THE MEDICARE FRAME-UP

There is only one way to bring the benefits of the free market into health care: end government intervention

By Robert Garmong

After battling for months over two allegedly opposite versions of the bill to add prescription drug coverage to Medicare, members of the House and Senate announced Saturday they had reached an agreement. House Republicans managed to include in the bill a provision to contract out Medicare benefits by giving elderly patients subsidized insurance, rather than having the government directly pay for pharmaceuticals. Many Democrats, however, decry this as a privatization of Medicare that, in the words of Representative Charles Rangel, would not reform the Medicare system as we know it, but dissolve it. Republican Bill Thomas agrees: Our answer to that is, we certainly hope so. Members of both parties see the Republican-led effort to pass the bill as a break with the Great Society welfare state.

In fact, the agreement is based on the same socialist premise as the original Medicare system--and it promises to be every bit as disastrous in practice. The premise is that one gains a moral claim to a good, not by earning it, but simply by needing it. On this premise, as long as any patient has an unmet need, other people must be coerced--whether through taxes or regulations--to meet it.

Economically, this guarantees skyrocketing expenses as more and more of the elderly cash the blank checks offered them by government. Medicare is already expected to face bankruptcy within 15 years--and Senator Ted Kennedy calls the current prescription drug expansion only a down-payment. Some have estimated that the new program's $400 billion estimated cost will quickly turn into $800 billion or more.

What will happen when those blank checks start bouncing? Since Medicare money is, in one of President Bush's favorite phrases, the people's money, ultimately the decision of how it's used belongs to Congress--and that means price controls and rationing. The original Medicare program began rationing care soon after its inception, and ever since the medical spending crisis of the 1980s Medicare has imposed price controls on doctors via Diagnosis Related Groups (a fee schedule that pays, for each diagnosis, an amount fixed by bureaucrats in Washington).

It is the basic moral premise of the welfare state--the idea that the producers of health care may be coerced to provide for the needs of their patients--that turns Medicare into a war against the very doctors and hospitals who produce the services it seeks to redistribute. And this attack on producers leads inevitably to shortages and the rationing of care.

By the same logic, we can expect that the prescription drug plan will end up imposing price controls on drug companies. The only difference, in the Republican plan, is that allegedly private companies will be the middlemen executing Congress's orders.

This has happened before, in the HMO debacle of the 1990s. Congress effectively created the HMOs in 1973, when it offered massive tax incentives to employers who shunted their workers into managed-care plans. The goal was to bring the power of the market to solve the crisis created when doctors and hospitals, squeezed by Medicare price controls, raised prices for non-Medicare patients. In fact, HMOs brought the worst aspects of socialism: rationed care, tyrannical bureaucracy, price controls, harried and disgruntled physicians, miserable service for frustrated patients--all of it blamed, not on the government programs that created the health-care crisis, but on the pseudo-private HMOs.

We can expect the same catastrophe to come from the privatized Medicare prescription drug plan. Nominally private insurers will answer to penny-pinching government paymasters, who will demand that they cut costs by limiting patients' access to drugs and by imposing price caps on drug companies. This is merely an indirect form of price controls, imposed by private companies acting to please their government employers.

The results of price controls are well-known. No company will be eager to risk the vast resources needed to create new drugs--decades of research and billions of dollars invested - knowing that when it finally succeeds in producing a path-breaking new drug, its profits will be pinched by government edict. Such consequences will be no less deadly because the agent issuing the government's edicts is a corporation.

Socialism with a free market veneer is still socialism. All the Republicans are doing, in their supposed attempt to expand the free market, is planting the government's smoking gun in capitalism's pocket.

There is only one way to bring the benefits of the free market into health care: end government intervention. As long as Republicans do not reject the socialist premise that the needs of patients authorize the sacrifice and coercion of producers, their supposed support for the free market will merely hasten its demise.

Robert Garmong, Ph.D. in philosophy, is a writer for the Ayn Rand Institute (www.aynrand.org) in Irvine, CA. The Institute promotes Objectivism, the philosophy of Ayn Rand, author of Atlas Shrugged and The Fountainhead. Send comments to reaction@aynrand.org