Account Login

4,398,210 Views
Jul 17, 2017
Presented by
Bob McEwen

Why is the government so bad at healthcare? Why did Obamacare make it more expensive than it already was? Is there a solution? Former Member of Congress Bob McEwen explains.

The government has tried to provide healthcare for 75 years. These efforts have been fraught with bureaucratic waste and scandal. 

  • The Veteran’s Bureau, the VA’s predecessor, was created in 1921—and shut down nine years later due to corruption.View Source
  • The current health insurance system is partly a result of big government restrictions imposed in 1942. Wage and price controls prevented employers from paying higher wages, so FDR allowed employers to pay for their employee’s healthcare. This created a “third party purchaser.”View Source
  • The American Medical Association, the United States’ largest association of physicians, opposed the passage of Medicare in 1965, calling it “the beginning of socialized medicine.” The AMA was right.View Source
  • WATCH: “Single-Payer Health Care: America Already Has It” – Pete Hegseth, PragerUView Source
  • Related reading: “A Better Choice: Healthcare Solutions for America” – John C. GoodmanView Source

When the government provides healthcare it neither consumes nor pays for the product, so it doesn’t care much about quality or cost.

  • When a consumer buys something for themselves, they want to get the highest quality good for the lowest price. When the government pays for something like healthcare with tax dollars and doesn’t consume it, it is removing the consumer from the transaction – which inevitably results in higher costs and lower quality.View Source
  • When prices are transparent and consumers are empowered to make choices, consumers shop around for the best value, forcing providers to compete on quality and price.View Source
  • WATCH: Scholars Leehan Chen and James Capretta on improving health and healthcare.View Source
  • Related reading: “Healthy, Wealthy, and Wise: 5 Steps to a Better Health Care System” – John Cogan, R. Glenn Hubbard, Daniel P KesslerView Source

If doctors and insurers were allowed to compete freely, costs would go down and quality would rise—but government keeps getting in the way. 

  • LASIK eye surgery is filled with competition and is unhampered by the regulation found in other fields of medicine. Prices have decreased by as much as 88% since 1997.View Source
  • In plastic surgery, another uninsured medical procedure, competition has driven down prices, and supplied numerous alternative treatment options.View Source
  • A Stanford study found that healthcare prices decreased an average of 3.5 to 5.4 percent in areas where there was more competition between doctors.View Source
  • WATCH: “Why Is Healthcare So Expensive?” – Information Station/PragerUView Source
  • Related reading: “Power to the Patient: Selected Health Care Issues and Policy Solutions” – Scott AtlasView Source

A Stanford study found that healthcare prices decreased an average of 3.5 to 5.4% in areas where there was more competition between doctors.

  • A Stanford study found that healthcare prices decreased an average of 3.5 to 5.4 percent in areas where there was more competition between doctors.View Source
  • WATCH: Bob McEwen on “The Power of Free Market Economics.”View Source
  • Related reading: “Healthy, Wealthy, and Wise: 5 Steps to a Better Health Care System” – John Cogan, R. Glenn Hubbard, Daniel P KesslerView Source

Canada’s single-payer healthcare system is failing miserably, resulting in a shortage of doctors and unreasonable wait times.

  • Dr. Claude Castonguay, the father of the single-payer healthcare system in Quebec, on the failure of socialized medicine in Canada: "We thought we could resolve the system's problems by rationing services or injecting massive amounts of new money into it." His recommendation to alleviate problems was to "give a greater role to the private sector so that people can exercise freedom of choice."View Source
  • Canadians wait over four months on average for major procedures, such as cardiovascular surgery.View Source
  • Canadians wait eight weeks or more on average for MRI tests. The single-payer healthcare system has produced a shortage of family practitioners, so nearly half of Canadians use emergency rooms to treat ailments that could be handled by a family doctor.View Source
  • In 2014, Canadians had to wait 9.8 weeks for procedures considered “medically necessary” – 3 weeks longer than physicians considered to be “reasonable.”View Source
  • WATCH: “Single-Payer Health Care: America Already Has It” – Pete Hegseth, PragerUView Source

Government intervention in healthcare increases waste and fraud. Medicare loses $60 billion every year from fraud. 

  • Medicare loses $60 billion every year from fraud.View Source
  • The Veterans Administration spends at least $6 billion a year in violation of federal rules.View Source
  • In September 2016, the Department of Health and Human Services reported that 12 percent of all Medicaid spending – close to $140 billion – had been given away through improper payments.View Source
  • Over the past five years, the Senate Finance Committee found at least $5.7 billion in wasted Affordable Care Act spending.View Source
  • WATCH: Scholar Michael Cannon on healthcare fraud.View Source
  • Related reading: “The Primal Prescription: Surviving The ‘Sick Care’ Sinkhole” – Doug McGuff, MD, Robert P. Murphy, PhDView Source

Can we trust the government to run our healthcare system? Over 10% of all Medicaid spending is wasted on improper payments. 

  • In September 2016, the Department of Health and Human Services reported that 12 percent of all Medicaid spending – close to $140 billion – had been given away through improper payments.View Source
  • Medicare loses $60 billion every year from fraud.View Source
  • The Veterans Administration spends at least $6 billion a year in violation of federal rules.View Source
  • Over the past five years, the Senate Finance Committee found at least $5.7 billion in wasted Affordable Care Act spending.View Source
  • WATCH: Scholar Michael Cannon on healthcare fraud.View Source
  • Related reading: “Power to the Patient: Selected Health Care Issues and Policy Solutions” – Scott AtlasView Source

The Affordable Care Act has contributed to rising prices—not curbed them as promised by Democratic legislators and President Obama.

  • In Maryland, Virginia, and Connecticut, premiums rose an average of 20% under the ACA from 2016 to 2017.View Source
  • In the four years before the ACA was passed, premiums for Preferred Provider Organization insurance increased 15%, afterwards this number jumped to 66.2%.View Source
  • Healthcare costs are especially higher for people who get insurance through their employer. In 2008, the average employer plan cost $12,680. Employees would pay $3,354 of the total cost. By 2016, the cost rose to a total of $18,142, with workers having to pay an average of $5,277 of the total cost.View Source
  • On top of premium increases, 20.9 percent of manufacturing firms and 16.8 percent of service sector firms in New York reported that they were hiring fewer employees because of Obamacare.View Source

When the government buys and allocates medical services, ultimately those services must be rationed or denied.

  • Obama’s plan for the ACA involved $500 billion in cuts to Medicare. The healthcare of seniors was rationed to pay for a new healthcare program.View Source
  • Rationing already exists in single-payer healthcare systems like Great Britain’s, which only pays $31,000 - $47,000 for every year of life added. New Zealand’s health system will not pay for vaccines costing more than $20,000 for every year of life added.View Source
  • In the UK, a baby with a rare condition was recently ordered by the court to be taken off life support. The decision was against his parents’ wishes and was made despite offers to treat him free of cost outside the country.View Source
  • Canada’s wait time for healthcare ranked last out of 11 developed countries. The single-payer healthcare system has produced a shortage of family practitioners, so nearly half of Canadians use emergency rooms to treat ailments that could be handled by a family doctor.View Source
  • WATCH: Former Congressman Bob McEwen on “Socialism: Hype vs. Reality.”View Source

Why is the government so bad at healthcare? They’ve been at it for seventy-five years and still can’t get it right. It’s expensive. Access is spotty. It’s mired in bureaucracy. And it’s fraught with waste. 

Obamacare was supposed to fix all this, but instead, like every other government healthcare program before it, it just made things worse. 

Why? 

Because the government is a third-party payer.

Let me explain.  

Suppose you are going to buy something for yourself. You have two priorities: price and quality. You want the highest quality for the lowest possible price.

Say you’re buying a television. You have many options: the size of the screen, the quality of the image, the price. Only you know which one best suits your needs and your budget. And a lot of companies are competing for your business. You do your research; you make your choice. 

This is called a first-party purchase – the person paying is the person using. 

Now, let’s suppose that either the price or quality is not controlled by you; in this case, you are buying something for someone else. You care about the price because you are paying for it, but you are a little more flexible on the quality. A good example would be a wedding gift – say, a coffee maker. 

You might think, by the time it breaks they’ll forget who gave it to them anyway…the cheaper one will be fine.

All of us have bought things for others we never would have bought for ourselves. We care about the price because we’re paying for it, but not so much about the quality because we’re not going to use it.

Or, suppose that we’re going to use something, but we’re not going to pay for it. Then we’re concerned about the quality because we’re consuming it, but the cost is not as important because we’re not paying for it. Any father who ever got roped into paying for an open bar at a wedding understands this program. Nobody ever orders the cheap stuff when it’s free. 

These are called second-party purchases. The person paying is not the person using.

And now, for the coup de grace:  when it is not your money paying for something, AND you don’t use it. Then you’re not concerned about either the price or the quality.

Suppose the boss gives you $150 to buy a door prize for the office party. In a store window, you see a six-foot tall stuffed frog marked $149.00 You think, Oh, that’s perfect – let’s buy it. The raffle winner is awarded the six-foot frog. Everyone laughs at the gag. 

Now, this is called a third-party purchase – a purchase that is made with money that is not yours (therefore you don’t care about the cost) to buy something you’re not going to consume (therefore you don’t care about the quality).

Here’s the point: By definition, all government purchases are third-party purchases. The government spends other people's money on things it won't consume. It doesn’t care about the price or the quality. Thus, there will always be waste in government spending.

That is why, to paraphrase Abraham Lincoln, government should do only those things that a man can’t do better for himself.

If 300 million Americans were free to buy health insurance for themselves, just as they buy their own life and home and car insurance, then that little gecko on television would offer us health insurance with a little more coverage for a little less cost. 

And he wouldn’t be the only one. Insurance companies and hospitals would be working night and day to get our business. Quality would go up, and prices would go down. It’s already happened with laser eye surgery. It used to cost $2,200 per eye. Now it can cost as low as $500 per eye. That’s the way free enterprise competition works…every time.

But when the government gets involved, costs go up, waste and fraud go up, essential medical services are denied or unavailable. These are the hallmarks of government healthcare bureaucracies around the globe. 

The sooner we make health insurance a first-party purchase again, the sooner Americans will get the health care they want…finally. 

I’m Bob McEwen for Prager University.

You Earned A Badge

Course: Government Can't Fix Healthcare

Join PragerU now to claim it

  1. Watch The Video
  2. Claim Your Badge
  3. Take the Quiz
  4. Gild Your Badge

Like what you see? Support PragerU today