The Real Free-Market Approach to Health care

by Jacob G. Hornberger

Part I

       In his book A Critique of Interventionism, Ludwig von Mises wrote, “Authors of economics books, essays, articles, and political platforms demand interventionist measures before they are taken, but once they have been imposed no one likes them. Then everyone—usually even the authorities responsible for them—call them insufficient and unsatisfactory. Generally the demand then arises for the replacement of unsatisfactory interventions by other, more suitable measures. And once the new demands have been met, the same scenario begins all over again.”
       No words could more accurately describe the nature of America’s so-called health-care crisis. After decades of governmental intervention into the health-care arena, the failures are apparent for all to see. But rather than root out the cause of the problem, Americans are demanding that government do something about it.
       What are the governmental interventions that have caused America’s health-care crisis? Licensing, Medicare, Medicaid, economic regulation, and income taxation. What is the solution to America’s health-care crisis? The repeal (not the reform) of licensing, Medicare, Medicaid, economic regulation, and income taxation.
       What is the response of the average American to such a prescription? “That’s too radical. That’s too extreme. The system needs to be reformed, not abolished. Give us something we can work with.”
       And the same is true with many free-market advocates. “You need to modify your views. No one is going to take you seriously. Congress will never invite you to testify. Newspapers won’t accept your editorials. You need to be more practical.”

The denial of reality

       Most Americans, including many free-market advocates, simply will not—perhaps cannot—face the truth: that the welfare state (socialism) and the managed economy (interventionism) have never worked and can never work. No matter what is done—no matter who is put in charge—no matter what plan is used—the result will always be the same: failure. The sooner we come to grips with this truth, the sooner we can begin traveling the road to a healthy and prosperous society.
       Why do Americans have such a difficult time accepting the reality of their condition? Part of the answer lies in the indoctrination they receive from the time they are in the first grade and that continues even after they graduate from college. The indoctrination is so complete that no matter how carefully you explain the reality of their circumstances, Americans simply refuse to accept it.
       Let me give you an example. Ask any American if the United States is a land of free enterprise. He will proudly say, “Of course it is.” Ask him if it has always been so. He will puff out his chest and proclaim, “You bet it has. And free enterprise has prevailed over socialism!”
       But then explain to him that during the first 150 years of American history, the American people said “no” to the following: income taxation, welfare, economic regulation, licensing, Medicare, Medicaid, and Social Security. Then remind him that he, along with his fellow Americans, say “yes” to the following: income taxation, welfare, economic regulation, licensing, Medicare, Medicaid, and Social Security. Then ask him, “How can different principles be the same? How can white be black? How can A be B? How can opposites both be free enterprise?”
       He will stare at you with befuddlement. For he cannot defend the way he has been taught to view the world since he was six years old. As he tries to reconcile reality with the way in which he has been taught to see the world, ask him, “Do you favor the Cuban way of life—a way of life which has income taxation, welfare, economic regulation, licensing, and free medical care for everyone?” He will not answer, because he cannot answer.
       But the problem goes much deeper. Americans do not want to face reality. For the reality is too terrifying for them to consider. It means that everything about America’s “free-enterprise system” that they have learned in school—that they have taught their children—that they have read in books, newspapers, and magazines—is false. To accept reality would constitute an admission that Americans have, for decades, been living a life of the lie. It is much less terrifying for them to continuing living a life of deception.
       This is one reason that people resent so deeply the true advocates of economic freedom—we expose their lie. We make them confront the reality and pierce through the deception that clouds their minds. We provide the tough medicine that enables people to see the world for what it is. We “cause” the pain associated with their recovery process.
       Why is it so important that we do this? Because we cannot begin solving societal woes until people eliminate the psychological barriers to recognizing the real nature of the problem. If people believe, for example, that America’s health-care crisis is due to a failure of the free market, then their natural inclination is to accept what their public officials say is the cure—governmental intervention. But if they pierce through to the reality of what is happening by recognizing that governmental intervention is the cause of the health-care crisis, they are much more apt to accept real free-market principles as the solution.
       Would our fellow Americans be better off if we simply let them continue living their lives of deception? No. A life of a slave is not made better simply because the slave thinks he’s free. Moreover, a life of the lie ultimately manifests itself through severe psychological disorders, which, in turn, often result in an addiction to mind-altering drugs.
       Therefore, for us to validate the deception would be morally wrong, for it would only worsen the person’s condition and make it more difficult for him to recover.

The “free-market” alternatives

       And that is the gravamen of some of the so-called “free-market” solutions to America’s health-care crisis—they mislead people into believing that a reform of the welfare-state, managed-economy way of life (as opposed to its elimination) is a “free-market” approach to the problem.
       For example, consider two “free-market” alternatives to the health-care plan proposed by President Clinton—the plans proposed by two conservative think tanks—the Heritage Foundation and the National Center for Policy Analysis.
       The Heritage “free-market” plan would mandate, by force of law, that people purchase health-care coverage. In other words, under the principles of “freedom” promoted by Heritage, people would be “free to be forced” to buy health-care coverage.
       The NCPA plan is less oppressive. It calls for “medical IRAs,” an income-tax device by which people would be encouraged, by virtue of a tax deduction, to donate money into a savings account that could only be used to cover medical expenses.
       What is wrong with these two “free-market” plans? They accept the legitimacy and inevitability of the welfare-state, managed- economy way of life. Even worse, they assume that their plan—the “free-market altemative”—will save the welfare-state, interventionist system and make it work more efficiently. But worst of all, by making people believe that these plans constitute a “free-market alternative,” they validate the life of delusion and unreality that afflict the American people.
       Mandated health care and income-tax deductions do not constitute freedom. They may be less intrusive and less oppressive alternatives to President Clinton’s health-care plan, but they are not free-market alternatives.
       Mandates and freedom are opposites. If a person is free, then that means he is not mandated to buy anything. If a person is mandated to buy something, then he is not free. Mandates are not a free-market alternative, because mandates violate free-market principles.
       Moreover, to be free entails living your life the way you choose (so long as it’s peaceful), to accumulate unlimited amounts of wealth, and to decide for yourself how to spend your own money. If government controls the amount of income a person keeps, then that is the essence of slavery, not freedom. And to the extent that government is able to use such devices as income-tax deductions to manipulate people into buying things that they might not otherwise purchase, to that extent a person cannot be considered free. Consider the words of Friedrich A. Hayek in his book The Constitution of Liberty:
The question of how many courses of action are open to a person is, of course, very important. But it is a different question from that of how far in acting he can follow his own plans and intentions, to what extent the pattern of his conduct is of his own design, directed toward ends for which he has been persistently striving rather than toward necessities created by others in order to make him do what they want. Whether he is free or not does not depend on the range of choice but on whether he can expect to shape his course of action in accordance with his present intentions, or whether somebody else has power so to manipulate the conditions as to make him act according to that person’s will rather than his own. [Emphasis added.]
In other words, an individual is considered free only when he can decide for himself how to utilize his own resources. He is not considered free when the state either orders him to spend—or manipulates him into spending—his resources in some state-approved fashion.
       Would people be better off under the Heritage or NCPA plans, as compared to the President’s plan? Of course, in the same manner that the slave on the plantation is better off the more choices he is “free” to make on the plantation. But the “freedom” of the slave to make choices does not change the real nature of his condition; it simply makes his slavery less onerous.
       The welfare-state, managed-economy way of life is doomed to fail, as central planning and economic control have failed all over the world. Neither the Heritage plan nor the NCPA plan will change this; at best, they can delay the inevitable or make living conditions less onerous in the meantime. But the major drawback to their adoption is this: a few years from now, when the health-care system is in even bigger crisis (which it will be), public officials will make their inevitable proclamation: “We have tried free enterprise, and it has failed; now we must use governmental intervention to fix the problem.”
       There is one and only one solution to America’s health-care woes: a total separation of the economy and the state. This involves, first, a recognition that the welfare-state, managed-economy way of life is a cancer that infects our body politic. And, second, a cure that calls, not for Band-Aids but, instead, for radical surgery by which such interventions as income taxation, welfare, licensing, Medicare, Medicaid, and Social Security are eliminated.

Part II

       For over one hundred years, the American people said no to governmental intervention into health care. Americans did not permit their respective states to license physicians and other health-care providers. They did not permit government to provide health care to the poor and needy. No one was required to purchase health insurance. The result of this unusual way of life was the most advanced medical system in the history of man.
       The real question is, “Why?” Why did five or six generations of Americans say no to such governmental schemes and controls as licensing, Medicare, Medicaid, and compulsory health insurance?
       President Clinton and his wife Hillary would have us believe that the reason is that Americans simply had not yet invented or discovered these devices. The Clintons claim that governmental control over people’s health, and political redistribution of their wealth, are brand-new, 21st-century concepts whose time has come. And, unfortunately, most Americans, having received their “education” in public schools, don’t know any better.

The Declaration of Independence

       The reason for the American rejection of socialized medicine for over one hundred years lies in the principles of the Declaration of Independence. Our ancestors had a radically different understanding of the words in that document than their counterparts living today.
       What did the words “. . .they [men] are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness. . . .” mean to our ancestors? They meant that you, as an individual, have the right to live your life the way you choose, so long as you do not interfere, in some direct way, with the rights of others to do the same. You have a right to sustain your life by producing goods and services through the exercise of talents and abilities that God gave you-and then trading these with others who are doing the same. You have a right to accumulate unlimited amounts of wealth (i.e., property) through this process. And you have a right to choose what to do with your own money.
       And while the political process was certainly abused (i.e., slavery, tariffs, railroad grants), the prevailing philosophy of our American ancestors was that it was the height of evil and immorality to use the political process to steal one person’s money in order to give it to someone else. This is the reason—not ignorance, but rather morality—that Americans rejected such schemes as Medicare, Medicaid, and Social Security. Unlike their modern-day American counterparts, they believed in and practiced God’s commandment, “Thou shalt not steal.”
       Here is an example of how radically different our ancestors’ beliefs were compared to those of Americans living today. In the 1880s, Texas farmers suffered a long, devastating drought. Congress passed a relief bill that appropriated $10,000 to the farmers. The philosophy of our American ancestors was expressed by President Grover Cleveland—a Democrat!—in his veto message:
I find no warrant for such an appropriation in the Constitution, and I do not believe that the power and the duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevailing tendency to disregard the limited mission of this power and duty should, I think, be steadfastly resisted, to the end that the lesson should be constantly enforced that though the people support the Government the Government should not support the people.
       The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the Government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment.and conduct which strengthens the bonds of a common brotherhood.
       Thus, Americans believed that charity towards others meant nothing unless it came from the willing heart of the giver. They understood that “coerced charity” was simply disguised thievery. And while they would fight to protect the right of a person to say no to his neighbor, they had faith that most people would voluntarily help those in need.

“Freedom” according to the Clintons

       How dramatically different things are today. President and Mrs. Clinton tell us that Americans must be forced to provide for everyone’s health care. Private citizens are not able to take care of themselves. And they certainly cannot be trusted to help others voluntarily. People should be “free,” the Clintons tell us, as long as they do what they are told by their political masters. And worst of all, the Clintons denigrate the memory of people like Thomas Jefferson, George Washington, and Patrick Henry by falsely claiming that the Declaration of Independence entails “a right to health care,” that is, a right to steal the fruits of someone else’s earnings through the use of the political process.
       Whenever the Clintons extol the virtues of socialized medicine, they point to the European model. “France, Germany, and Great Britain all have compulsory health care,” we are told, “and so how can a major industrial power like the United States be without it?”
       What the Clintons need to be reminded of, however, is that two hundred years ago, our ancestors fought a war in which they killed thousands of British soldiers—and that the reason for these deaths was our ancestors’ full and complete rejection of the European model of omnipotent government that now holds the Clintons and their statist supporters in its grip.
       The truth is that President and Mrs. Clinton and their statist friends hate everything that the American revolutionaries and their 18th-century successors believed in. The idea that an individual should be free to manage his own life is anathema to the present-day American public official. Like his European counterpart, he believes that private citizens exist only to serve the public good-and to obey the commands of public officials.
       The Clintons and their cohorts have one, and only one, objective in mind—to maintain the 20th-century, statist empire over which they preside. But they know that, in the final analysis, they need the support of their subjects to continue and expand their control. For this, they rely heavily on the ignorance of those who received their “education” in social-studies classes in public schools. And, unfortunately, public-school teachers have done their job well. For Americans honestly believe the claims of the Clintons and their statist friends that the so-called “health-care crisis” reflects the failure of America’s “free-enterprise system.”

Free enterprise . . . or socialism?

       Free-enterprise system? How can licensing of physicians and other health-care providers be “free enterprise”? Free enterprise means to engage in enterprise freely. If a person must receive the permission of the political authorities to engage in an enterprise, then the enterprise is not free. The reason that 18th-century Americans had no licensing was not because they were ignorant but because they knew that people had the God-given right to engage in any economic enterprise without seeking the permission of their public officials.
       Licensing of physicians came into existence in the U.S. at the beginning of the 20th century. It is a device to limit the supply of doctors, to protect them from competition, and to increase their income levels. It is a throwback to the old European guild system that Americans in 1776 found so revolting.
       Free enterprise? How can Medicare and Medicaid, established in the 1960s, be free enterprise? Here, the political process is used to steal money from some individuals in order to give the loot to others. It is a throwback to the old European, socialist notion of “from each according to ability, to each according to need.”
       Free enterprise? How can the taxing of incomes be free enterprise? Either people have the right to accumulate unlimited amounts of wealth by serving others, or the political authorities decide how much a person will be permitted to accumulate. The progressive taxation of incomes is a throwback to the old, European, socialist notion of public ownership of the results of production.
       The truth is that it is not “free enterprise” that has failed the American people. Rather, it is the European, socialist experiment with which the Clintons and their friends are so enamored that has failed the American people. After several decades of the welfare state and the managed economy, the chickens are coming home to roost. The old, decrepit, bankrupt European ideas of governmental licensing and medical care for the poor and aged have failed, not only here, but in Cuba, Russia, France, Great Britain, and everywhere else they have been tried.
       And the results are clear for all to see. The American revolutionaries and their 18th-century successors have been proven right. And their 20th-century counterparts have been proven wrong—and now they are panic-stricken at the thought of their empire—and its omnipotent power over the lives of the American people—coming crashing down.
       The struggle is not new—it has been going on for centuries. On the one side are aligned the supporters of empire—of control—of plunder. Aligned on the other side are the small minority of those who cherish individual freedom. As the empire continues to crumble, the question is, will the solution be more control, or will it be a dismantling of America’s 20th-century experiment with socialism?

Part III

       The only solution to America’s health-care crisis is to end, not reform, governmental intervention into economic activity. What would this entail? A way of life in which people would be free:
  • to do whatever they want, so long as their conduct is peaceful and does not intrude, in some direct way, on the rights of others to do the same;
  • to engage in any economic activity without political permission or restriction;
  • to enter into mutually beneficial exchanges with others;
  • to accumulate unlimited amounts of wealth;
  • to choose for themselves what to do with their own money—save, spend, donate, invest, or whatever.
       Generally, the solution to America’s social woes lies in ending, not reforming, its welfare-state, regulated-economy way of life. Specifically, the solution to America’s health-care crisis entails the elimination of income taxation, licensing laws, Medicare, and Medicaid.

Income taxation

       What is the relationship of income taxation to the health-care crisis? A major part of the problem is that people cannot afford the costs of health care. But suppose income taxation had been abolished ten years ago. Assume that a person has paid an average of $15,000 a year in income taxes. If he had saved the money, this would mean, of course, that he would have $150,000 plus interest in his bank account—an amount that would be very helpful in paying medical bills and medical-insurance premiums today.
       Now, granted, that’s water under the bridge. But the point is this: the more money that government sucks out of the pockets of the people, the more difficult it is for people to afford health care and other things they wish to buy. Conversely, if people were free to keep everything they earn, they would be able to afford health-care costs, as well as a multitude of other things.

Helping the poor

       What about the poor—those who still would be unable to afford health care? Doesn’t government have a duty to help them?
       No! First and foremost, it is important to remember the fundamental immorality of governmental assistance. Under Medicare, Medicaid, or any other political subsidization, the money is taken by force from one person (primarily through income taxation) and given to another. When public officials engage in this conduct, they celebrate the “goodness” of their act. They say, “We are good because we are helping others.” But the truth is that their conduct is highly evil, for they are “being good” with the fruits of earnings that have been taken by force from others. In other words, while their conduct is legal, it ranks with that of private thieves in terms of morality.
       What would happen to the poor if Medicare and Medicaid (and all coercive transfer programs) were eliminated (rather than reformed)? Would they starve in the streets or die for lack of medical care?
       Governmental officials say, “Yes! The American people cannot be trusted to care for others on a voluntary basis. They must be forced to provide assistance to others through the Internal Revenue Service, Medicare, Medicaid, and other welfare programs.”
       It is a lie. And it is the most important lie underlying the entire welfare-state way of life. For if the American people ever conclude that they can be trusted to care for others on a purely voluntary basis, that will be the day that the welfare state will come to an end.
       How do we know that the American people would help others if they were not forced to do so? Because the evidence is all around us. The caring nature of others can be found everywhere.
       I grew up on a farm on the U. S.-Mexican border, near one of the poorest cities in the United States. One day, one of our farm hands—a Mexican illegal alien—discovered a lump on his neck. We took him to our physician, who diagnosed the lump as cancerous.
       What happened to him? Well, it’s a story that will warm your heart. We had a friend who had been poor for most of his life. His poverty had dramatically ended with the discovery of huge quantities of oil under lands on which he had a sizable interest. Our friend learned about the plight of our employee. The next day, our friend picked up the employee, escorted him to the airport, put him on his Learjet, and had him flown to Houston for treatment at one of the world’s leading cancer clinics. The man was admitted into the clinic, even though he had no money (although we suspected that our friend may have covered the bill). The cancer was successfully treated—it never recurred.
       And the same beneficent attitude characterized our family physician. Every time I visited him, his waiting room was filled with people who could not afford to pay for his services. I never saw him turn away—or heard of him turning away—any patient for lack of ability to pay. He just kept treating them even though the chances of his getting paid were minuscule.
       Does this happen all over the country? You bet it does! But it takes a willingness to see it happen. The person who fails to see it is the person who does not want to see it!
       It is useless to try to convince governmental officials of the caring nature of the American people. For public officials have a vested interest in the continuation of the welfare state.
       Our battle must be for the hearts and minds of those in the private sector. They must be persuaded not only to have faith in themselves but, equally important, to have faith in others as well. People’s belief must go from, “I would help, but no one else would,” to “I would help, and I know that others would do the same.” Once this shift in mind-set takes place among the American people, the foundation of the welfare state will crumble.


       Licensing is special-interest legislation for the benefit of physicians and other medical personnel. Its primary purpose and effect are to limit entry into the medical profession in order to protect medical people from competition.
       Does licensing ensure competent doctors and nurses? If it does, then why do we continue to have so many malpractice judgments against doctors and other medical personnel? And one problem with licensing is that it seduces the public into believing that because a person has been licensed by the state, he must be competent.
       What would happen if licensing were repealed? Well, no one would run out into the street looking for a quack to perform heart surgery on him. The current stock of physicians would continue to exist. People would probably continue using the doctor they are using today. What if someone needed a new doctor? The likelihood is the person would rely on the recommendation of his current physician. Moreover, well-established and well-known physicians in the community would band together to publish a list of recommended doctors in the area; private certifying agencies (i.e., Consumer Reports or Good Housekeeping) would do the same. The market would provide the vehicles that people needed for selecting their physicians and other health-care providers.
       What, then, is the difference between a system of licensing and one without licensing? The latter enables people to reject the official or approved method of treatment! For example, suppose someone who is not a licensed physician treats an AIDS patient in some non-approved manner. Under current law, he is thrown into jail for practicing medicine without a license. And governmental officials tell the AIDS patient that he cannot use the treatment because it might kill or otherwise injure him.
       But what authority does the state have to prevent a grown-up from seeking out the medical care that he wishes to have? The decision as to what course of action a person wishes to take with respect to the treatment of his own illness properly lies with him, not with governmental officials. And, while it may appear unlikely to the established medical order, there is always the possibility that the alternative, non-approved treatment could prove to be effective.
       The idea behind medical licensure can be summed up as follows: “We governmental officials will not permit you to seek alternative medical care, because you might hurt yourselves. No matter how old you are, you will always be a child of the state. We will take care of you, just as your daddy and mommy once did. We will not permit you to make mistakes. We will not let others take advantage of you.”
       But one fundamental problem is that the state is not like daddy and mommy were. After all, very few daddies and mommies inject their children with malaria, hepatitis, and radiation, as the U.S. government did to hundreds, possibly thousands, of Americans, some of whom were innocently seeking medical care when they unknowingly received their injections. And most daddies and mommies would never send their children to a place like the Veterans’ Administration Hospital for medical treatment; in fact, if they did, they would surely be convicted of child abuse by any jury in the land.


       Several decades ago, the American people were seduced into abandoning the principles of our ancestors. The state took control over our education. It took control over our earnings. It took control over our economic activity. It took control over our social activity. It took control over our charitable activity.
       And now the state wishes to take control over our health care. If we permit this to happen, we will reap the whirlwind, for the results will be as disastrous as they have been in very other field of governmental endeavor.

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