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NO INCENTIVES

In a socialized system there are very few (if any) incentives to improve. Consider this. Whether you are an outstanding health worker, a mediocre one or a terrible one, you earn more or less the same salary. This is so because your salary depends on the number of patients that visit you and since there are no ranking systems; people tend to distribute themselves by load. They go to the least busy professional. The result of this process is that eventually all health practitioners end up having about the same amount of patients, regarding of their skill level.

In a free market, professionals get rated all the time. The higher a rating the higher the payment this person can command. But the ranking is directly related to skill level, therefore there is a gigantic incentive to increase performance and service quality. A very proficient professional may actually have fewer patients than a mediocre one, but will generate a much larger profit nevertheless. The incentive is very clear indeed! In our system the only valid rule is: improve thyself or go broke. As this is the golden rule, all professionals (good, mediocre or terrible) are forced to increase their skill levels hence benefiting all people. This rule is also called competition and it works!

In a socialized system, the race is towards minimum effort which equals decay. In a free market, the race it towards improvement which equals increased quality for all.

DEATH PANELS

This is the label that people gave them, although their politically correct and formal titles are usually something along the lines of Advisory Committee or Special Inquest or Policy Group or something similar. Their job is to cut services. When governments finally arrive to the realization that an unlimited insurance scheme is simply not viable and are facing the risk of total collapse (which would be politically catastrophic because politicians would not get re-elelcted), they resort to cuts.

Of course, politicians need a way to disengage themselves from the hard decisions, and hence they “entitle” a group of people deceived into do the cuts for them. This group is usually hidden and tucked away in the farthest corner of the so-called democratic system, to ensure as little scrutiny as possible. When politicians must refer to this group, it is always in terms of “courageous” and “diligent” and “hard working” and “caring”.

Their job is to make risk/rewards assessments. It is usually a statistical process. X amount of money allows us to treat 10 patients for disease “A” or one for disease “B”. Since we only have X funds, we won’t treat “B” at all. If you have “B”, you are out of luck.

Because they always leave out the most expensive treatments, this is equivalent to determine who lives and who dies, hence the name “Death Panels”.

The error of the process is not in determining how to help the most people, but trying to help all of them for all diseases; while at the same time doing nothing to reduce costs. Politicians are trapped. They want to provide unlimited health services (because it buys them votes) but these services are too expensive. In order to decrease expenses, they would have to upset powerful monopolistic interests that support their political campaigns with funds; which is equivalent to political suicide. Hence, they do what all clever politicians do, pass the problem to the next politician. And when they can’t pass it on any longer, they pass the blame to somebody else. Problem solved (for them).

Note: de-regulation is a complex topic. In general terms and for small companies, it is a blessing because it reduces taxes and bureaucracy. For larger companies it is a problem because they see regulation as an entry barrier preventing smaller companies from competing with them. Have you ever noticed that usually big corporations are in favor of regulation, particularly when either their write it or self-regulate?

FUNDING

If we take a look at government expenses directed towards socialized health systems, you will notice that they are generally in the order of 5 to 12% GDP or, more importantly, anywhere 10 to 25% of all Tax revenues. To this, we have to add private health spending, which is about the same (yet another 5 to 12% GDP). These numbers vary from country to country, but they give us some idea on where we stand.

If we now look at the yearly growth rate of health care related expenses, we notice that it is growing much faster than revenues, in many cases 50% or faster than government revenues (i.e. also called taxes or robbery). This is history, we are not making this stuff up; there are plenty of statistics if you have the time to look them up. Incidentally, this indeed confirms Libertarian and Austrian economic forecasts in this area made in the last 80+ years!

These spending numbers will only further increase due to all the baby-boom generation retirees.

Obviously, the system is unsustainable. It will go bankrupt very soon (if it is not bankrupt already). Do nothing is not an option anymore. There are two ways in which we can solve this problem:

  1. Assuming that we could pressure the government to cut other programs (including the military) and assuming that economies won’t collapse due to Central Bank out-of-control printing and assuming that politicians will actually fulfill their promises and assuming that taxes could be increased without too many problems and assuming that people are willing to receive less social-help from the government, then, and only then, we can stretch the current health-system fairly into the future. Assuming. What are the chances?
  2. We can dismiss the entire concept of socialized health care and let the free market solve the problem, cheaper, faster much more effectively.

We know it will, because before socialized health care and during the times where governments did not go to war and did not mess around with money too much, health care services were mostly affordable and available to most people! Again, this is history, not politico-economic science fiction.

We must also consider that in the event a free market is established (and we mean a full free market, completely unimpeded by government intervention), economies will boom and everybody’s standards of living will increase, hence making health care even more affordable.

DECREASING COSTS

The key to decrease costs in health care is not offloading tasks from the public system to the private one or enabling more private competition. All these measures will help somewhat, but they won’t be enough.

In order to reap maximum free market benefits and hence decrease costs, all government-sanctioned monopolies even remotely related to health care issues must be repealed.

This means no forced licensing requirements for any kind of health worker, from doctors to nurses or janitors. Let the free market decide which professional is best and which requirements are acceptable by the people.

It also means no pharma regulations nor forced licensing of medications of any kind. Let pharma companies stand behind their products and if not, get punished by the market. Also, repel all patent and copyright laws.

To top it all up and for these benefits to accrue year after year, no printing whatsoever. Even better, switch to 100% gold reserve banking.

Take a look at what’s happening in locations such as India or Latin America. In those places services from first rate health care practitioners can be had at a fraction of the cost imposed in so-called developed countries. This advantage is not produced due to devaluated currency or lower quality standards. There is some influence in pricing due to lower costs, but the main reason is relaxed, ignored or non-existing regulations. All these factors conspire to provide a superior service to a much lower cost (in USD or EUR or JPY or any other “hard” currency) to medical tourists. And this cost is even lower for local population, almost on the edge of affordability. Of course, there is still a lot of territory to cover, but the effects of de-facto de-regulation are clear.

Note: please see the Glossary if you are unfamiliar with certain words.

Continue to Socialized health care - Part 3

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