The contemporary debate in America over national health insurance is ultimately a debate over the future character of the country.  Shall America be a nation of free peoples who are primarily responsible for themselves and who fulfill their needs and desires through voluntary, market intercourse with their fellow citizens, or shall America continue to move further down the path of political control and state intervention in the affairs of everyday life?
       For more than a hundred years, this, more than anything else, has been the continuing controversy in public discourse in the United States.  The contrast between these conceptions of the good society was already explained in 1887 by J. Laurence Laughlin, founder of the economics department at the University of Chicago, when he wrote:
Socialism, or the reliance on the state for help, stands in antagonism to self-help, or the activity of the individual.  That body of people certainly is the strongest and happiest in which each person is thinking for himself, is independent, self-respecting, self-confident, self-controlled, self-mastered.  Whenever a man does a thing for himself he values it infinitely more than if it is done for him, and he is a better man for having done it.  If, on the other hand, men constantly hear it said that they are oppressed and down-trodden, deprived of their own, ground down by the rich, and that the state will set all things right for them in due time, what other effect can that teaching have on the character and energy of the ignorant than the complete destruction of all self-help?  They begin to think that they can have commodities which they have not helped to produce.  They begin to believe that two and two make five.  It is for this reason that socialistic teaching strikes at the root of individuality and independent character, and lowers the self-respect of men who ought to be taught self-reliance.  Self-help leads to activity in production and healthy exertion.  State-help tends to make all individual energy weak and flabby, because it teaches one to rely on an outside power.  The danger of enervating results flowing from dependence on the state should cause us to restrict the inteference of legislation as far as possible.... The right policy is a matter of supreme importance, and we should not like to see in our country the system of interference as exhibited in the paternal theory of government existing in France and Germany. [Emphasis in original.]
       When he wrote these words more than one hundred years ago, Professor Laughlin was still expressing the beliefs of most of the Americans of his own time.  These beliefs in individualism and self- help were taken for granted by the vast majority of his countrymen.  They were considered the foundations for what made America great as a free and increasingly prosperous nation. But there were new clouds forming on the horizon, blown by an ideological wind from Europe.  From across the Atlantic there was arriving an old idea in new clothing: political paternalism under a now name, “the welfare state.” And it was the storm clouds of collectivism, socialism and the welfare state that people like J. Laurence Laughlin were trying to warn other Americans to beware of.
       And, now, a hundred years later, that welfare state dominates the world, including America.  Even now with the end of most of the totalitarian regimes of the 20th century, in this post-communist era, the ideology of the Intrusive State, the Interventionist State, the Welfare State still remains the prevailing political philosophy of our time.  And what has it created in place of America's original system of individual liberty and economic freedom?  Sociologist Jack D. Douglas has summarized its result in his book The Myth of the Welfare State (1989):
America today is ruled by an immense imperial state bureaucracy headed by an imperial president, imperial legislators, and imperial courts, all of which strive mightily every day to extend their powers over our lives.  We have drifted blindly, in the quest for the deceitful lures of utopian ideals and greed, into the tyranny of the majority which the founding fathers saw as the greatest danger to the System of Natural Liberty.  America today is a government-dominated society in which all of us are controlled in innumerable ways directly and, far more, indirectly by vast and still-proliferating regulatory agencies issuing a torrent of administrative laws, by untold thousands of planning commissions and committees, by soaring police powers, by a tidal wave of legislative laws and activities, and by a tumultuous sea of injudicious court decisions in which revolutionary ukasi are masked in the rhetoric of constitutional precedents, rational interpretation, and due process.  Interlocking layers of our huge government bureaucracies now dictate minute details of our lives and enforce these dictates with vast police powers.  There is literally no realm of life that is still free from massive intrusions by government legislative, regulatory, and judicial fiat.
       But while many in contemporary America may admit and even express concern over the growth of state power due to the welfare state, they also often now believe that there is no alternative to governmental paternalism.  The problems of old age, medical insurance and health care preclude “individualistic” solutions of self-help, it is claimed.  How can people provide these things for themselves?  Surely, whether we desire it or not, the state must act as the provider and regulator of these essential “social services” for the good of all in the society.  There is no turning back, it is said.  All we can do is try to make the welfare state as humane and cost-efficient as possible.  A free society cannot effectively supply those basic and vital services that the vicissitudes and uncertainties of life require each person to be concerned about for himself and his family.
       But contrary to this view, before the modern welfare state made its appearance in the late 19th century, first in Imperial Germany and then in the rest of the Western world in the 20th century, voluntary associations of mutual aid had arisen among free men.  And these provided the voluntarist, market solutions for the supply of those “social services.”  In the Great Britain of the late 18th and 19th century, they were known as “friendly societies.”  In his monograph The Welfare State: For the Rich or for the Poor? (1982), David G. Green summarized the workings of and the services provided by these mutual aid societies, and it is worth quoting Mr. Green's summary at length:
In the main, the friendly societies originated at the end of the 18th century and early in the 19th.  Initially they were local voluntary associations established to make provision against the hardship resulting from the death of a relative or from illness or accident which prevented the breadwinner from supporting his family.  The death of a man, wife or child meant not only an emotional loss; it also meant that the cost of the funeral fell on the survivors.  And however poor they were, few were prepared to arrange a "cheap" funeral for a loved one.  If it was the husband, or breadwinner, who had died, the problem was, of course, even more acute for the widow and the orphaned children.        Each member of a friendly society paid regular contributions into a common fund used for four main purposes.  First, if a man became ill or had an accident he could draw a weekly allowance, sufficient to keep himself and his family from extreme privation.  Secondly, the fund would meet the cost of medical care and medicines for the member. Thirdly, if either a man or his wife died, the surviving partner could draw a fixed sum from the fund sufficient to meet the cost of the funeral.  Fourthly, the fund would be used to support the widow and orphans of a deceased member.
       These were the main benefits which men banded together to provide in the early years.  Later they began to provide additional services for themselves. Some friendly societies arranged facilities for small savings to be accumulated and for members to borrow small sums. Many offered other forms of insurance; endowment assurance, life and even fire insurance. Some provided mortgages....
       The typical member of a friendly society was a skilled working man in one of Britain's industrial regions.  Apart from the obvious advantage of mutual insurance against some of life's hazards, he might be attracted by the convivial side of the societies: social activities, weekend outings, and annual conventions.  Or the moral aspect of the movement might appeal to him: the commitment to self-reliance, self-improvement, self-education, and hostility to government interference. For many, membership provided opportunities for leadership lacking in the workplace.
       And in his recent book, Reinventing Civil Society: The Rediscovery of Welfare Without Politics (1993), David Green explains that by 1910, the year before the British government passed the 1911 National Insurance Act, there were 28,877 registered friendly societies of these types providing medical, old age and accident insurance, with memberships totaling 6,623,000.  But Mr. Green also points out that there were many more friendly societies providing the exact same services which chose not to be officially registered with the state.  And these had a total membership of around another 3,000,000. Thus, the British private sector, before the First World War, already provided “welfare” services for more than three-quarters of the work force of Great Britain.  And these privately funded services were not reserved for the skilled and middle-income members of the British work force.
       Today, America is faced with one of the greatest proposals for extending the welfare state and governmental dependency in this century.  The Clinton administration has called for the nationalization and the politicization of the entire health-care and medical insurance industry in the United States.  Regardless of the rhetoric used and “news bites” created to rationalize what is being advocated, national socialism in medical care is the essence of the Clinton plan.
       The perversity in the arguments made by the administration's spokesmen for national socialist health care is that they claim that theirs is an attempt to remedy the shortcomings and failures of private health care in the United States.  But what has created many of the cost problems in medical care in America during the last years is precisely the fact that the state has intervened in the health-care industry and generated incentives that have reduced or eliminated many of the normal behavioral constraints on demand and price in a free-market economy.
       This is exactly what government medical programs such as Medicaid and Medicare have done.  Joseph Bast, Richard Rue and Stuart Wesbury have explained the process in their book Why We Spend Too Much on Health Care (1992):
The manner in which government funds are spent on health care also fuels health care inflation.  For example, Medicaid beneficiaries make small payments toward their medical expenses, giving them an incentive to overuse health services and little incentive to comparison-shop for lower-cost therapies or providers.  Prior to 1983, health care providers were paid the estimated cost of the service plus an agreed-upon profit.  This “cost-plus” pricing encouraged providers to expand the range and volume of services they delivered and increase the prices they billed the government.  With its huge market share, changes in the federal government's reimbursement policy are immediately felt by other players in the health-care field.  The cost-plus payment system under Medicare forced other health care buyers, who bid against Medicare for health services, to pay higher prices.  The heavy traffic of consumers for whom health care was nearly or entirely "free" made it more difficult for those consumers who were still cost-conscious to have any effect on prices.
       Serious cost-containment efforts finally started in 1983, when the federal government changed Medicare and Medicaid reimbursement from cost-plus to predetermined payments for medical procedures grouped into diagnosis related groups (DRGs).  Direct government financing of capital spending continued, with the federal government assuming 80 percent of capital costs....
      Starting in 1986, hospitals began shifting the cost of treating Medicare and Medicaid patients onto patients with private health insurance.  Jack Meyer, Sharon Silow-Carroll and Sean Sullivan describe the results- “As Medicare and Medicaid have tightened their payment policies, providers have naturally tried to shift some costs to private payers.  The cost shifting may not cause total health-care spending to be any higher, but it increases the tab for many private employers and individuals.”
      ...Government's entry into the health care market has dramatically expanded the volume, intensity, and price of health care.  By first bidding up the price of health care with a payment system that encouraged excessive utilization and spending, and then imposing cost-containment measures that led to cost-shifting, government has inadvertently increased the cost of health care to other buyers and changed the way health care is delivered.  In so doing, government has contributed to a process that has priced health care and health insurance out of the reach of millions of Americans.
       Yet, the advocates of national socialist health care insist that the rising costs and less-than-satisfactory care is the fault of the private sector, when in fact it has been the state's intrusion into the private health-care market that is behind practically all of these undesired effects.  Having distorted and disrupted the health-care market with one set of state interventions, the government is now proposing to fix its own mistakes with comprehensive state intervention and regulation over the entire medical industry.  No clearer road to disaster can be proposed.
       How have the critics of the proposal for national socialist health care responded?  Their analyses of the Clinton plan and its likely consequences have usually been insightful and penetrating.  They have effectively pointed out many of the negative effects that would result in terms of the availability of medical care, the costs of the proposed system in terms of taxes and insurance premiums, the degree of loss of freedom of choice that would occur, and the retarding of medical and pharmaceutical research that might follow from its implementation.
       And, yet, almost all of the opponents of national socialist health care refuse to challenge the fundamental principle behind the Clinton plan: That the state has the right and responsibility to intervene into the provision and regulation of the health-care industry.  Many of them have accepted the underlying premise that the individual cannot be trusted or allowed to care for himself and to peacefully arrange for provision of his needs and desires through mutual and voluntary contract and association with his fellow men in society. And in this sense, they have accepted the foundation of all collectivist thinking in our age.  This problem was already discussed many years ago by the Austrian economist Ludwig von Mises in his book Liberalism (1927):
It is universally deemed one of the tasks of legislation and government to protect the individual from himself.  Even those who otherwise generally have misgivings about extending the area of governmental activity consider it quite proper that the freedom of the individual should be curtailed in this respect, and they think that only a benighted doctrinairism could oppose such prohibitions....
       We should see that as soon as we surrender the principle that the state should not interfere in any questions touching on the individual's mode of life, we end by regulating and restricting the latter down to the smallest detail.  The personal freedom of the individual is abrogated. He becomes a slave of the community, bound to obey the dictates of the majority.  It is hardly necessary to expatiate on the ways in which such powers could be abused by malevolent persons in authority.  The wielding of powers of this kind even by men imbued with the best of intentions must needs reduce the world to a graveyard of the spirit....
       The propensity of our contemporaries to demand authoritarian prohibition as soon as something does not please them, and their readiness to submit to such prohibitions even when what is prohibited is quite agreeable to them shows how deeply ingrained the spirit of servility still remains within them.... A free man must be able to endure it when his fellow men act and live otherwise than he considers proper.  He must free himself from the habit, just as soon as something does not please him, of calling for the police.
       Separate from the problem of the present costs and availabilities of medical care and health insurance, and even if the advocates of various forms of state intervention in the health-care process could be convinced that most of the problems they are concerned with could be solved by fully freeing and privatizing the medical and health-care industries, our century remains a prisoner of the idea that the individual must be secured through political action from any errors and omissions on his part in unthoughtfully planning for his own future needs. Every individual must be protected from his own actions.  He must be prohibited from making the “wrong” decisions and regulated and controlled to assure that he does the “right” things with his life and resources.  We live in the era of the security state.
       And it is the idea of the security state that must be opposed if the proposals for national socialist health care are to be defeated root and branch.  The Future of Freedom Foundation was founded five years ago with this purpose in mind: To demonstrate the fundamental dangers and disasters that may follow from all further extensions of collectivism—whether it be called the welfare state, the mixed economy, interventionism, socialism, “liberalism” or social democracy—and to make the moral and economic case for rolling back and repealing all forms of collectivism in our society.
       The present volume, The Dangers of Socialized Medicine, has this purpose in mind.  The authors all share in common a belief that the implementation of any form of national socialist health care in the United States would create medical catastrophe for the people of America.  In their contributions, they demonstrate both the undesirable consequences that would follow from instituting any form of such a system and why the only hope for a sound and efficient health-care system in America lies in the radical repeal and denationalization of all existing state interventions in the health-care industry.
       The essays originally appeared in the Foundation's monthly publication, Freedom Daily, most of them in the January, February, and March 1994 issues.  It is hoped that they will add an important dimension to the case against national socialist health care and that they will serve as a guide for rethinking the premise upon which the welfare state has arisen in 20th-century America.  Nothing less than the future of freedom is at stake.

Richard M. Ebeling
Vice President of Academic Affairs
The Future of Freedom Foundation

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