The government and health insurance

Imagine, if you will, an ordinary trip to the doctor's office. You think that you may have been experiencing common symptoms of an infection or another curable condition. When you describe your symptoms to the doctor, he recognizes immediately that you do indeed have the said condition. He also informs you that there is a treatment that you can undergo that will rid you of this condition. However, the bad news is that your health care provider will not cover the procedure and since you struggle to make ends meet, there is no way you can afford to pay for it yourself if given the option. Sound terrible? Well, welcome to the world of nationalized healthcare.

The left seems to be slowly building up to a new push for nationalized health care. America's most dangerous liberal pundit, Paul Krugman, has been espousing this type of system in recent columns. DNC Chairman Howard Dean has similarly been hinting on national television that the Democrats would like to have this debate. Health care reform has long been Sen. Hillary Clinton's pet issue and now she is gearing up for the 2008 presidential election. Additionally, health care costs continue to rise with little attempt at reform. It is almost as though a perfect storm is brewing for the Democratic Party to push for this issue. However, health care reform in the form of nationalization is not the answer.

The government's role in society is to provide only those services that cannot be more efficiently provided in the private sector. For example, it would be hard to have private police departments in each city or a privately-owned military and expect to produce the same results. Health care, on the other hand, is not something provided more efficiently by the government. I have always found it perplexing that Medicare is seen by politicians as a great government program when those for whom it was created have such displeasure with it.

The reason that health care is inefficiently provided by the government is because the government must make decisions on what procedures it should cover. This leads to complicated bureaucratic decision-making that will ultimately lead to the worsening of health. For example, let's assume that an untreated ear infection will lead to hearing loss and ultimately a person going deaf. The government decides that being able to hear is better than being deaf and so they will provide antibiotics to those people who have ear infections. Then one day two men are brought to the hospital, each needing emergency surgery to prevent death. One is deaf, the other is not. The hospital can only treat one and so since the government has assumed that being able to hear is preferrable to being deaf, they choose to treat the person who can hear. However, quality of life is not restricted to one's ability to hear and by treating the man who can hear, the hospital is discriminating against the disabled man. Now, since the government has decided that being deaf may not be an important determinant in the quality of life, they question whether they should indeed cover the cost of the antibiotic that would cure the ear infection.

Sounds ridiculous, right? It is not. Tim Harford describes a very similar situation in much greater detail in The Undercover Economist where the British government will not cover a laser treatment that eliminates lesions on one's retina, the leading cause of blindness in Great Britain.

In addition to being inefficient, health insurance provided by the government does nothing to actually reduce the cost of health care, which is the actual problem. One can only imagine how busy doctor's offices would be if every person in the waiting was receiving their medical care for "free". Each time someone had a runny nose or a cough, they would instantly run to the doctor to receive unnecessary treatment because, after all, they are not charged per visit. This increase in demand would lead to an increase in cost of providing health care and thus would worsen the problem and thus vastly increase government expenditures. If companies are feeling the pressure on profits from health care costs, one can only imagine the increase in the budget deficit given a government that already spends at will on bridges to nowhere.

Nationalized health care is not the answer.