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The Question of Trust in the Healthcare Debate

As could be expected, our podcast with Adam Gaffney on the merits of a single payer system has led to many arguments on Twitter, none of which were particularly productive at persuading one side or the other.

However, at the end of a back-and-forth that I had with Dr. Mark Hoofnagle, an academic trauma surgeon from St. Louis and a national health plan advocate, he tweeted a comment with which I agreed in part:

He said

…the difference in our attitudes has to do with trust, we each trust a different actor more, but the source of our distrust is common.  It’s the influence of money on politics to game and corrupt intent.

I agree with Mark that we each trust a different actor more, but I disagree that we hold the source of our distrust in common.

In my last post, I precisely focused on the question of trust and proposed that the best strategy to counter the single payer movement is to insist that government cannot be trusted.  But my reason for distrusting the government is not primarily the corruption of money coming from the private sector—although that is obviously also a huge factor to be considered.

In his devastating 1920 essay on economic calculation, Ludwig von Mises showed that once you interfere with the normal market mechanisms of pricing goods and services, it really doesn’t matter how corrupt or honest government employees are.  Once market prices have been interfered with, the problem of allocating resources becomes insurmountable.  It’s a problem of knowledge not probity.

The argument applies to healthcare, of course, and is still valid with the “hybrid” systems that Mark seems to be in favor of, like those of Germany, France or the Netherlands.  Switzerland is also one such system, and if you’ve missed listening to our podcast about it, you should definitely hear what our guest Swiss doctor and economist Marc Fouradoulas had to say about the Swiss system.

Once a government interferes with prices, you will have mis-allocation and mal-distribution of healthcare: Shortages here, surpluses there, the exact kinds of problems that Dr. Hoofnagle seems to be concerned about when he laments the lack or cost of insulin in the US.

The reasons the Swiss and these other systems seem—on the surface—to be able to get away with it (temporarily, to be sure) has more to do with other aspects of their economies than it does with the wisdom of their government employees.  Switzerland, for example, is a much wealthier nation, has a much smaller defense budget (which I would certainly favor for the US), etc.  Likewise for the Dutch, I suspect.

The other reason to not trust the government is that unlike the private sector, the public sector is not subject to any significant competitive pressure. There is no effective or efficient mechanism to hold it accountable for its errors.

And if we add to those reasons the question of corruption and inherent disincentives in the bureaucracy, then mistrusting the government is really a no-brainer.

2 Comments

  1. Anthony M. Perry on 09/07/2018 at 5:11 PM

    As a 15 year Medicare beneficiary I can testify to its appeal. With standard Medicare and a supplemental plan one shows his card and by and large that’s it. From then on you get high tech care with no direct cost, extremely wide availability of providers and very timely services. The out of pocket costs for the coverage are heavily subsidized and therefore affordable. I don’t think any other national plan I have heard of matches it, and I have friends in various countries around the world whom I have quizzed about their circumstances. Once a month I get documentation from CMS showing me the services I have received, the usually grossly exorbitant prices I was charged and the markedly lower payments that Medicare has approved, assuring me that I have been protected from the storm. Beneficiaries accept the present level of services as they stand and have little appreciation for the waste and inefficiency built into the system.

    What politician of either party worth his salt wouldn’t salivate at the thought of providing this benefit to all his constituents. The reason we don’t have Medicare 4 All today is that it can’t be done. If it could be we would have had it long ago. But the politicians have a big problem. The Medicare system we have now, with all its gross ignoring of the basic laws of economics, is hurtling toward fiscal destruction. The CMS bureaucrats are flopping around like fish in a net trying to discover some new method of service delivery, risk shifting or management technique which would allow them to realize their vision of central control nirvana.

    There is no possible way that Medicare as presently delivered to the seniors can be extended to everyone and they know it. Any attempt would involve unacceptable increases in taxation, as well as major cuts in the availability and quality of providers and services. This would especially be the case if the thing was done wholesale as its proponents advocate so that people could still recall what they formerly had.

    So I think there is time. And as the foundation of our present overall system continues to crumble I think the best idea is to continue widespread efforts to provide working alternative examples of medical care without third party interference, and to vigorously promote and extend the opportunity for individual saving for future medical expenses through HSA’s. I greatly fault the Republican legislature for falling down on this end while they had the opportunity.

    • Michel Accad on 09/12/2018 at 4:38 PM

      I’m in full agreement, Tony.

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