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logo    How Not to Cure Health Care


In 2001, Milton Friedman, the eminent economist, published an article titled, How to Cure Health Care (available at http://www.thepublicinterest.com/archives/2001winter/article1.html). Although the article accurately describes the problems with the current American medical care delivery system and compares it to the systems of other nations, it is an intellectually dishonest document and more accurately should have been titled, "How Not to Cure Health Care."

Mr. Friedman's associating himself with one specific recommendation for curing the health care system can be likened to Julia Roberts' recommending a specific line of cosmetics. So Mr. Friedman's argument must be assessed carefully if the document is not to be dismissed out of hand as an example of the well known informal fallacy, argumentum ad vericundiam; an illicit appeal to authority.

When you look carefully at the argument, one of the first suspicious things you find is absolutely unverifiable claims.

For instance, ". . . nobody spends somebody elses money as wisely or as frugally as he spends his own." To some, this may appear to be some sort of common-sense truth, but it isn't true at all. I suspect that almost anyone knows someone who spends his own money as recklessly as he would spend someone else's. You may even know someone who spends his own money more recklessly that he would spend someone else's.

Another is, ". . . employees are likely to do a better job of monitoring medical care providersbecause it is in their own interestthan is the employer or the insurance company or companies designated by the employer." Notice the hedge, likely. How could anyone know how likely this is? To do a good job of monitoring medical care providers, you would have to have access to all sorts of information, none of which is readily available. Go to any phone book, pick out the names of three physicians, and then ask yourself, how could I monitor the quality of care provided by these doctors? How could you even find out about their fees?

Then theres, ". . . the lower the price, the greater the quantity demanded; at a zero price, the quantity demanded becomes infinite." Ask yourself what this means. The air we breathe is free. Do we demand infinite amounts of it? If food were free, do you really think wed all sit around asking for more and more and more?

Again, "If the tax exemption for employer-provided medical care and Medicare and Medicaid had never been enacted, the insurance market for medical care would probably have developed as other insurance markets have." How is anyone supposed to calculate this probability? How can anyone ever calculate the probability that something would have happened if?

Enough of these, but next you find the gratuitous use of emotionally charged words.

For instance, "Gammon's observations for the British system have their exact parallel in the partly socialized U.S. medical system. Removing the two words, partly socialized has absolutely no effect on the meaning of the sentence. So why are those words there? Because they're hot button words, surely to get the heads of a specific class of people nodding.

Mr. Friedman raises this specter elsewhere too. "We are headed toward completely socialized medicineand, if we take indirect tax subsidies into account, were already halfway there." But he knows very well that our system of medical care has not one iota of socialism in it. Socialism is an economic system based on collective or governmental ownership and distribution of goods and services. But our government, either on the state or national level, doesn't own the means of providing medical care. They are all owned by private persons and corporations (virtual private persons). So what's the point of calling this specter forth? Its only purpose is to stir up the emotions of the antisocialists. As such, this specter has no place in a policy statement, especially one that tries to give off the air of an economist's objective investigations.

Of course, Mr. Friedman is right when he labels the third party payment system as the root of America's health care problems. Unfortunately the solution he suggests not only won't work; when one thinks about it, it is absolutely baffling.

Friedman writes, "The high cost and inequitable character of our medical care system are the direct result of our steady movement toward reliance on third-party payment. A cure requires reversing course, re-privatizing medical care by eliminating most third-party payment, and restoring the role of insurance to providing protection against major medical catastrophes" and implementing medical savings accounts. He writes, "A medical savings account enables individuals to deposit tax-free funds in an account usable only for medical expense, provided they have a high-deductible insurance policy that limits the maximum out-of-pocket expense."

I have commented on medical savings accounts before, because I cannot see how people could be expected to accumulate enough money in them to guarantee access to medical care. But Mr. Friedman's article gives this a new twist. He says, ". . . a number of large companies (e.g., Quaker Oats, Forbes, Golden Rule Insurance Company) . . . offered their employees the choice of a medical savings account instead of the usual low-deductible employer-provided insurance policy. In each case, the employer purchased a high-deductible major medical insurance policy for the employee and deposited a stated sum, generally about half of the deductible, in a medical savings account for the employee. That sum could be used by the employee for medical care."

Although this is interesting, how can it possibly solve our greatest problem with the health care system? Since employers are the ones who purchase high-deductible major medical insurance policies for employees and deposit a sum in a medical savings account for the employee, those now covered by medical insurance would continue to have reasonable access to the health care system. But this scheme would do nothing for the millions of people who are either unemployed or are employed by companies that do not provide health insurance unless . . . . What is the unless? Unless the government provides the major medical insurance policies. But that would be a national health insurance program which Mr. Friedman makes clear he is against. So all Mr. Friedman's thesis amounts to is a scheme to continue providing health care to those who already have it and leave the have nots to themselves. And he has the audacity to call this a cure!

It is a wonder that a respected economist would present such a piece of biased baloney; it is a greater wonder that Americans would read and not see through it. These two make clear just how deep the trouble America is in. (5/6/2005)