Commentary

Socialized Medicine is Already Here

Congressional Democrats are trying to expand government health insurance to children who don’t need public assistance, while their party’s presidential hopefuls are concocting even grander schemes to achieve “universal coverage.”

“That’s socialized medicine!” cry the Republicans. President Bush asks whether we want a government-run health care system or a private system. Republican presidential hopeful Rudy Giuliani accuses Democrats for lusting after the socialized systems of Europe, Canada, and Cuba. In a recent television appearance, Sen. Hillary Clinton (D-N.Y.) emphatically denied the suggestion that she supports socialized medicine.

Was Clinton being disingenuous, or are Democrats really trying to foist socialized medicine on the American people?

The question seems silly once you consider how socialized our health care system already is. Government already finances about half of Americans’ medical care, so you might say our system is already half-socialized. Yet we are much farther along the road to socialized medicine than even that would suggest.

Consider two distinguishing features of socialist economies. The first is that the government decides what individuals may produce, what they consume, and the terms of exchange.

That is largely true of America’s health care system. Government controls production and consumption by determining the number of physicians; what services medical professionals can offer and under what terms; where they can practice; who can open a hospital or purchase a new MRI; who can market a drug or medical device; and what kind of health insurance consumers may purchase.

Government bureaucrats even set the prices for half of our health care sector directly, and indirectly set prices for the other half. When you read about Medicare over-paying imaging centers and hospitals, or that it’s impossible for Bostonians to get an appointment with a general practitioner, it’s largely because the bureaucrats got the prices wrong, and those rigid prices do not automatically eliminate shortages and gluts like flexible market prices do.

A second feature of socialist economies is that there is little incentive to make careful economic decisions, because government has put everyone in the position of spending other people’s money.

Canada may have the most heavily socialized health care system in the advanced world. Yet America’s system is as much a tragedy of the commons as the Canadian system, where health care is ostensibly “free.” In each country, only about 14 cents out of every dollar of medical spending comes directly from the patient.

How can America’s health care system be “socialized” when we rely on the private sector more than any advanced nation? Because it doesn’t matter whether the dollars and the hospitals are owned publicly or privately. What matters is who controls how they are used.

In 2007, the average family of four will pay $25,000 for health insurance — nearly 30 percent of their income. About $14,000 represents taxes that fund health programs for the elderly and the poor. In other words, the government controls the lion’s share.

The remaining $11,000 purchases the family’s own coverage, usually through an employer. Though we count that as “private” spending, the government largely controls that $11,000 as well.

Congress provides a substantial tax break for employer-controlled health insurance. That sounds nice, but it means that workers who want to control their coverage themselves face a tax penalty. That penalty often forces such workers to pay twice as much for less coverage. That benign-sounding “tax break” effectively requires Americans to let someone else control a large chunk of their incomes and their health care decisions.

We may call that “private” spending. But notice the hallmarks: government denies individuals control over their economic decisions, and encourages them to act as if they were spending someone else’s money — in this case, their employer’s.

How can our system be “socialized” if we don’t force patients to wait for care, as other nations do? America does ration by waiting — just ask any Medicaid patient — though we do so less often than nations where governments arbitrarily limit medical spending.

But that’s because we commit the opposite sin: our government encourages unlimited health care spending, which causes enormous waste.

For example, the federal Medicare program essentially makes an open-ended commitment to pay for whatever medical care seniors and their doctors demand. That may be why researchers at Dartmouth Medical School have estimated that Medicare purchases $60 billion in useless services every year. That’s nearly one-fifth of all Medicare spending. It also may explain why we spend 50 percent more on medical care than other advanced nations without making ourselves noticeably healthier.

Surely, America doesn’t have socialized medicine of the Canadian or British variety, or socialized medicine borne of some deliberate plan. But American politicians should stop pretending that socialized medicine is some far-off dystopia.

To paraphrase Keyser Söze, the greatest trick that advocates of socialized medicine ever played was to convince the American people that we don’t already have it.

Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of the forthcoming 2nd edition of Healthy Competition: What’s Holding Back Health Care and How to Free It.