ObamaCare will institute central planning in healthcare
One of ObamaCare’s key architects is a fervent supporter of socialist healthcare
The first steps toward socialist healthcare in Britain were policies similar to ObamaCare
Of course ObamaCare is socialism. It has been designed along explicitly socialist lines—which is to say, on the central-planning model—and it features such secondary features of socialistic enterprise as income-redistribution, economic leveling, the co-opting and nationalization of private enterprises, and the elevation of an elite planning class that is not subject to the rules it will draw up for the rest of the country.
That much of Obama’s agenda is socialist is hardly the subject of serious debate. Writing in the socialist journal Dissent, Robin Blackburn considered the government’s response to the financial crisis of 2008 (a response whose nationalizing orientation was apparent during the last days of the Bush administration, to say nothing of the opening days of the Obama administration). “In the weeks and months after September 2008,” she writes, “capitalism as we know it was saved from a near-death experience by massive state intervention that left the U.S. federal authorities with major assets that included a huge stake in Citigroup, the country’s largest bank; in AIG, the largest insurer; and in GM, the world’s largest automobile concern. Fannie Mae, the mortgage giant, was returned to public hands. Although it is ridiculous to label these desperate—and temporary—measures ‘socialism,’ it would be equally absurd not to see that public ownership on this scale presented an element of a distinctly socialist approach.”1 In other words, it’s a distinctly socialist approach, just don’t call it socialism.
And that goes double for healthcare.
The most fundamental fact at issue in the healthcare debate—the datum most cited by supporters of healthcare nationalization—should have given away the game early and easily: the United States spends about 15 percent of GDP on healthcare, while other countries such as Canada and Germany spend about 10 percent. Obama revisited that fact consistently in his speeches on healthcare: “We spend one and a half times more per person on healthcare than any other country,” he told joint session of Congress, “but we aren’t any healthier for it.”2
Set aside the second part of that claim (Americans do, in fact, enjoy significant returns on their healthcare spending) and concentrate on the first. It is true, unquestionably, that the United States spends more as a share of its economy on healthcare than do most other countries. Why is that inherently problematic? The United States spends more on lots of goods and services than do other countries, and spends a lot less on some, too. Relatively speaking, the United States spends much more of its collective income on information technology, and much less on food, than do Haiti, Rwanda, or the alleged economic powerhouse that is the People’s Republic of China, for that matter.
Does that mean the Haitians and the Rwandans are getting a much better deal on their laptops and Internet routers than we are? Does it mean that Chinese peasants are eating better? Probably not. The truth is that, as societies become wealthier, it takes much less of their income to cover things like food and shelter; with much more disposable income to dispose of (and Americans, with our low savings rate, do dispose of our disposable income), wealthy societies will tend to consume more entertainment, travel, education, professional services, and the like. Healthcare is a service that is in very high demand—when you need it, you need it. Americans’ high level of healthcare spending is not evidence that we are getting ripped off; it’s evidence that we are a rich country.
Why would there be some metaphysically “correct” portion of GDP to spend on healthcare? The answer, of course, is that there isn’t, just as there is no metaphysically correct level of spending on food, clothing, shelter, entertainment, bubblegum, campaign commercials, or any other item of consumption that might come to the interest of the powers in Washington.
One might as easily point out that the United States spends far more on education than do most other countries—significantly more than do Japan or Korea. And it would be difficult to argue convincingly that we are getting better results than the Japanese or the Koreans. But when it comes to education spending, the argument is precisely the opposite of that made for healthcare reform; no amount of spending on education ever is considered too much. It is impossible to imagine Barack Obama telling a joint session of Congress that we, as a nation, spend too much of our GDP on education, and that we should prune ourselves back to the level of spending seen in Singapore, which gets a very good education bang for its buck.
Why the discrepancy? The politics is obvious: U.S. education consists of expropriating money from the private sector and transferring it to the public—since almost all education in the United States is public education. For healthcare the cashflow vector is reversed: even before ObamaCare, more than half of all U.S. healthcare spending was done by the government, but the parties cashing the checks are mostly private businesses: doctors, hospitals, pharmaceutical medical-device manufacturers, and the like. President Obama is not going to tell the teachers’ unions that America is spending too much money on them, but he’s happy to tell that to doctors and medicine-makers.
Abstracting spending on a particular sector as a share of GDP is a classical symptom of central planning. Advocates of healthcare socialization mistake the measurement for the thing measured—they mistake the map for the territory. Why should it be a problem that the United States spends 15 percent of GDP on healthcare? Why would 14 percent be inherently preferable? Why would 10 percent be preferable? If lower is better, why wouldn’t 1 percent be preferable?
These abstractions are about as meaningful as Stalin’s plan to double the wheat harvest every five years—they do not tell us anything at all about the underlying activity, which is far too complex to be captured in simple measurements. Likewise, the relative comparisons between countries are nearly meaningless. The United States is the third most populous country on the planet, behind China and India. Its population is mind-bogglingly diverse, its economy incomprehensibly complex. It is full of immigrants from all over the world, legal and illegal. It is ethnically, religiously, culturally, and demographically one of the least homogenous places on Earth. Comparing Americans’ healthcare outcomes with those of Swedes is foolish. (Although it is worth noting that Swedish-Americans end up with healthcare outcomes very similar to those of Swedes in Sweden. Similarly, people of Okinawan origin tend to be extraordinarily long-lived wherever they are in the world.)
Understood properly, ObamaCare is an obvious exercise in socialistic central planning. It is not what we would recognize as full socialism—it is not Canada’s government medical monopoly, or Soviet Russia’s government medical monopoly, for that matter—but it does not have to be. Venezuela’s oil industry is no less socialistic for its having more than one firm involved—all the firms are dominated by Hugo Chávez, by THE PLAN, and by politics. The United States under ObamaCare may very well end up with dozens of insurance companies—but every one of them will be offering a product designed in Washington, D.C., rather than one produced by the marketplace.
Like so much American central planning, the socialization of health-care is being enacted indirectly, through the socialization of a particular kind of finance. Much as Fannie Mae and Freddie Mac, the Federal Housing Administration, tax policy, and even the highway system were used by Washington to reshape the housing market according to political diktats (the result of which was the financial crisis of 2008, which itself was used as an excuse for the further socialization of finance), healthcare has been federalized through the socialization of insurance.
This did not, incidentally, begin with ObamaCare. Before the Democrats’ healthcare bill was even considered, the U.S. government already spent 50 percent of all healthcare dollars, dominating the marketplace through Medicare, Medicaid, and other federal programs. Using the crude tools of politics, Washington decided that the fundamental problem with U.S. healthcare was not access to quality medical services and products, but access to healthcare insurance—which, as rigorous empirical analysis has shown, is only tangentially related to access to healthcare.
But well-insured voters are reasonably docile on healthcare concerns, even though there is much in U.S. healthcare that cries out for reform. Insurance coverage acts as a political sedative, so Obama & Co. came up with a solution that was every bit as ham-handed as Hugo Chávez’s decision to fight ransom kidnapping by seizing the bank accounts of victims’ families. Their plan was to pass a law requiring every American to buy insurance. One would think that Americans who 1. wanted insurance and 2. could afford to buy insurance would 3. already have insurance, but the Obama administration didn’t see it that way.
This oversight was, of course, a case of willful blindness. Once the federal mandate to buy insurance was in place, the government had a moral and political excuse to intervene, deeply and wantonly, in the structure, pricing, and delivery of insurance. Having long experience with socialism-by-finance, the Fannie Mae and Treasury department veterans in the Obama administration could hardly have hit upon a solution more attuned to their own worldview and interests—or less attuned to the political and economic realities of healthcare.
Leftists often champion the Cuban healthcare system as a model of the efficiencies of socialized medicine. While touting the Castro regime’s falsified statistics, they deny the nightmarish reality of the system. For example, the National Post’s Larry Solomon recounted how the Cuban regime reacted to a 1997 outbreak of dengue fever: fearing news of the disease would hurt Castro’s reputation and lessen the influx of tourist dollars, health authorities simply denied the affliction’s existence. When a Cuban doctor, Dr. Dessy Mendoza Rivero, circumvented the official cover-up by informing a Miami radio station about the outbreak, he was arrested and sentenced to eight years in prison. Later, the government admitted the disease was dengue fever. Solomon notes the wider pattern:
Anecdotes abound of the government cooking the books to prove the glories of the Revolution to the world, with many academics distrusting the official government figures. A demographer from the National Academies of Sciences found that the Cuban government’s own data was at odds with official overall statistics for child mortality: If anything, it indicated a growing, not a falling, infant mortality rate, a suspicion supported by other statistics from the Cuban Ministry of Health which showed high rates of several childhood diseases that generally correlate with high infant mortality. Other scientists doubt the claims made over HIV, noting the many Cubans who had served in African wars, the many African students in Cuba, the rampant sex trade in Cuba, and the high rate of HIV among Cubans who escaped from the island. A secret 1987 Cuban Communist Party survey of 10,756 respondents showed 88% of the public in one province to be disappointed with their health-care system. When the Cuban suicide rate skyrocketed—it’s now twice the typical rate in Latin American countries—the Cuban government stopped reporting suicide statistics in a way that allowed international comparisons.
Northwestern University professor David Dranove, author of The Economic Evolution of American Healthcare, notes that few if any of those building ObamaCare would identify themselves as socialists, but socialism is what they are building nonetheless. (He does not mention that Medicare czar Donald Berwick, one of the most influential architects of ObamaCare, is blisteringly anti-capitalist in his rhetoric, denouncing the “darkness of private enterprise,” or that his preferred model is the explicitly socialist National Health Service in the United Kingdom. Perhaps this is an oversight, perhaps mere professional courtesy.) Whatever their political motivations, their error is identical to Hayek’s “fatal conceit”—the belief that the best and the brightest, given sufficient political power, can rationally plan human affairs. Describing the Ivy League academics who are being tapped to implement ObamaCare, Professor Dranove writes,
My Cambridge colleagues are mostly economists and know a lot about how markets do and do not work. They have learned from economic theory and practical observation that free market health insurance is imperfect. Fearing adverse selection, unregulated insurers take steps that leave some individuals uninsured, while other individuals choose not to buy insurance and free ride off of taxpayer subsidized charity. Most economists (myself included) agree with this diagnosis of the problem with insurance markets.
. . . But this solution does not end with a government takeover of health insurance. There isn’t a public or private health insurer anywhere in the world that doesn’t directly intervene in the delivery of medical care. Socialized insurance necessarily leads to socialized medicine, and if the government controls well over half of the insurance sector through Medicare and Medicaid, and tightly regulates the rest, it is only inevitable that it will also seek to control how healthcare is bought and sold. And I don’t think it will make much difference whether it is Democrats or Republicans in control. The temptation to set the rules for 17 percent of the GDP is too great.
The Obama administration has hired an army of academics to implement the new reforms. They bring with them the finest Cambridge pedigrees and promising ideas. They will write the first draft of the rules and academics everywhere will nod in approval at the cleverness of our colleagues. (Some of us may even enjoy seeing our own pet ideas turn into policy.) But in the fullness of time, the rules and regulations that will govern our healthcare system will bear the imprint of politicians more than academics. It is the nature of the beast.
My Cambridge colleagues do not favor socialized medicine. But I fear that the regulatory behemoth they have been entrusted to manage is too big for them, despite their talents. Ten years from now, we will look back at these days as the beginning of the end of market-based medicine in America. And my colleagues will only be able to look back, shake their heads, and say “it wasn’t supposed to turn out this way.”3
Translation: it wasn’t the socialism we dreamed of!
But it will be the socialism the bureaucrats asked for. Personnel is policy, at the federal level no less than at the local school board. The Center for Medicare and Medicaid Services (CMS), once an obscure federal backwater, will be at the center of the federal takeover of U.S. medicine, generating policy, imposing rules, and creating protocols. In appointing Dr. Berwick to head that organization, President Obama was sending a strong message about what kind of system his administration intended to build. Speaker of the House Nancy Pelosi famously opined that Congress had to pass the healthcare bill to find out what’s in it—but the political reality is that the largely unread bill’s main thrust is to create gigantic new federal administrative body that will generate its own rules and procedures, and that those will be profoundly influenced by Dr. Berwick and his colleagues. What do they have in mind?
Let us consult Dr. Berwick himself for an answer to that question: “I am romantic about the NHS,” he said, referring to Britain’s National Health Service. “I love it. All I need to do to rediscover the romance is to look at healthcare in my own country.”4 The NHS, he said, is “an example for the whole world—an example . . . that the United States needs now more than most other countries do.”5 Lest you think that he has exceeded the limits of fulsomeness in praise, he goes on: “The NHS is not just a national treasure; it is a global treasure.”6
Dr. Berwick is resolutely anti-capitalist. In addition to denouncing private enterprise as “immoral,” he advised would-be reformers in Britain, many of whom are unhappy with the results of their own exercise in medical socialism, “Please don’t put your faith in market forces.”7 Market forces, of course, are all that stand between would-be central planners and the rationally planned economic order they imagine. In an article on healthcare reform, Dr. Berwick argued, “In the United States, competition is a major reason for our duplicative, supply-driven, fragmented care system.”8 Sounding every inch the socialist, he referred to “collective action overriding some individual self-interest” as the “Holy Grail” of healthcare.9
The smart set scoffed at Sarah Palin’s talk of “death panels,” but Dr. Berwick has this to say: “The decision is not whether or not we will ration care—the decision is whether we will ration with our eyes open.”10 Specifically, he argues that we must use the force of government to “reduce the use of unwanted and ineffective medical procedures at the end of life.”11 Unwanted is one thing; if you do not wish to receive medical care, it takes no Herculean effort to avoid it. But who shall decide what is “ineffective”? The answer, of course, is Dr. Berwick and the other central planners.
Single-sector socialism of the sort suffered by British healthcare consumers or American public-school families depends upon context and local conditions, of course—there are, after all, a few excellent public schools in the United States, and no doubt some Britons receive high-quality healthcare. But we can watch those systems over time and analyze the results, especially since enterprises such as the NHS produce a lot of data. It’s worth taking a look at some of it to get a foretaste of what the socialized U.S. system will look like.
The NHS is very strongly parallel to the U.S. education system in one important regard: the class of people from which the central-planning staffers are drawn do not rely upon it. Just as the very wealthiest Americans still send their own children to private schools (as, indeed, do many of the non-wealthy who can afford to do so, including a majority of Chicago’s public-school teachers—itself a telling fact) about 8 percent of Brits maintain private insurance and thereby access to healthcare outside of the national system. This is, in many cases, a matter of some urgency; NHS routinely denies services to sick people on purely financial grounds. Like Dr. Berwick, they know they must ration, and they choose to do so “with their eyes open” and their green eyeshades on.
As the BBC reported in 1999, “Patients are suffering and some have died as a result of rationing in the NHS, doctors have claimed. A survey of almost 3,000 doctors by Doctor and Hospital Doctor newspapers found that one in five doctors know patients who have suffered harm as a result of rationing. More than 5% of GPs surveyed also said they knew of patients who had died as a result of being denied treatment on the NHS.”12 The results of such rationing are not always obvious. Because the NHS does a relatively poor job providing care for elderly patients with chronic conditions—because such care is expensive and because the “return on investment” is calculated to be low in the case of the old and sick—many elderly Britons with conditions such as Parkinson’s or dementia are cared for mainly by family members, especially by spouses.
Furthermore, a denial of care to a caregiving family member can have a cascading effect, as the BBC discovered. “Among those doctors was Sidcup GP Dr. Richard Money, who reported the case of a 70-year-old man who was awaiting surgery while acting as the sole carer for his wife, who had developed Alzheimer’s Disease. Dr. Money said the patient was referred for surgery in 1997. Despite the fact that he had a poor outlook without surgery, he was kept on the waiting list for more than six months. Eventually, his condition deteriorated, and he died after about a year after the initial referral while he was still awaiting surgery.”13
Such stories are depressingly common in Britain and in other countries with similarly politicized systems. Unsurprisingly, U.S. hospitals and clinics are routinely treated as medical havens by Canadians denied care by their “free” socialist system. One of the main problems is that central planners take their political mandates to be realities; they cannot bear to speak about rationing, so they pretend it does not exist. Doctors and hospital administrators, of course, know otherwise. “Nearly half—45%—of GPs who responded to the survey said they were aware of patients whose treatment had been delayed on grounds of cost,” the BBC reported. “Ministers have repeatedly argued that rationing is not necessary in the NHS. But doctors claim that, with finite resources, rationing is inevitable.”14
To patients denied care, it will not much matter whether that rationing was conducted with eyes closed or, as Dr. Berwick prefers, with eyes open.
The NHS, created in 1946, was already mired in scandal, politicization, accusations of favoritism, and financial mismanagement by the 1960s. A study of complaints against Ely Hospital in Cardiff turned up abuses out of a Dickens novel: nurses even assaulted patients, cracking their heads open and then suturing up their split scalps without medical supervision. A litany of similar abuses was catalogued. Incredibly, the NHS tried to put as non-scandalous a spin as possible in its report, a sampling of which reads:
The middle-aged patient Housman (on Ward 21) was on one occasion handled with undue roughness by Charge Nurse “M” and Staff Nurse “N” and mismanaged so as to be wounded in the scalp. The wound was sutured by Charge Nurse “M” and the patient treated with paraldehyde without any medical supervision and was not seen by a doctor until the following day. This incident was caused not by malice but by the acceptance of old-fashioned, unduly rough and undesirably low standards of nursing care; and of a system whereby members of the nursing staff were permitted to suture wounds and administer drugs without any or sufficient reference to or supervision by medical staff (Paragraphs 89 to 96).
(c) The elderly patient Addison (on Ward 17A) was struck in the face on at least one occasion in course of an unduly clumsy and rough attempt to control his movements. The incident was caused by lack of skill and some lack of sympathy in handling a difficult patient and probably not by malice. We were unable to identify with certainty the male nurse responsible for this incident (Paragraphs 30 to 37).
(d) The young epileptic patient Masefield (on Ward 23) who had aggravating and difficult habits, was slapped on the face on more than one occasion by Charge Nurse “A” and Staff Nurse “R”. This conduct was not caused by malice but was due to the acceptance of old-fashioned and unsophisticated techniques for controlling a difficult patient (Paragraphs 109 to 113).
(e) We were unable to pursue the allegation that Charge Nurse “A” used a hose on certain naked patients in a yard. XY did not claim to have been an eye witness of this incident; and the witness to whom he attributes the story was unwilling to give evidence before us.15
A lack of skill and some lack of sympathy—for nurses beating elderly patients so badly they required stitches. Notably, the authorities were not even able to identify which staff members were responsible for the abuse, which of course bespeaks negligent oversight and a bureaucratic culture of self-protection, features that will by now be familiar from our studies of socialism around the world. For all that “darkness of private enterprise,” it is impossible to imagine American medical practitioners hosing down naked patients in a hospital yard.
Various attempts were made at reform in the 1960s and the 1970s, but they were largely ineffective. This era was, it is worth noting, the very height of British socialism. In the years preceding the election of Margaret Thatcher, Britain had been transformed into a democratic socialist state, and thereby had been brought to its knees by rapacious public-sector workers, recalcitrant union bosses protected by the central-planning elites, and gross misallocations of capital and distortions of investment decisions. The intellectual failure of British socialism was nowhere more obvious than in British healthcare, but healthcare socialism is a particularly nefarious variant. Even as heavy industry was re-privatized during Thatcherite rule, the NHS survived unscathed.
It is remarkable that it did so, given its performance. Central planners can and will attempt to ignore economic realities, but incentives will continue to act in accord with the laws of supply and demand, which are as non-negotiable as the laws of gravity. Just as the Obama administration in 2008 to 2010 was very concerned with final prices paid for healthcare, the NHS bureaucrats necessarily set upon hospitals’ profits and doctors’ relatively high salaries as inefficiencies to be weeded out in the new, rational order. The result was, inevitably, a shortage of doctors. Again, the results were so extreme as to be unimaginable to most Americans, who could expect to enjoy better healthcare in prison than many Britons received in their hospitals.
“The NHS, [former UK deputy prime minister John Prescott] says, is Britain’s ‘greatest creation’. Really? Greater than parliamentary democracy? Greater than penicillin? Greater than the discovery of DNA, or the abolition of slavery, or the common law? John, the NHS produces some of the worst health outcomes in the industrialised world. Britain is the Western state where you’d least want to have cancer or a stroke or heart disease. Ours is now a country where thousands of people are killed in hospitals for reasons unrelated to their original condition. If this is our ‘greatest creation’, Heaven help us.”
_________________________________
Daniel Hannan, British Conservative MEP, 2009
By the middle 1970s—the high-water mark of British socialism—conditions in many British hospitals had reverted to pre-Victorian standards. This was especially true for those treating the mentally ill—which is to say, for those British subjects with the least political power. In 1975, there was one—one!—doctor in NHS hospitals for every 660 mentally ill patients. In his 1975 study Rationing Health Care, Michael Cooper wrote, “It is possible to find wards in mental hospitals where patients sleep, eat, excrete, live and die in one large room.” Cooper’s work is referenced in a lengthy study of the NHS by University of Dallas professor John Goodman, “National Healthcare in Great Britain,” which contains page after page of horrifying revelations: “Mentally ill patients, who fill 45 percent of all occupied beds, receive an average attendance of one hour per year from hospital doctors. As one commentator observed, ‘it would be extraordinary indeed if patients did not suffer from delays in prescribing, in motoring side effects, in over-treatment, and in discharge following recovery’ under these conditions.”16
Given that doctors were investing in these patients a grand total of one hour per year of medical attention, it is much easier to see how nurses could get away with beating their patients bloody and then stitching them up without medical supervision.
Desperate for warm bodies to fill available physicians’ slots, the Brits began to import enormous numbers of doctors from abroad, most of them trained at foreign medical schools that did not, to put it mildly, necessarily live up to Western standards. As Professor Goodman notes, by 1975 some 85 percent of the new doctors in geriatrics and 86 percent of the new doctors in mental health were foreign-trained.
There is nothing inherently wrong with foreign-trained physicians, of course, and overseas medical training has made great advances since the 1970s. These figures are simply cited to indicate that with the advent of NHS, suddenly nobody in Britain wanted to be a doctor, especially a doctor treating the elderly or the mentally infirm, i.e., those most likely to need intensive medical care and least likely to be able to agitate politically to secure their own interests. The results were, as the data make clear, nothing short of horrific.
Bear in mind, this was not some Third World backwater, and this was not 100 years ago. This was England—civilized England!—only a few years ago.
There have been additional attempts at reform, of course, and the most recent of them have attempted to allow more Britons to avail themselves of the capacities of the country’s tiny surviving private healthcare system. In other words, while the Obama administration has been inspired by the socialist NHS, the NHS itself is looking to de-socialize itself, at least in baby steps. Needless to say, the introduction of market-oriented reforms has been met with opposition from the central-planning elites that is absolutely red in tooth and claw.
Will socialized healthcare in the United States more closely resemble 1970s-era Britain, as its critics fear, or 2010 Sweden, as its enthusiasts hope? The Patient Protection and Affordable Care Act, known colloquially as ObamaCare, does not, after all, establish a single-payer system, as the most socialistic advocates of healthcare reform had hoped. It does not make doctors employees of the state (though many already are functionally that when it comes to Medicaid and Medicare patients, which is one reason why so few doctors accept new patients under those programs). Why should we assume—what reason do we have to believe, other than history, experience, prudence, economics, and a passing familiarity with political realities—that ObamaCare will give us the socialism Britain suffered, rather than “the socialism we dreamed of”?
To answer that question, bear in mind that Britain did not start with a single-payer system. It began with a system very much like the American one pre-ObamaCare: the provision of direct medical services for the very poor under a system rather like our Medicaid, later supplemented by a national health-insurance program that, like Medicare and Medicaid, accounted for about half of all healthcare spending. In fact, the timeline of Britain’s transformation from an almost entirely private system of healthcare to an almost entirely socialist one will prove strikingly familiar to the observer of the contemporary American scene.
Professor Goodman’s study provides an invaluable history of the evolution of British healthcare; writing in the 1970s, he could hardly have predicted the extent to which he was describing America’s future while chronicling Britain’s past, but it’s all there: the individual mandate, buying off the insurance companies, means-testing and rationing, the replacement of decentralized systems with central planning, and ultimately, the imposition of socialism on the whole mess.
Britain had long taken an official interest in the plight of the poor, and particularly in their healthcare. Indeed, throughout much of British history, poverty has been treated as a matter of public hygiene, with the government’s anti-poverty programs owing as much to early epidemiology as to economics. The Act for the Reliefe of the Poore, a.k.a. the Poor Law, was enacted in 1601 under the reign of Queen Elizabeth I. As Professor Goodman notes, it remained the fundamental framework for public-health and anti-poverty programs in Britain until the establishment of the NHS.
Unlike their later colonial cousins, the British maintained an established church, and the Poor Law empowered local Church of England parishes to levy taxes for the support of their impoverished parishioners. Some of their programs, such as the rather austere poorhouses and workhouses, will seem practically medieval to the modern reader, but then, this was not long after the end of the Middle Ages, so there’s a good reason for that. Compared with much of the rest of Europe, to say nothing of the rest of the world, the British system was the most progressive thing going. A commercial society, Britain was highly attuned to the issue of economic incentives, and so those dependent upon public relief were maintained at an economic level below what they would earn as laborers, thus helping to ensure that services were only consumed by those who had few or no other options. This was an early version of what today we’d call “means testing” and the rationing of government benefits.
But the working classes had other options available as well. Charitable undertakings, mostly run by religious groups, made available various kinds of relief services, including medical care, even to those poor who were not eligible for the poorhouse. And as the national home of the world’s first insurance market, Lloyd’s of London, Britain was, predictably, an innovator in the world of private health insurance. Mutual-aid organizations, known as “friendly societies,” provided sick pay, disability benefits, and death benefits to their members in exchange for a weekly premium. Many of these societies grew to be extremely financially sophisticated; indeed, it is a tragedy of history that they did not have access to modern actuarial techniques. If they had, Britain and the rest of the English-speaking world might have been spared both the indignities of socialist medicine and the cruel buffoonery of the modern insurance industry.
Between the primitive insurance business and the public-relief system, the British underclass enjoyed what was for the period a remarkably advanced social-security network. “Overall, the poor-law system was quite successful in providing food and shelter for millions of poverty-stricken individuals,” Professor Goodman notes. “Medical care of some sort existed in the public relief houses, and by the end of the eighteenth century most parishes provided some medical services for the poor in their own homes.” But the system would soon be transformed in a way familiar to those who have studied Crisis and Leviathan: a public emergency would erupt, inspiring “reformers” to take steps far beyond what would have been necessary to head off similar catastrophes in the future.
In the case of British healthcare, the Leviathan-enabling crisis was the cholera epidemic of 1866, after which the hygienic conditions of the poorhouses became a cause célèbre. The reformers first pressured local parishes to set up a network of hospitals, including isolation wards for those with contagious diseases and asylums for the insane. These existed alongside charity hospitals that had long been maintained by religious orders and local churches. At the same time, the friendly societies were beginning to experience financial difficulties—largely, as Professor Goodman notes, as a consequence of the fact that British workers were living longer as their healthcare, nutrition, and work conditions rapidly improved. With the existing system facing economic pressures and the memory of the 1866 epidemic fresh on the minds of reformers, the stage was set for the creation of a national health system.
The real opening salvo in the socialization of British healthcare—as in the socialization of American healthcare—was the socialization and nationalization of the insurance market. David Lloyd George, at the time chancellor of the exchequer, was the author of the national health-insurance system. Much like the planners of ObamaCare, Lloyd George viewed healthcare principally as an economic abstraction, and his benefits-and-battleships socialism was not terribly unlike that of war socialist Woodrow Wilson. And, like Wilson, he was partly inspired by the example of Otto von Bismarck, who had established an individual mandate for industrial workers in the late nineteenth century, which would later be expanded to cover almost all German workers in the buildup to World War I.
For Lloyd George as for Bismarck, healthcare was mainly an economic question. As Professor Goodman writes, he was “primarily concerned with sickness as a cause of poverty, not for its own sake. His proposal sought to provide medical care for the breadwinner—but not his family—so that he could return to work.” Accepting public benefits was for generations known as “going on the Lloyd George.”
Like the U.S. Social Security/Medicare/Medicaid system, the Lloyd George program was funded by a combination of payroll taxes levied on workers, a second payroll tax levied on employers, and a government contribution paid out of general tax revenues. It does not take a great deal of economic sophistication to appreciate that all three of those taxes ultimately are paid by the same party: the worker himself.
But economic sophistication was not then in great supply. “The Lloyd George scheme was sold to the public on the cry of ‘ninepence for fourpence,’” Professor Goodman writes.
In other words, low-income workers were told that they were being offered benefits whose value was more than twice the value of their weekly fourpenny contribution. The facts were otherwise. Both economic theory and empirical evidence suggest that employment taxes are not actually borne by employers. The threepence employer contribution was simply part of the cost of hiring a worker for one week. Employers had no financial reason to care whether the “contribution” went to an insurance scheme or to workers in the form of wages. So most economists believe that the burden of such taxes ultimately falls on the workers themselves. In the absence of the tax, the worker’s wage would have been three-pence higher. In addition, part of the burden of general taxes undoubtedly fell on low-income workers. So the twopence contribution from the state partly came out of the pockets of workers as well. The siren song of something for nothing, then, was largely a hoax.17
It is a hoax familiar to contemporary Americans. While the Obama administration has promised not to raise taxes on any but the wealthiest Americans, it plans to raise taxes on Americans’ employers, as though those expenses will not be passed on to the workers themselves. Additionally, payroll taxes will be raised for a minority of U.S. households under the program. As Dr. Berwick, Obama’s man at CMS, put it, “We must—must!—redistribute wealth” through the national healthcare program.18 Similarly, the law will raise taxes and fines on many businesses— which will have the inevitable result of driving many (probably most) Americans out of market-based systems into “free” or subsidized government programs.
One insidious aspect of socialist governments’ wealth redistribution policies is that they allow for the redistribution of political rights. Because property rights are fundamental to any liberal society, the disruption of those bedrock rights invites the truncation of many other political rights. Zimbabwe’s land-redistribution plan under the socialist government of Robert Mugabe is one dramatic example. Another is the case of Albania’s post-World War II “agrarian reform” program, which was used as a pretext to attack organized religion, a sector that harbored significant opposition to the socialist regime. As Raymond Zickel and Walter R. Iwaskiw reported in a federal research project for the Library of Congress, the aim was to destroy organized religion in Albania by confiscating and even burning down houses of worship and other religious property.
If land reform can be used as a pretext to burn down monasteries, healthcare reform can be used as an excuse to repress unpopular political speech, as already is happening in the United States, with the Obama administration threatening to close down any insurance company that publicly links rising health-insurance costs to the passage of ObamaCare.
Never mind that those “free” programs come at a price of trillions of dollars. That something-for-nothing approach is a critical component of central planners’ political platform. Alleging to rationally plan these industries, they argue that they can squeeze waste, fraud, and abuse out of the system; misunderstanding the role of competition and profits, they claim that by eliminating those negative elements, they can achieve savings—the magical formula of better care at lower costs.
This is why much of the healthcare debate is so abstract, dominated by meaningless questions such as what portion of GDP represents the optimum for healthcare spending. Predictably, much of this discourse is dishonest—and incompatible with well-established facts. As the New England Journal of Medicine puts it, “Barack Obama has argued that ‘too little is spent on prevention and public health.’ . . . Our findings suggest that the broad generalizations made by many presidential candidates can be misleading. These statements convey the message that substantial resources can be saved through prevention. Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.”19
Lloyd George argued that his program would, in the long run, save Britain untold sums of money by preventing the impoverishment of working-class families. Get the breadwinner back in working trim, the argument went, and we’ll save a lot of money down the road by not having to put his widow and children on the dole. It hasn’t worked out that way, of course.
Like Barack Obama, David Lloyd George faced one major obstacle to enacting his program: opposition from the insurance lobby. And like Obama, he was able to overcome that obstacle through the second-oldest tool in the political arsenal: bribery. (The oldest tool, if you’re wondering, is a large rock to the head.) The friendly societies of Lloyd George’s day were, like their modern counterparts, hostile to the socialization of their industry, and for much the same reason: they stood to lose money. The British Liberals responded by creating a program that would work through the existing insurance industry, requiring the working class to purchase insurance coverage and providing subsidies to enable that purchase.
American Democrats would take precisely the same route a century later, with the “individual mandate” for health insurance and the array of subsidies that enabled it. Like their later American counterparts, the British insurers were very much pacified by having the government pass a law requiring that practically every family purchase its products. The friendly societies made another calculation that would later inform their American epigones: by establishing themselves at the intersection of government, finance, and medicine, they—not the doctors, not the patients, not the hospital owners—would be in charge of the system.
In other words, ObamaCare will place the United States in much the same position in which the United Kingdom found itself in the wake of David Lloyd George’s reforms: with a system dominated by profit-seeking insurance companies, but one that is at the same time financed mostly through the government, with all of the clumsiness and lack of accountability that entails. The economics are quite similar, and so are the politics: Lloyd George’s reform package was sold in part as a measure for mitigating a restive working class that might otherwise be tempted into demanding more radical measures to secure its interest. ObamaCare has been sold as the moderate alternative to an NHS-style single-payer system.
Moreover, Lloyd George’s system was met with mixed feelings by Britain’s Fabian socialists, who believed that it did not go far enough but who also insisted that the working classes were not competent to see to their own affairs without oversight from the Oxford and Cambridge men who dominated the political class. The American Left has greeted ObamaCare as a distasteful compromise with the private sector but celebrate the insurance mandate on the theory that the American working class is too stupid to secure its own interests without being forced to do so by federal statute.
You will notice, though, that Britain did not stand still after the Lloyd George insurance reformers. Neither will America after the establishment of ObamaCare. In fact, it took Britain less than thirty years to go from a socialized insurance market to a fully socialist healthcare system. The United States, being restive by nature, will probably move even faster.
If we continue to work under the theory that Britain’s past illuminates America’s future, then it is worth noting, in brief, how the Lloyd George insurance system became the NHS that we know today.
The Lloyd George scheme, like ObamaCare, created perverse financial incentives that were ultimately unsustainable. In addition to buying off the insurance lobby, Lloyd George and the Liberals had to buy off the doctors, which they did by establishing a generous remuneration plan that kept them extraordinarily fat and happy; the volume of medical services rendered increased by 50 percent in the years following his insurance reforms, and doctors’ fees increased by roughly the same amount, meaning that doctors’ incomes rose sharply—doubling in poor areas. Later attempts under the NHS to rein in those expenses led to the catastrophic physician shortage experienced by Britain in the 1960s and 1970s, just as attempts to limit physicians’ payments under Medicare and Medicaid in the United States have led to a critical shortage of practitioners willing to accept new patients under those programs.
The British friendly societies that were less successful in screening out high-risk subscribers soon found themselves in dire financial straits and resentful of their more successful competitors, creating a lobby for national action to produce a system that was more “fair”—meaning, of course, a system that would do more to guarantee their own profits and improve their position in the marketplace. Since medical services were “free” at the point of consumption, patients had no incentive to limit their use of healthcare services, and the addition of financial benefits—particularly disability payments that required a doctor’s certificate—greatly increased the man-hours and administrative overhead necessary to maintain the system. Doctors responded by shunting as many of their patients as possible onto the dole and the charity hospitals. The radical difference in the quality of care provided to “private” patients—those paying their own expenses out of pocket—and to those in the national system led to social resentments that inevitably found expression in electoral politics. In other words, Britain found itself in precisely the position in which the United States is positioned to find itself in the next ten to twenty years.
“In the 1920s and 1930s, there were numerous recommendations to alter the national health insurance scheme,” Professor Goodman writes. “They included recommendation to extend benefits to the dependents of the insured workers, and to expand the system to cover hospital treatment and other specialist care. Ultimately, these proposals were rejected in favor of a full-fledged, universal scheme of ‘free’ medical care. Many people saw reform of national health insurance as patchwork on a scheme that was fatally flawed in any event. Healthcare, they argued, should be available to everyone as a matter of ‘right.’”20
The Lloyd George model turned out to be a transitional stage on the road to healthcare serfdom. ObamaCare will likely serve a similar purpose, as that is its intention. “I am a proponent of a single-payer universal healthcare program,” then-Illinois state senator Obama said in 2003, back before he was politically required to pretend that he endorsed no such thing. “All of you know we might not get there immediately, because first we have to take back the White House, we have to take back the Senate, and we have to take back the House.”21
Having done that in 2008, what comes next? In a 2007 interview, then-U.S. Senator Obama laid out the plan: “Let’s say that I proposed a plan that moved to a single-payer system. Let’s say Medicare plus. It would be, essentially, [that] everybody can buy into Medicare.”22 Allowing everybody to access Medicare is equivalent to what is known as the “public option”—creating a quasi-socialist system to run parallel to the existing system, and then using the coercive powers of the state to financially undermine what remains of the private system, leaving the public “option” the only option.
Senator Obama envisioned as much as far back as 2004, when he said, “At the federal level, what I’m looking at is a very specific proposal that would provide healthcare coverage for all children who need it all across the United States, would allow 55- to 64-year-olds to buy into the Medicare system. And I think that if we can start with children and those persons 55 to 64 that are most vulnerable, then we can start filling in those holes and ultimately I think, move in the direction of a universal healthcare plan.”23
Democratic senator Barney Frank more succinctly described the strategy of using ObamaCare to establish the expanded federal role, supplementing it with a “public option,” and then replacing the whole ugly tuna casserole of a system with an NHS-style full socialization: “We just don’t have the votes for [single payer]. I wish we did. I think if we get a good public option, it could lead to single payer, and that’s the best way to reach single payer. The best way we’re going to get single payer—the only way—is to have a public option, and demonstrate its strength and power.”24
It worked in Britain. It will work here.
In the course of lecturing a group of congressional Republicans about the wisdom of his healthcare proposal, President Obama said,
If you were to listen to the debate—and, frankly, how some of you went after this bill—you’d think that this thing was some Bolshevik plot. That’s how you guys presented it. . . . We’ve got to close the gap a little bit between the rhetoric and the reality. I’m not suggesting that we’re going to agree on everything, whether it’s on healthcare or energy or what have you, but if the way these issues are being presented by the Republicans is that this is some wild-eyed plot to impose huge government in every aspect of our lives, what happens is you guys then don’t have a lot of room to negotiate with me.25
But, of course, Obama’s healthcare proposal, as articulated by the president himself and by his congressional colleagues, was anything but a Bolshevik plot. It was a David Lloyd George plot, a Wilson war-socialism program, an iteration of Bismarckian national socialism without the fancy uniform, braid, epaulettes, mustache, or Prussian accent. It is socialism in one sector, the fatal conceit of the best and the brightest, Chávez-ism without the red shirts and rousing party songs. It was and is a way station on the road to serfdom.