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Wednesday, February 6, 2008

The Fallacies of Socialized Medicine

The issue of health care will be one of the most important in the campaign in the general election. The Republican nominee will likely present a plan to provide health care that includes tax breaks and avenues to create choice. The Democrats will almost certainly have some form of universal health care, or socialized medicine. I have debated universal health care with many a liberal and I have found the idea to have four main fallacies.

The first fallacy comes from the compassionate idea that all individuals deserve health care even if the can't afford it. While in a perfect world this would be nice, the reality is that free health care isn't a right in the constitution. Once the government begins to create rights where they weren't there, then it stops doing the things it is supposed to do. Compassionate people want the less fortunate taken care of. Misguided compassionate people want the government to take care of the less fortunate. Many of these very same people freely admit the flaw of socialism in general but view health care in a category separate. This is itself a fallacy. There are plenty of things in this world that are vital to living: health care, transportation, lodging, etc. If health care is seen as exceedingly vital and thus it should no longer be treated by the same market principles as everything else, where will it stop? The government can soon say that mortgages are too important for the market to take care of and create universal mortgages. The bottom line is that you either believe the free market works best or you don't. If you don't then you live in socialism. If you do, then you apply the free market to everything.

The second fallacy is that universal health care is free. Of course, that is plain nonsense. If those that can't afford health care have it paid for for them, then it is someone else paying for it. That is the dirty little secret that no proponent of universal health care wants to address. They all constantly scream about forty some million uninsured, but then act as though a magic wand will make them insured. It won't. It will either happen by raising everyone's taxes, or just those that can afford it. Either way this is nothing more than another form of income redistribution. The less fortunate are provided for on the backs of the more fortunate. Not only is this more class warfare, but it has a long history of failure. Punishing the successful at the benefit of the less successful maybe a good political strategy, but it isn't good policy. It is the successful that drive the economy. Burdening them with extra taxes only gives them less incentive to be successful.

The third fallacy is that universal health care disregards the principle of value. If you pay for your own health care, then you will pay attention to price and quality. If someone else is paying for it, you will abuse it because value is unimportant to you. As consumers we shop around. We don't buy the first car, tv or washing machine we see. We try and figure out which one is best. That's because we are paying for it. In universal health care someone else is paying for it and thus we no longer need to try and figure out value. All universal health care will do is drive up health care costs by consumers who have someone else paying for it. John Stossel found some amazing things when he examined the field of laser eye surgery. He found that doctors made house calls, worked weekends and evenings, the gave patients their home and cell number. They did all this because their patients demanded it. That's because unlike other medical procedures laser eye surgery isn't covered by insurance. Since patients paid for it themselves, they suddenly became the sort of consumers they are with any other product or service. Not surprisingly, laser eye surgery is one of the few medical procedures that has seen its cost drop not increase.

The final fallacy is that universal health care has worked where it has been tried. My liberal friends are fond of pointing out Sicko as some sort of proof of the greatness of universal health care. Despite that piece of propaganda, the realities of universal health care is long waits, bad care, and terrible medical conditions. In Britain a woman pulled out her own teeth with pliers and vodka because she couldn't wait any longer to see her dentist. A Canadien Member of Parliament actual went to America to get treated for cancer because the wait would have been too long in their own country. In Britain, record number of people go outside of the country to receive treatment because of fear of infections and long waits.

Socialized medicine doesn't work. It doesn't work because socialism doesn't work. We have a long history of failure in all socialized states. No amount of compassion and misguided good intentions will change the inherent flaws in any system that socializes any industry, and the fallacies I pointed out are proof.


Alex Dinamo said...

Man, you seriously missed it in this post. Your reasoning does not hold water (you either believe in free market or not??!! why, because god says so??) and your "proofs" just are laughable. A British tabloid?? The only thing more saddening than your post is that governments in poor countries like Mexico are pushing for the "all free market" economy, following the US advice.

People who doesn't have any "buy power" are simply defenseless in the free market, out of all hope. We have millions here in Mexico. Go and tell them about the virtues of free market, and how bad it would be if someone else pays for their health care.

mike volpe said...

Alex, if I am so wrong, why, besides some vague allusions to free markets, do you not say anything specific.

That whole post is nothing but rhetoric.

Yes, either you believe that free markets work, and then they always work or you don't. If you think this is illogical, then show me why it is, don't just say it.

The fact that you have nothing but rhetoric tells me that you have no arguement. You believe in socialized medicine however you don't know why. Thus, since someone disagrees you say they have missed the mark. This is typical third grade debating tactic. Your reasoning appears to be that I am wrong because you say so.

No one is defenseless in the free market, just look at Wal Mart. Being poor is in and of itself a bad situation, however you don't fix it by socializing medicine.

It sounds like you just simply don't believe in the free market, however history has proven that socialism fails everywhere it is tried, because socialism punishes the successful among us and when you do that you stunt growth.

Anonymous said...

I see no point being made here at all. Pure free market systems fail just as fast as pure socialism fails. You need a mix of both to keep a nation stable or an economy functioning. Do you really think its in our best interests to turn the US into victorian England? Should we send the poor to jail? Let the diseased die in the streets?

And what on earth does this mean?
"No one is defenseless in the free market, just look at Wal Mart." If anything, you could argue that Wal-Mart has a long history of taking advantage of the defenseless in the free-market. Does your boss lock you in the office at night?

mike volpe said...

Free markets aren't perfect but they do not fail. The markets certainly don't fail the system. When that market is tinkered with, then it fails. Socialism has a long and storied tradition of failure.

Again, you either believe that the free market is best or you move to a state where there is socialism. This idea that we should have a mixed system comes from those that want ease the society into socialism.

Walmart's entire business model targets the poor and offers them a plethora of products at prices they can afford. I wrote about it recently...

You are talking about the way in which they treat employees which is irrelevant, and also misleading and incendiary.

Your arguement is much like that of Alex', you apparently think that you are right because you say so.

If you need to have a so called mixed system then show evidence, don't just say it.

If you claim that free markets fail, then show evidence.

Mark Steyn wrote an entire book, America Alone, on the failure of socialism in Europe.

I don't know any so called mixed economies that do better than economies built strictly on capitalism.

Free markets are the best because they are pure. They don't respond to emotion, compassion, or sympathy, they simply weed out the weak and reward the strong. They may not be nice, but they are effective.

Scipio said...

I typically believe in free markets too, but Mike, you are over simplifying the argument - which, in my opinion, does more harm than good. Market solutions can work, but not with some vague reference to free markets.

Natural market equilibriums do not tend to settle at with open markets. Rather, power tends to consolidate in any market. Early market players tend to develop barriers to later entry. The lack of market power by individual consumers, information assymetries between providers and consumers, and the inherent lack of bargaining power resulting from being a buyer who may have to "value" his life, prevent markets from forming.

Therefore, your argument misses the point in that it just "presumes" efficient markets will form.

That being said, I agree that socialized medicine is not the answer. HMOs, theoretically were a good idea. It was a way for consumers to consolidate in order to gain market power. Yet, HMOs ended up not passing on those savings to consumers. So one, the government DOES need to get involved to prevent effective collusion amoung HMOs. Government also has to get involve to ensure HMOs do not engage in deceptive practices - to ensure actual consumer transparity to the benefits they will actually receive.

The Government also needs to get involve to ensure market competition occurs. The barrier to entry towards becoming a doctor in the United States is rediculous. Doctors are so "extremely" in debt when the graduate that, not only can they get away with charging huge prices, they have to. And even if government offered some form of scholarship program to increase the number of doctors, we don't have the capacity in our medical schools to teach them. As our population has continued to sky-rocket, we have not adequately enlarged the ability of our educational institutions to produce sufficient numbers of doctors.

There is A LOT we can do to fix health care. Our health care problems will not be fixed by vague references to free markets. But, I do agree with you in that we are not yet to the point where we need nationalized health care. We need some Teddy Roosevelt type action in the health care industry.

Bennett said...

If socialism is such a failure then why is it that the euro is stronger than the dollar and the quality of life is (on average) higher in socialist nations. The free market theory is just as flawed as any other extreme economic theory. If our country did not interfer in the economy at all, as you suggest, "you either believe in free market or not", then there would be no correct ingredient lables, no way to know food was safe to eat, and absolutly no way to check if medication actually had an effect. Goverment mediation in the economy is essental to keep the markets unfree, as completely free markets are not conducive to a healthy sociaty. All games need referees

mike volpe said...

With all due respect Scipio, gibberish is gibberish even if it is intelligent sounding gibberish.

You just described how markets work. Great. Thus, the companies that take advantage of it will work better than the rest. So, what exactly is your point.

If you tell me I am oversimplifying it, fine, but don't go into a long rant that has nothing to do with anything.

This piece isn't about how to make the health care market work, but rather why socialized medicine is flawed. I am not going to go into detail about how free markets work. That is for another piece about how to fix the health care market with free market ideas. That isn't what this piece is about. It sounds as though you are trying to write that piece.

mike volpe said...

Bennet, what in the world are you talking about? What does the value of the dollar have to do with anything, and where do you get the idea that the quality of life is better anywhere than the U.S.

Again, if the free market theory is flawed, fine, but prove it, don't just say it.

You can talk about all the referees you want, however I have first hand experience with so called referees. Do you know why when you close on a home there are over one hundred documents to sign...that's right because of the great "referees" and all the fairness they create. The only thing that most government regulation creates is useless and needless bureaucracy that goes nowhere.

I have written plenty of pieces on all the great "refereeing" in mortgages...

You can give me all the theory you want, I have first hand knowledge of what happens when the government referees.

Scipio said...


My whole point is that your overlooking the basic definition of "market." Markets don't always form. The gibberish I cited are all factors that prevent markets from forming. These gibberish factors have prevented efficient markets from forming in the US. Without government "tinkering" markets can and do fail - they fail b/c they are unable to form. Markets can only form when two parties desire to perform an exchange, both having market power and information. In the US, we have the first prong - but we have issues with number 2 and 3.

rapchat said...

"you apparently think that you are right because you say so"

Nope. Although that seems to be your practice. There are several good comments posted here, but you disregard them out of hand because they don't agree with your simpleminded free market rhetoric.

The end result of any country with no government interference in the market is power concentrating in the hands of the few, and the poor, weak, or just unlucky committing crimes to survive and dying ill in the street - and eventually a collapsed economy. It happens all the time in the third world. Look at Haiti or half the countries in Africa.

BTW - I didn't mean to post as anonymous, I hit the wrong button...

mike volpe said...

I am not overlooking the definition of a market. I have written about how I don't see big oil as a market, and I even believe that they may even need to be broken up...

We don't have any such problems in health care. There are plenty of doctors, plenty of hospitals, insurance companies, etc. Whatever barriers to entry there are, they don't stop health care from being a market.

Socialized medicine believes that the health care market leaves millions behind and that socialized medicine can do better, and this piece points out the flaws in that thinking.

I agree all markets aren't alike, however all markets are better than socialism.

mike volpe said...

No, rachaport,

I dismiss them when they aren't backed up. You can't say that mixed economies are better than free markets without backing up that statement, and you can't say that our standard of living is worse because it isn't.

Your rant is another example of long winded rhetoric with nothing else. Again, you seem to think you are right because you say so. That isn't how it works. If you don't think markets are best prove it don't just say it.

You are absolutely right. Capitalism rewards the few at the expense of the rest however the alternative is socialism or capitalism like in the Soviet Union and Venezuela, however in capitalism those that are rewarded: work harder, smarter, have more ingenuity than the rest. That is how capitalism works. Again, it may not be nice, but it is fair and efficient.

TricKracker said...

Ask not what your country can do for you... unless your asking for universal healthcare. Makes me sick. Universal Healthcare will work just as our Universal Retirement Plan does now: It'll be taken out of my paycheck and not there for me when I need it. My self-employment tax of 15% will bump up to 20%, for a grand total of 50% tax on my gross. Ask what you can do for your country.

Lin said...

My Canadian uncle had a serious embolism while in Florida one summer and I clearly recall him saying had this happened in Canada, with their system of socialized medicine, he may well have succumbed due to the incredibly long wait for an MRI to diagnose his condition. In Florida, he was able to have an MRI within hours, and thus have his life saved. I wonder how many folks who champion Universal Healthcare/Socialized medicine have given this aspect of it enough thought. It only sounds good on paper.

mike volpe said...

the reason there are long waits is because in Canada people get treated for anything they can imagine because it costs the same whether you never go or you go all the time, and that gets back to my point about not assigning value.

GFR said...

The choice is not between free healthcare and free-market healthcare. The choice is between free-market healthcare and NO healthcare. Not just in the US but in Canada and Europe as well. I used to work for the 3rd largest pharmaceutical company in the world. This company was the largest pharmaceutical company in Europe but it was number nine in the US. Ten percent of its profits came from European sales. NINETY percent of its profits came from US sales. If the US went to a nationalized healthcare system my former company's profits would drop by 80%. This would mean they would be out of business in a few years. Indian pharmaceutical companies would continue to produce existing drugs for a while but they do almost no research and their quality control is pitiful, (many of the AIDS drugs that were produced by Indian generic manufacturers, at cost, for the African market didn't work at all).
Nationalized healthcare in Europe and Canada can continue to exist as long as the US system is viable because the US taxpayer is picking up the tab. If the US goes to a nationalized system, research drops off to nothing very rapidly. Western generic manufacturers are run out of business shortly afterwards by the Indians. Not long after that the drugs that are available don't work because of Indian corruption and regulatory problems.
This would be a tragedy because the biological sciences are undergoing a revolution in understanding how the human body works. Conditions that were untreatable a few years ago are being treated now, and they will be curable in a short time. If we go to nationalized healthcare a lot of people will die who would otherwise have lead healthy, productive lives. What we really need is more funding for the FDA so that trials can be conducted more rapidly. More competition is the way to bring healthcare costs down, not more regulation.

GFR said...

Bennett says that Socialist systems work better than free market systems but the overwhelming evidence is that they do not. The USSR, East Germany, Cuba, any number of other countries tried to force Socialist practices to work and they were abject failures. Europe has been doing better recently precisely because they have abandoned socialism. Their economies were so screwed up after years of socialism that they are having a renaissance now. In absolute terms the standard of living in the US is far better than in Europe. I lived in the UK for years and there is no comparison.

Jim said...

So let's get it straight: you're saying the best system is where there is absolutely no compassion: survival of the fittest. Not very nice, indeed.

Would it be alright with you, say, to just exterminate disabled and homeless people -with a considerably painful method- for the sake of the economy? Suppose nobody else ever finds out about it.

mike volpe said...

That is a misleading distortion of what I said, and frankly your logic is the manner in which Marx sold communism to the proletariat. Capitalism rewards the few at the expense of the many, whereas communism allows all of us to be in it together.

Yes, capitalism rewards the few, however it is fair. In capitalism you are rewarded for hard work, ingenuity, and risk taking. No such rewards are granted in socialism.

Capitalism is survival of the fittest no doubt about that, and that nature is used by folks like you to attack it, but capitalism gives everyone a chance for success. Socialism allows no such thing, because it requires obscene amounts of taxes to survive.

Yes, in capitalism only a few thrive, however in the end, if you don't make it you only look in the mirror at failure.

jim said...

What exactly is a misleading distortion of what you said?
I said you defend the survival of the fittest; you just confirmed that. Then I asked a question, which you didn't answer. I'm not trying to convince anyone of anything, really. I'm just proposing a moral dilemma. Would you exterminate them, yes or no?

Just to make things clear, I'm not an advocate of any particular system, I'm just trying to form my own opinions.

Now, do you really think capitalism is fair? That it gives everyone a chance of success? What about children who don't get proper food or education?

mike volpe said...

When you ask a provocative statement like do you favor exterminating people because you favor capitalism you distort what I say. Of course, I don't advocate that, however the homeless stand little chance of success in capitalism. Capitalism isn't necessarily fair. Of course, someone born into a wealthy family has a greater chance of success than someone born into a poor family, but capitalism gives everyone a fighting chance.

Bill Gates had no special privileges or advantages and that didn't stop him from overwhelming success. Stories like Gates are filled throughout capitalistic societies.

The reason that survival of the fittest is the best approach is that it encourages competition which betters all societies. If you have no motivation to be better than everyone else then you are not motivated to innovate, work hard, and succeed. In socialism, all your needs are taken care of and thus you have no motivation to do any more work than is necessary.

Capitalism doesn't work as such. Success is never guaranteed and never assured. Any and all success can be taken away instantaneously by a changing market place, which forces all players to constantly innovate and adapt.

Socialism requires no such effort, and thus their societies are never moved forward.

jim said...

The problem is not everyone has a 'fighting chance'. I'd like a game with winners, yes, but with no pre-determined losers. I guess that's impossible without a little socialism.

mike volpe said...

With all due respect, that is mumbo jumbo. Ronald Reagan was born the son of the town drunk and grew up to be President. Don't give me that nonsense that not everyone has a fighting chance.

Ray Charles was born into abject poverty and he couldn't see and he wound up being fabulously successful and wealthy.

Not only is your statement nonsensical rhetoric that again isn't backed up by anything, but obviously your mind is made up which is counter to what you claimed.

You take on the approach of others here which apparently is that you are right because you say so.

I can give you plenty of examples of people that made despite great odds and they made it in part because capitalism does give everyone a fighting chance. All socialism does is take away motivation to work hard.

mumbo jimbo said...

Whoa, whoa, chill out. Always on the offensive huh?
Aren't you tired of writing the same sentences over and over to discredit people? They're starting to lose meaning.
Of course I don't have any proof and my mind isn't made up; I don't think anybody is 'right', every solution to a moral problem has pros and cons.
But are you sure you're proving anything yourself? Examples don't imply a generality even if they're a lot.
Bye-bye now.

mike volpe said...

If you can't back up your statement, then your statement is meaningless.

You say that in capitalism some people simply can't make it except that Ronald Reagan was born the son of the town drunk and wound up President. If he can make it, then anyone can make it.

Bill Gates was nothing more than a geeky college student with vision that no one else had, and he made it. Michael Dell was just a college freshman that built his roommate a custom computer, then his dorm, and then created Dell. They had no special advantages. They worked hard, they had vision, and they made no excuses.

You only make rhetorical statements that you then freely admit you can't back up.

Even though you make clearly biased rhetorical statements that you admit can't be backed up, you then claim to not have your mind made up.

I've debated a lot and I can spot third grade debating tactics a mile away. Rhetoric is rhetoric, and evidence is evidence. You have rhetoric and no evidence, period.

Ross said...

Well, I see how this argument has gone from socialized medicine to comparing the US to other places in the world. All that needs to be said is that socialized medicine would fail and drop our economy to a position that's worse than the one we are in now. The people that want free healthcare are the same people that doesn't want to be taken off of welfare because they're too lazy to get a job to support themselves or their family. Healthcare should be treated as a luxury, not a neccessity, only because not everyone deserves it. It is simply a privelage, not a right.

Jim said...

So all the poor are poor because they're lazy?

mike volpe said...

I don't know I haven't taken a poll, but yes most poor people haven't worked nearly as hard as those that are successful. Besides, that is not what I said.

What I said is that in capitalism, if you work harder, smarter, and more efficiently, you will be rewarded. Those are the traits you want to reward.

What you are trying to do is play populist class warfare. You want to pit the poor against the successful and likely you will side with the poor. That makes for good politics, but horrible policy.

This isn't about assigning blame but rather putting together a policy that makes the economy run best. I don't know why the poor are poor though I would bet that overwhelmingly they don't work as hard as the successful. That is frankly besides the point. The real point is that capitalism gives everyone a fighting shot and Ronald Reagan, Ray Charles, Michael Dell, and Bill Gates are living proof.

Ross said...

Well not neccesarily because they're lazy, because there are quite a few exceptions. Especially with how the middle class has kind of gone downhill since the start of the Bush administration. What I was saying is that there are people who simple don't want to give up and try to earn a living. There are certain financial aid programs for certain people who earn a living. I myself have free insurance from tri-care because my father is retired military. The military is also a road less traveled for health insurance. Or even certain jobs with benefits. I was only pointing out the people who probably dropped out of high school and didn't go to college that are trying to have other people provide for them. I am definitely not a rich person with an income of about $24,000 a year between my father and me, but we manage to do just fine with the healthcare situation.

mike volpe said...

Let me tell you how ridiculous this rhetoric about the middle class suffering under Bush is...home ownership exploded under Bush. People that never had an opportunity to own before now own. As a result those same folks owned irresponsibly and we now have the mortgage crisis. Of course, it is more complicated than merely blaming the homeowners...

but the reality is that the middle class had opportunities they never had before under the Bush administration. Those opportunities led directly to the economic downturn we have now, and now Bush is not only blamed for the economic downturn but also for not giving them any opportunities in the first place.

Ross said...

Well, I wasn't trying to sling mud at Bush, I think he's a good guy. I'm just saying that I have friends whose parents have not had a raise since about 2001 and they work for the airline industry. But really man, you can't deny that economy has been going downhill lately, and it's not just because of the war. As of right now, there is no budget on congressional spending and the democrats want to keep it that way. That is one good-sized problem with our deficit.

mike volpe said...

You have friends that haven't had a raise since 2001 in the airline industry. There are two sorts of evidence: anecdotal and scientific. That is anecdotal and anecdotal is weak. Maybe the problem has nothing to do with Bush but with the industry. Maybe it is your friends. Either way, when you take a handful of friends and extrapolate them to an entire society that is flawed.

My evidence is scientific. Home ownership exploded. More people, as a percentage of society, own homes now than ever. Given that it is silly to say that the middle class is shrinking. That is rhetoric not backed up by the facts.

Here is why this all bothers me. Bush is blamed for not acting in time to fix the mortgage mess. I work in it and I can tell you there is nothing he was going to be able to do, but that is another issue. Yet, the mortgage mess is an after effect of all sorts of new people owning homes. Well, if all sorts of new people own homes, how can he also be blamed for not doing enough for the middle class. The wealth don't rent.

Jim said...

It's funny that you use the argument of anecdotal evidence being weak right after you give anecdotal evidence (Ronald Reagan, etc.) as indisputable 'living proof'.
First grade debating tactics are cool!

mike volpe said...

I figured someone would try and point that out, so instead of explaining myself, I just let someone like you point it out and feel smart for a second, before I explained myself.

I was pointing out that in capitalism everyone has a fighting chance not that everyone is equal. If Ronald Reagan can be born the son of the town drunk and find overwhelming success anyway, then anyone can find success because no one's circumstances are any worse.

If Ray Charles is born into abject poverty and blind and still finds success than anyone can.

The point is that I used the most extreme situations and the most extreme success to point out that everyone has a fighting chance.

I never said that everyone does find success in capitalism. In fact, I said that in capitalism most don't, but those two and many others are living proof that success in capitalism is ultimately an individuals responsibility.

The other poster pointed to a few friends not having a raise as proof that the entire middle class doesn't get a raise. That is taking anecdotal evidence and applying it to the whole.

One situation takes an example to show the possibilities. It isn't making the claim that most wind up like it, but rather that it is possible.

Had the poster said that some in the middle class didn't come up during Bush, and then pointed to his friend that would have been one thing, but he didn't. He claimed the middle class as a whole was hurt and then used anecdotal evidence.

These two concepts maybe out of your grasp, but they are two totally different arguements.

jim said...

Ha, I love how you're downgrading yourself by resorting to personal attacks.
I do understand the difference, but it doesn't make your Reagan argument any more solid.
So you say 'Reagan was in a bad economic situation. Reagan became president.' and your conclusion is 'anyone can make it' and not 'everyone will make it'. Great. Still a fallacy.
What if a child's IQ isn't high enough to do relatively simple tasks because of insufficient nurturing in his first years? Does he have a fighting chance?

mike volpe said...

Absolutely, look at Corky from that one show.

Let me explain it again. I chose two extreme situations with extrmely successful outcomes to show that if those two can make it anyone can make it. I didn't say that everyone will but that they can.

Frankly, you did figure it out, because you tried to throw out an even more extreme situation. Don't play dumb with me, you are clearly not that dumb. I didn't use any personal attacks either.

I will thank you for contributing to making this my most commented piece.

jim said...

Not much competition there!va

Joe said...

Mike you are incredibly intelligent, I wish there was more people like you

Anonymous said...

Have you people lost your mind...The fact that people have a chance means nothing..I have a chance at winning the lotto but I don't play because its a poor mans tax..We don't want a system that only gives people a chance..we want a system that gives people a reasonable expectation of success..If you look at the numbers..Race, sex, say the least shows us that much needed improvement is needed..The Free Market is great..The social programs are great..The perfect balance is what we need...Governing is the prime importance here..Not absolute one or the other..