because they sure did) and prospective citizen- beneficiaries felt any rational brake to their demands on the system. It was proposed as an all-you-can eat smorgasbord and it became a pig trough.
No significant or durable limits were set as to what services qualified or didn’t qualify. Lots of truly specious “services” were allowed on the power of political persuasion alone. Employers may have been rational in dumping beneficiaries from their own health plans onto the state, but no mechanism was included in the state’s legislation that penalized them from doing so. And nothing significant was done to require individuals seeking coverage to become responsible stewards of their health.
I don’t doubt the state of Tennessee expected some financial bloodletting from their program, but what they got was near exsanguination. The only response they could make was to lower reimbursements to the point where the markets to provde state-funded services were extinguished, which is what they did.
The program was not necessarily a failure just because the beneficiaries didn’t feel any pinch, although that was important. It was a failure because it was conceived as a pork-barrel spending project before it was ever managed as a long-term government service with proper fiduciary duties required of those doing the managing.
Anonymous
While I don’t agree with the whole Objectivist “selfishness is good” thing, I do think socialist redistributionist schemes are inherently immoral. What is worse, they cultivate immorality in those who participate.
You don’t have to see eye to eye with Rand on everything to observe all around you the fullfillment of Hayek’s predictions regarding the errosive effects of collectivism on personal morality and integrity.
Look at all the Medicaid providers who, resentful of their inability to set their fees at a level they think fair, fall into the habit of “creative coding”–i.e. routine lying. A sordid thing to watch in formerly proud and dignified profession.

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