There is no such thing as a free lunch. Whether you pay with your time or someone else’s money, Milton Freedman hit the nail on the head. Nothing in life is ever free; healthcare included. Many Americans argue that a universal healthcare system such as the ones implemented in Europe is the most beneficial, however, they miss many important factors. Although private sector insurance has its issues, it far outweighs a universal healthcare system for the United States. A vast majority of American supporters of a universal healthcare system believe they will pay nothing for a visit to the doctor, medical prescription, or emergency room procedure. Unfortunately, this is not the case: there is no such thing as a free lunch. Europeans pay a higher tax rate to compensate for healthcare costs. Furthermore, a visit to the doctor or a procedure may not be fully covered, which has become a controversial issue in some EU countries. The primary issue lies in forcing one to participate in state-mandated healthcare which violates the inherent liberties that freedom entails. One should be able to choose what care is best for themselves or their families. This choice cannot be put up to the state, as they do not know everyone’s needs. By electing to move to a single-payer healthcare system, we limit the rights of each individual and give those in power a stronger influence over an issue that is very personal. We limit an individual’s right to make their own decisions about healthcare when we force a state plan upon them. There is no reason to subject a tax-paying citizen to a cookie-cutter healthcare plan created by people who don’t know an individual’s circumstances. Proponents of universal healthcare may argue that both in Europe and in the United States, there is still an option to remain under private insurance. While this is true, citizens are still forced to pay for state-mandated programs through tax. I can still remember my first paycheck. After working 12 hours a week at the age of 14, my pre-tax check barely reached $100. After-tax, I was at about $80. Part of that tax was from Medicaid, a state-run program for low-income people. Today, with a much larger paycheck, that amount has gone up exponentially. I find it difficult to justify paying for a commodity that has alternatives and is not used by everyone It is interesting, further, that some state healthcare systems encourage the use of private sector insurance for better coverage. Many times, government-run systems do not cover all aspects of necessary care and rely on the private sector to cover any gaps. The private sector also tends to offer better care. The fundamental questions then become ‘Why does private sector insurance offer better care? Why can’t the United States adopt a similar healthcare system to those used by the EU?’ The answer roots from a singular economic concept: incentives matter. Incentives are the reason for the structure of the U.S medical ecosystem. They explain higher prices for services and higher prices for insurance. What causes schools such as Harvard, Yale, Stanford, and Johns Hopkins to be the premier medical institutes globally? It is their reputation for graduating quality doctors that become renowned experts in their fields. The top 20 medical schools in the world are all American-based. With such a good reputation, students are incentivized to attend. With so many applications from all over the world, these medical schools can charge more tuition. Incentives matter. What is the cause of high drug prices? Forbes reports that companies such as Eli Lilly, Roche, Abbot Laboratories, and Johnson & Johnson spend between $4 and $11 billion on introducing a new drug to market. Why do big pharma companies spend massive amounts to produce and run trials on new treatments? The patent on a new drug incentivizes them to produce. They are encouraged by this system to produce the highest quality drug at the quickest rate. Once again, incentives matter. Why can hospitals such as The Mayo Clinic, Cleveland Clinic, and UCLA charge so much for a lifesaving treatment? They are dedicated to getting the best doctors, best technology, and best care. This all comes at a price. To hire the best, they must incentivize them through benefits and higher pay. Furthermore, private sector insurance offered by employers attracts workers to join a firm. Prospective employees will compare fringe benefits offered and choose which company offers the best packages. In terms of the labor market, too, incentives matter. The structure of incentives in America makes the transition to a universal healthcare plan nearly impossible. From the education of doctors, business practices, and type and quality of care, the American system is based on competition. American doctors make much more money compared to European Union doctors, the publication Physicians Weekly reports. The US makes over 4.5 times the amount as some EU countries. Due to the increased rigor of a US medical school, extended requirements for certification, and increased cost of the schooling itself, doctors in the U.S are incentivized by higher salaries in order to pay off debt accrued during schooling. Higher salaries force hospitals and practices to charge more, therefore increasing costs across the entire healthcare system. Despite higher prices, Americans with private insurance tend to benefit from better wait times, quality of care, and individual options. When examining healthcare in the United States and comparing it to the EU, it is important to consider that big pharma companies are incentivized to produce through the capitalist model. Subsequently, better quality care and more experienced doctors result from that incentivization. The freedom to choose a healthcare plan tailored to the individual is given through private-sector care. Meanwhile, forcing one to use a state-mandated plan limits individual liberty and leads to an increase in the power of a few. Therefore, the U.S should continue to improve its healthcare system by focusing on providing quality private sector insurance for those who want it rather than forcing a top-down, centralized healthcare behemoth on its people.
Matthew is a student at Wabash College in Crawfordsville Indiana, where he studies Classics and Rhetoric. He is an active member of Kappa Sigma Fraternity and enjoys traveling, playing volleyball, and writing. Matthew is the spring 2022 intern with the Austrian Economics Center.
The AEC’s fundamental goal is to promote a free, responsible and prosperous society. Through education and improving public understanding of key economic questions, the AEC promotes the idea of a free market economy and the ideal of a free society.