Sunday, September 20, 2015

More on Government vs. Private Health Insurance Middlemen: Coercive Power vs. Profit

In reply to my comments on the New Jersey Star-Ledger letter Eliminating the costly private-insurance middleman, in which I countered the letter writer’s call for eliminating the private insurers with a call to eliminate government interference from health insurance (see my 9/14/15 post), a correspondent replied to me that “Privatization places profits over people,” followed by a slam at health insurance company CEO pay.

I left this response:

I’m not sure what’s meant by “privatization.” But “profits over people” is a ridiculous absurdity.

To the extent markets are free—which means, people are free to trade on their own judgement—profits are earned by providing value to consumers. No value, no profits. Consumers don’t pay for non-value. My Crestor reduces my cholesterol, reducing my chance of heart disease. That’s a value to me. So I take it, and the pharma company gets paid, earning a profit. My insurer, since I chose to have drug coverage, gets paid, earning a profit. They didn’t put their profit over me, no matter how much their CEOs get paid. I gained. The company gained. Win-win. The same is true of the medical devices used in my recent surgeries, the hospital supplies and equipment, the anesthesia. And the same is true throughout business and industry, including insurance. Why should I care what CEOs make? They’re running companies that, by my own judgement, add value to my life. Otherwise, they wouldn’t get my money. Companies can’t put profits over people. The people—consumers—determine who gets the revenue from which profits come.

Nobody can put profits over people, because to earn profits a company must first think of how to create value for people, so the people voluntarily buy the company’s product. No value for consumers—the people—no profits.

Now consider Medicare. It doesn’t have to worry about profit. It can take your money by force of taxation; i.e., at the point of a gun. It needs no voluntary consent from the people. Medicare puts power over people. It seizes your money, whether you consider Medicare a value or not. Medicare uses force of law—guns—to forbid competition in the 65+ insurance market in areas of healthcare it covers. Medicare uses its legally enforced—gun-backed—monopsony power to dictate doctors’ fees. Unlike private insurers and its CEOs, Medicare doesn’t earn its money. It doesn’t have to. It simply takes it. So it doesn’t have to be concerned with profit. It doesn’t need the consent of the consumer. It has brute physical power.

And that’s the difference between free market healthcare and government healthcare. It’s either profits and voluntary choice, or guns and no choice.


Of course, today’s health insurance industry is not even remotely indicative of a free market, given government’s extensive controls and mandates. Today, there is no real competition. In a truly free market, things like CEO pay would be moderated by market forces. So discussing CEO pay in relation to government vs. free market healthcare is to compare apples to oranges.

Related Reading:

Moral Health Care, not “Universal Health Care”—by Paul Hsieh for The Objective Standard

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