The Costs and Consequences of Medical Socialism

I should point out an excellent essay at on the present level of Western government interference in medicine, and the costs and consequences that result. You should most certainly read the whole thing; it's one of the better introductions to the subject I've seen in recent years. A few excepts:

There are two popular images of socialized medicine. I don't think either captures what the reality is in our prosperous and largely capitalistic country.


I find it striking that after the collapse of socialism in Eastern Europe and the Soviet Union, virtually no effort was made to privatize health services. To be sure, there are now private health services in these countries, but the official systems of socialized medicine still exist. This fact is a testament to the reigning orthodoxy. The world seems to understand that it is a mistake to nationalize agriculture and factory production. No one advocates a Department of Software Development, even if there are far more interventions in this sector than there should be. And yet health care, all over the world, is assumed to be a normal function of government.


This is despite the vast number of stories we hear about English and Canadian health care socialism, mostly having to do with a lack of innovation and a grim shortage of medical, surgical, and emergency services. In these countries, there is much that mirrors the former Soviet experience, except in one area: their governments are not as poor. This changes the incentive structure. The government has incentives to spend money. Indeed, governments win from passing money around, and that can mean making more money available rather than less, unlike in the Soviet system.

To understand this point is to add an additional factor to the way we understand socialist medical care. It's time that we change our expectations concerning what socialism will look like in our future, though we have it partially now. The key problem with socialism is that it misallocates resources, and when applied to the U.S. medical sector, this means a vast overconsumption of medical services as well as artificially high prices. The system is carefully structured in a mercantilist way to socialize losses and privatize profits. In this way, the largest players in the market benefit and a small group of semi-private cartels are insured against financial failure.


First, there are severe limits on the number of service providers, as there have been for a century. We brag about the specialization we have among doctors, but what we do not have is a range of choices among levels of training. When we want our car fixed, we can go to the dealer or we can go to another 40 places with a range of mechanics, some of whom have had extensive training and some of whom have not - a fact which may or may not reflect on the quality of their work.

In medical economics, however, we are supposed to believe that physicians are a class set apart like ordained priests with special powers. You are either ordained to practice medicine or you are not. The limits on the numbers - which are built into the cartel of medical schools as well as the licensure system - are nothing but a mercantilist effort to increase prices and incomes. Of course every profession has its licensure system, but the medical one has been uniquely successful in making the barriers to practice incredibly high.


Everyone has horror stories to tell of how aging people are treated by our medical system. What strikes me as strange is how the financial incentives of hospitals and insurers are rarely considered to be a factor in the medical decisions made on their behalf. We are all supposed to believe that our medical establishment is purely interested in human welfare. But if we understand the financial incentives at work, we have a new window into why it is that so vast a percentage of medical resources are used to treat people in the last months of their lives.

The level of freedom in research and medical commercialization matters greatly. It is a very large determinant of the speed with which future medicine arrives - and especially medical technologies capable of reversing age-related cellular damage that lies at the root of frailty, degeneration and death. At the moment, right this instant, the system is broken. The very fact that we have "a system" is a breakage; that entrepreneurs are held back from investment by rules and political whims that are now held to be of greater importance than any number of lives. That decisions about your health and ability to obtain medicine are made in a centralized manner, by people with neither the incentives nor the ability to do well.

As is always the case, the greatest cost of socialism in medicine lies in what we do not see. It lies in the many billions of dollars presently not invested in medical research and development, or invested wastefully, because regulations - and the people behind them, supporting and manipulating a political system for their own short term gain - make it unprofitable to invest well. Investment is the fuel of progress, and it is driven away by self-interested political cartels.

The situation is grim; the greatest engines of progress in medicine - the research communities of the US and other Western-style countries - are moving forward very much despite the ball and chain of regulation that drags them down. In the fight against age-related disease, and aging itself, how much further ahead would we be if we cut those chains and restored freedom to research, manufacture, review and quality assurance of medicine?

Sadly, I do not see this happening in the near future; a long, hard battle lies ahead for advocates of freedom and faster progress in any field. We live in an era of creeping socialism, economic ignorance, and blind acceptance thereof. It's almost as though no lesson was learned from the megadeaths, poverty and suffering of the Soviet experience, as we step a little at a time in that direction once more.

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Spot on!

Posted by: Ronald at December 17th, 2006 9:47 PM

I am glad to see people using my mechanic analogy.. I spread that one around the internet some years ago. I noted that if you needed a doctorate of mechanical engineering to legally repair a car, it would be tremendously expensive.

I would say there has been some small progress in the professional aspect. For example Walmart and others have been pushing to have less pharmacists per assistant by law. In some states it was/is 1 per 2.. but other states have been gradually reducing the ratio. Some to 1/7.

In the doctor arena nurses with 6 years of training are being granted limited perscriptive authority. A new profession, Physicians Assisistan has been coming up, now 1 of them per 10 doctors. They also have perscriptive authority and can work under doctors...

There is moves in some states also to grant pharmacists some perscriptive authority for lower level drugs.

These types of measures while not perfect, are moving in the positive direction. Towards more consumer choice, and lowering the cost so healthcare is affordable to more of the population. Or in a socialist system so that waiting lines are reduced.

Posted by: aa2 at December 19th, 2006 1:42 AM

You can't right an essay on Medical Socialism if you are ignorant enough to write about the "English health care system". It's Britain for God's sake, and we have been for 1707! The fact is that state involvement in anything, is not the demon that areas of the US media make it out to be (*FOX* cough cough I could go on for hours about how ridiculously biased and unrepresentative of general opinion Daniel Hannan's anti-NHS speech was). The vast majority of Europe adopt some degree of state involvement and yet were not any poorer, any less free in our right of expression or lacking anything that the average American citizen would deem normal. I don't pretend to be an expert, I'm just an 18 year old kid, and I am ignorant of alot aspects of American culture, but I find it frankly appaling how a nation can hold on to outdated views. I just pity the writer of this article for thinking that our NHS and the Canadian system are even comparable with the Soviet system. Absolute Crap.

Posted by: Alex at September 8th, 2009 9:48 AM

For the record, I am English - or "British" as you would no doubt prefer - and did in fact spend a couple of decades experiencing the NHS firsthand.

From the US side of the pond, agencies and common folk do in fact distinguish between the formative countries of the Union, which is one of the things you notice early on when visiting. Official forms often list England and Scotland as distinct entities, for example, and "English" or "Scottish" are as valid a response to nationality questions as "British." Similarly for Northern Ireland or Wales.

Posted by: Reason at September 8th, 2009 11:13 AM

Well, I watched Michael Moore's Sicko. Wooow! I think, the US government and its people are afraid of "socialism" too much. That's why, a lot of people in tha US can't distinguish the good and the bad things of socialism. I think, some European country such as UK has learnt from their past experience. And now, they can distinguise the bad and the good things of socialism.

I'm from the 3rd world country, but in my country, the government even provides the health insurance for the lower class. But in the US?? I don't think so...It's so horrible!!!

Posted by: ran mauri at February 28th, 2010 9:18 PM

I think medicine became socialistic. The doctors are no longer treating me for conditions that they use to treat. I may have to spend a 1000 dollars just to get a dentist to save my tooth. The medical providers refused to save the tooth and told me to go for an extraction. My dermatologist provider also refused to treat me. The doctors have to get authorizations from the insurance company which can cause delays in the treatment. My visit to the root canal specialist was a disaster. Even the visit to the dentist was a disaster because of the insurance policies.

Posted by: Anonymous at July 30th, 2014 10:11 AM
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