Wednesday, December 28, 2011

Decentralized Health Care

In a recent CTV interview, PM Harper said it's up to the provinces to find solutions to a better health-system. Gasp! An anti-federalist position. Too bad other Tory policies (namely, foreign policy and domestic spending) don't line up with more libertarian principles (albeit there's little libertarian about federal health care transfers).

Regardless, this is what Harper said:

“This government will ensure that there continue to be increases in health care transfers... But that isn’t the only solution. The provinces themselves are going to have to — I mean they’ve got obviously an even bigger financial issue on health care. Some of them are already starting to restrict the growth in spending, and they’re the ones who are going to have to really come up with the solutions on health care delivery.”

Fortunately for us consumers of health care goods and services, Hans-Hermann Hoppe has detailed a 4-step solution to our health-care woes. Although written for an American audience, his 4-step solution still applies to Canada. I've added in my own remarks, highlighted in bold.

A Four-Step Health-Care Solution by Hans-Hermann Hoppe

It's time to get serious about health care reform. Tax credits, vouchers, and privatization will go a long way toward decentralizing the system and removing unnecessary burdens from business. But four additional steps must also be taken:

1. Eliminate all licensing requirements for medical schools, hospitals, pharmacies, and medical doctors and other health care personnel. Their supply would almost instantly increase, prices would fall, and a greater variety of health care services would appear on the market.

Competing voluntary accreditation agencies would take the place of compulsory government licensing--if health care providers believe that such accreditation would enhance their own reputation, and that their consumers care about reputation, and are willing to pay for it.

Because consumers would no longer be duped into believing that there is such a thing as a "national standard" of health care, they will increase their search costs and make more discriminating health care choices.

You know all those doctors that immigrate from a poorer country and then end up driving taxis in downtown Toronto? They could open up their own practice. Don't trust those foreign medical degrees? Then don't go there. But don't stop others from doing so.

2. Eliminate all government restrictions on the production and sale of pharmaceutical products and medical devices. This means no more Food and Drug Administration, which presently hinders innovation and increases costs.

Costs and prices would fall, and a wider variety of better products would reach the market sooner. The market would force consumers to act in accordance with their own--rather than the government's--risk assessment. And competing drug and device manufacturers and sellers, to safeguard against product liability suits as much as to attract customers, would provide increasingly better product descriptions and guarantees.

This also means no more Health Canada. Or at least, give individuals the freedom to choose whether to abide by Health Canada's decisions. For example, Health Canada wants to regulate or downright outlaw a majority of natural health products (somebody wants Canadians getting vaccines rather than increasing vitamin D). Under step #2, the federal bureaucracy could put a little "disclaimer" on all products, but individuals (and provinces) would be free to ignore these disclaimers. If provinces took the step further, they could challenge Health Canada's authority to even put disclaimers on health products.

3. Deregulate the health insurance industry. Private enterprise can offer insurance against events over whose outcome the insured possesses no control. One cannot insure oneself against suicide or bankruptcy, for example, because it is in one's own hands to bring these events about.

Because a person's health, or lack of it, lies increasingly within his own control, many, if not most health risks, are actually uninsurable. "Insurance" against risks whose likelihood an individual can systematically influence falls within that person's own responsibility.

All insurance, moreover, involves the pooling of individual risks. It implies that insurers pay more to some and less to others. But no one knows in advance, and with certainty, who the "winners" and "losers" will be. "Winners" and "losers" are distributed randomly, and the resulting income redistribution is unsystematic. If "winners" or "losers" could be systematically predicted, "losers" would not want to pool their risk with "winners," but with other "losers," because this would lower their insurance costs. I would not want to pool my personal accident risks with those of professional football players, for instance, but exclusively with those of people in circumstances similar to my own, at lower costs.

Because of legal restrictions on the health insurers' right of refusal--to exclude any individual risk as uninsurable--the present health-insurance system is only partly concerned with insurance. The industry cannot discriminate freely among different groups' risks.

As a result, health insurers cover a multitude of uninnsurable risks, alongside, and pooled with, genuine insurance risks. They do not discriminate among various groups of people which pose significantly different insurance risks. The industry thus runs a system of income redistribution--benefiting irresponsible actors and high-risk groups at the expense of responsible individuals and low risk groups. Accordingly the industry's prices are high and ballooning.

To deregulate the industry means to restore it to unrestricted freedom of contract: to allow a health insurer to offer any contract whatsoever, to include or exclude any risk, and to discriminate among any groups of individuals. Uninsurable risks would lose coverage, the variety of insurance policies for the remaining coverage would increase, and price differentials would reflect genuine insurance risks. On average, prices would drastically fall. And the reform would restore individual responsibility in health care.

In Canada this means the introduction of private medical insurance. If this happens provinces are best to follow Hoppe's advice to not regulate the industry. Regulation will only increase costs and cause a situation similar to the Americans where health insurance isn't a result of consumer preferences but a strict obedience to arbitrary legislation.

4. Eliminate all subsidies to the sick or unhealthy. Subsidies create more of whatever is being subsidized. Subsidies for the ill and diseased breed illness and disease, and promote carelessness, indigence, and dependency. If we eliminate them, we would strengthen the will to live healthy lives and to work for a living. In the first instance, that means abolishing Medicare and Medicaid.

Only these four steps, although drastic, will restore a fully free market in medical provision. Until they are adopted, the industry will have serious problems, and so will we, its consumers.

It may sound cruel, but it's the truth. But since so many Canadians find it their idiotic duty (er, I mean patriotic duty) to provide government-sanctioned health care despite its costs, this is unlikely to find much support. That's why I find it important to hammer in these two points when discussing health-care with Canadians:

1. It's a violent system. The State uses coercion, that is, they force people to pay up for the "greater good." So if you support our health-care system you must support the violence that comes with it. Would you personally put a gun to your neighbours head and demand he pay for your next doctors visit?

2. Why does universal health-care require the State? This comes from the fallacy of thinking of society and State as one entity. If universal health-care is an essential part of Canadian culture and our way of life, then why do we need to force people to pay into it? Is universal health-care not possible under voluntary arrangements? Isn't that more humane? It may come in the form of charities, lotteries or another business model we can't even fathom. I don't know what the specific details would look like, but I'd rather have millions of entrepreneurs working on the problem than a few dozen bureaucrats. I can guarantee you that if health care industries operated only by profit-and-loss, and if the most profit could be found in providing all Canadians with health-care, a system would emerge where universal health-care remains intact. And a system based on voluntary associations would not only be more ethical, but more efficient as well.


  1. "Would you personally put a gun to your neighbours head and demand he pay for your next doctors visit?"


  2. I wouldn't want to live next to you

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