Bennie Hively's letter from Monday correctly identifies a number of problems with our current health care system. There can be no disputing that rising costs and declining quality of care in medical services demand our immediate attention. But his letter seems to indict a for-profit system as the primary culprit. And yet, numerous other sectors of the economy - including retail goods, food and groceries, clothing, electronics and telecommunications - do not suffer from ever-increasing costs and declining quality, clearly indicating that something else must be amiss, and that a simple explanation of profit motive fails to account for the current state of health care in the United States.
In a system of free and voluntary exchange, profits indicate that entrepreneurs have utilized resources in a way that has increased their combined value to society, a determination made by consumers who voluntarily reward those enterprises providing the greatest quality at the lowest price. When consumers choose not to reward a producer with their dollars, profits suffer and the business fails. In this way profits indicate whether or not the factors of production are being employed "efficiently" by serving the greatest number at the lowest cost. This is the only meaningful definition of "economic efficiency": when profits earned are a result of the voluntary transactions between consumers and producers in a free economy. Any other definition of "economic efficiency" necessarily entails substituting the decisions of planners for those of free consumers. But the decisions of those who would deny the free choice of individuals in the market are not altruistic as we are led to believe, but instead reflect the combination of ambitious politicians (seeking re-election) and powerful corporate interests (seeking to circumvent market forces for profit).
The health care industry suffers from the same ailment currently afflicting other markets experiencing the problem of rising costs and declining quality, such as the automotive industry, energy, education, or transportation: increasing government regulation (or outright control) which supersedes or limits the free decisions of individuals. In these markets, consumer supremacy is overridden by political decisions which directly benefit those interest groups as noted by Mr. Hively, such as insurance companies.
The history of government's involvement in health care is too elaborate to detail here, and the following should be read only as a cursory examination. When the federal government began offering tax breaks to employers who offered health insurance, more companies began providing it, creating a boon to the health insurance business. Through this and subsequent measures such as Medicare in the 1960s, the federal government has substantially increased demand for medical services. At the same time, licensing restrictions, favored by such groups as the American Medical Association, restrict competition by limiting the number of practicing physicians, most notably by targeting nurse practitioners.
The end result of government's meddling has been to stimulate consumer demand while restricting supply. Consequently, the laws of economics tell us we should expect skyrocketing costs as competition is reduced and consumer choice thwarted, causing quality to suffer. The end result is fewer people covered and increased profits for the industry as a whole. But these profits are not profits in the true economic sense of the word. They are not the rewards bestowed by consumers upon producers for innovation and quality. Rather, they are a result of the political machinations of legislators and corporate interests which restrict consumer freedom while lining the pockets of politically influential groups. Further political involvement in health care cannot be expected to produce anything but more of the same.
