Hornberger's Blog

Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
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Diagnosing America’s Health-Care Illness


Ludwig von Mises pointed out that one government intervention inevitably leads to more interventions in order to address the crises that are generated by the previous interventions. Ultimately, Mises said, the crises continue getting so bad that the government ends up taking over the entire sector.

That principle perfectly describes the area of health care.

The United States once had the finest health-care system in the world, one based on the principles of economic liberty and the free market. That changed in a big way in 1965, when liberal statist Lyndon Baines Johnson secured passage of Medicare and Medicaid, socialistic programs that provided “free” medical care for the poor and elderly.

What Medicare and Medicaid did, decade after decade, was to place an inordinate demand on health care, producing a concomitant rise in prices all across the board. When government makes things “free,” people tend to over-consume, which causes prices to go up.

Meanwhile, as the demand for health care continued to rise, the supply of health care remained constricted, thanks to medical-licensure laws, which protect people in the health-care industry from an oversupply of health-care competitors.

So, here was a prescription for disaster: Soaring demand brought about by “free” government-provided health care and restrictive supply brought about by medical-licensure laws.

As the decades went by, the price of health care began soaring, producing all sorts of distortions in health care to which suppliers, consumers, and insurers were constantly trying to adjust.

Aggravating the situation were such things as state regulations that attempted to protect intra-state insurance companies from interstate competition as well as income-tax manipulation that encouraged employers to purchase health-care insurance for their employees.

Slowly but surely, Americans became dependent on the welfarism and regulation. This included doctors and other health-care providers. It got to the point that many patients and many physicians just could not imagine life without the dole, without their beloved Medicare and Medicaid payments from the government.

Thus, as the health crisis continued to mount, most everyone’s position became the following: “Medicare and Medicaid, medical licensure, income-tax manipulation, and insurance regulation must be left intact. Now, what is your solution to the health-care crisis?”

In other words, the entire health-care debate was oriented toward coming up with a plan that reformed and saved the health-care socialism and interventionism that was at the root cause of the problem.

That’s inane.

Notice that many of the statist commentators are already saying that the Obama health-care plan is just a “first step.” Much more needs to be done, they say. The reason they’re saying that is because they know that Obama’s plan won’t fix anything. Instead, this latest intervention will simply produce a bigger crisis down the road, at which point the statists will call for the inevitable: a total government takeover of health care, just like in Cuba.

That’s the point that Mises was making — that interventions lead to more interventions, until government ends up owning or controlling that sector of the economy.

When a patient suffering an illness goes to the doctor, he hopes to receive a correct diagnosis of what ails him, because the prescription will inevitably turn on the diagnosis. Get the diagnosis correct, and there’s a good chance the doctor will issue the right prescription. But get the diagnosis wrong, and there’s a good chance that the prescription will be wrong.

The problem with health care is that all too many people have meekly and submissively accepted the diagnosis of a bunch of statist quacks, people whose deep devotion to socialism and interventionism blinds them as to the true cause of America’s health-care crisis. Their diagnosis of the quacks is that America’s health-care illness is due to freedom and free enterprise and that Medicare, Medicaid, licensure, income-tax manipulation, and regulation have nothing to do with it. Thus, their prescription for America’s health-care woes is — surprise, surprise — more socialism and interventionism.

What is the correct diagnosis for America’s health-care illness? America’s health-care system is sick because of the steady dose of poison that has been fed into the body politic for decades by the statists, in the form of Medicare, Medicaid, licensure, income-tax manipulation, and regulation.

What is the correct prescription? Immediate radical surgery, entailing the immediate repeal (not reform) of Medicare, Medicaid, medical licensure, income-tax manipulation, and insurance regulation. Nothing else will work.

Statism or economic liberty? That’s the choice facing the patient.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.