The Collectivization of Medical Costs Creates the Potential for a Limitless Rise in the Price of Medical Services

Insofar as medical services or facilities are limited in supply, the notion of the need-based right to medical care and the collectivization of medical costs to finance it create the potential for a limitless rise in the price of medical services. To understand this, imagine an auction. There are a large number of units of some good for sale. But there are not enough units for sale to satisfy all the bidders for all of their requirements. Thus some bidders must go away empty handed, or at least with fewer units than they would like. (As I indicated before, there could have been a larger number of units for sale, but the government does not let them on to the floor of the auction. It keeps them out by means of licensing legislation.) To the extent that the equivalent of the perverted notion of the need-based right to medical care prevails at this auction and the individual is relieved of financial responsibility by virtue of being able to charge his bids to a collective, there is simply nothing present to stop the rise in the bidding. No matter how high prices go, people still assert their alleged right to the item and go on meeting or exceeding ever higher bids, in the knowledge that their bid will be paid for by their collective. If this is an auction market for medical services, they go on bidding in the knowledge that their bids will be paid for by their insurance company or by the government. The only people who are eliminated from the bidding are those who lack medical insurance or the medical coverage of some government program. The rise in prices only stops if there are enough uninsured bidders who can be made to drop out of the bidding so that, for the moment at least, the insured ones can be satisfied.

Of course, when this situation was reached in the 1960s, and it was the uninsured poor and elderly who had to drop out of the bidding, the government soon stepped in to remedy the situation by making additional billions available for them, through the Medicaid and Medicare programs, so that they could carry on in the bidding for the supplies its licensing legislation had artificially reduced. Then, of course, the uninsured bidders who had to drop out of the bidding were drawn from a higher economic rank, namely, the lower middle class. This was because the rise in prices fueled by the government’s injection of still more funds into the medical market now surpassed their financial ability to pay.

Understanding these facts, incidentally, should make clear why the Clinton administration’s current proposal to force employers to provide medical insurance for the 37 million Americans who remain uninsured, leaves absolutely no alternative but price controls and rationing as the means of controlling costs. This is because if virtually everyone is now to have the need-based right to medical care and have his bills sent to the collective for payment, there will be absolutely no limit to the bidding and the rise in prices unless the government restricts the medical care he is allowed to have and determines the price that is to be paid for it. Try to imagine, for example, a situation in which there are 100 units of a supply available and 137 bidders, each of whom would like to have one unit of that supply and is in a position to send the bill for his bid to the government. The rise in cost to the government can only be controlled if the government imposes some kind of limitation on the amount anyone is allowed to bid for in this manner, such as 100/137 of a unit of the supply, and refuses to allow anyone to attempt to buy more by raising his bid even with his own money, because that too would increase the cost to the government.

—George Reisman, “The Real Right to Medical Care Versus Socialized Medicine,” http://www.capitalism.net/articles/SOC_MED_files/The Real Right to Medical Care Versus Socialized Medicine.html (accessed December 9, 2019).