Medicare Not Socialism

Throughout our current debate over current efforts to “reform” our healthcare system one of the core points of contention has been over the definition of Socialism.  Opponents to the current reform efforts of President Obama and Democratic Congressional leaders have properly pointed out that the current proposed reforms would ultimately result in the advancement of Socialism here in the U.S.  In response, those that support the current reform effort often point to the fact that few who oppose the current reforms have made any efforts in opposing or eliminating our Medicare system.  These proponents see little difference between what is currently being offered and our current Medicare system.  They argue that if you are not raising objections about Socialism regarding Medicare then you have no business doing so with the current reforms.  Of course this “hypocrisy argument” might be sound if only it were true that there were no difference between the current proposals to essentially nationalize our healthcare system and Medicare.  The reality is that there is a major deference between Medicare and the current reform proposals.

What is Socialism?

First, it must be understood that every government program is NOT an example of Socialism.  For the term Socialism to be applied to a government program we must ask ourselves whether that program is providing a service that could otherwise be provided by the private sector and our free-market system.  Examples of these services that generally cannot or would not be effectively provided by the private sector are: core infrastructure needs, parks, police/fire services, roads, utility delivery (easements), the space program, military and defense, etc…

To test weather a particular government program is an example of Socialism or not we must ask several basic questions; does the particular product or service form a Natural Monopoly (http://en.wikipedia.org/wiki/Natural_monopoly) and does the needed product or service have the potential for generating a profit?  Essentially, if there is no profit in it, the free market will not provide it regardless of how needed it is.

Medicare not an example of Socialism!

If we apply these tests to Medicare it becomes readily apparent that Medicare is not an example of Socialism because it is a needed product or service that would not generally be profitable to private industry.  While some would may argue that providing end of life medical coverage to the elderly is not a “needed” program, I will take the stance that it is needed because one of the measures by which any modern civilization is its willingness to care for those that have contributed so much to our society throughout their lifetime.  In my mind, caring for the elderly is little different than caring for our veterans whose service has helped to guarantee our democratic freedoms.  It is an obligation that we take on as a society to the benefit of society.

Medicare was initially design to be a form of medical insurance for the elderly.  Ultimately, as we age we ALL inevitably incur an ever-increasing number of medical problems and expenses as a simple result of aging.  In addition, this happens at a time in our lives when we are no longer earning an income and the ability to pay for medical insurance is greatly reduced.

Private insurance is based on the idea that a group collectively pays into a policy so that there is a pool of funds to pay for the medical expenses incurred by the few.  In the case of geriatric medical insurance, the number of people needing to draw from that cash pool to pay expenses quickly outpaces the ability for the cash pool to be replenished.  In essence, those in need of geriatric medical insurance would in the long run be better off paying for their own medical expenses out of pocket as the premiums for such insurance would become too great.  There simply is no profit to be found in providing private geriatric medical insurance.  As such, Medicare as it was originally conceived simply cannot be considered a classical form of Socialism because it provides a service that would not be provided by the free market.

Private industry or business would simply not provide geriatric insurance.  Even if they did, the premiums would be well beyond the ability of those individuals covered by those policies to pay and the extra load of covering those individuals would have to be placed on the younger generation.  This would ultimately make medical insurance simply to costly for many employers to provide for their employees.  Because the care of our elderly through private insurance is simply not economically viable Medicare was invented as a program where individuals would essentially pay their Medicare premiums throughout their life, rather than waiting until they were no longer working and unable to afford it.

Medicare does not work without free-markets.

Of course, any discussion about the viability of Medicare must include the inevitable fact that Medicare relies heavily on the private medical system.  As such it is arguable that the current proposed National Healthcare System would remove the few remaining free-market incentives in health care that help keep costs relatively low.  As our private health care system becomes less profitable under government intrusion into the free-market it is foreseeable that Medicare would suffer greatly as the cost to the government to provide geriatric medical coverage would rapidly increase.  Ultimately, the very proposed healthcare reform that is supposed to help reduce health costs will likely cause more bureaucratic inefficiencies.

Such government pressure on any free market system usually leads to the formation of monopolies as free market competition is often replaced with governmental regulation.  Over the years, we have seen a similar consolidation in companies that provide military hardware to the U.S. government.  Where once there were many, now there are only a few huge providers with ever expanding costs.  In many cases the economic success of these government contractors is tied more to their political connections and political influence than governed by their economic efficiency and ability to produce the best product at the lowest price.  Ultimately, the move by the U.S. government towards a single payer heath care system, which is the stated goal of both President Obama and many Democratic leaders, could ultimately cause the cost of Medicare to consume an even greater portion of our national budget as fewer private health care providers are able to compete and free-market competition is replaced with a “political-market” system.

Addendum:

As one final note; I want to point out that if this discussion about Medicare and Socialism teaches us anything, it is that contrary to what many Conservatives and even some Liberals think; not all “social” programs are examples of Socialism.  Many “social” programs would be better classified at Social Engineering Projects.  Even our public welfare system is not a service that would otherwise be provided by the free-market.  While many would argue that it is an unnecessary entitlement, I would argue that welfare in its various forms, while currently inefficient and mired in bureaucracy, provides a vital service to society.  Like Social Security, beyond making us simply feel good about caring for the elderly, poor or destitute in society, welfare is ultimately the nation’s insurance policy against revolt and revolution.  While this may sound cynical, historically people are far less willing to take up arms against their own nation when their children are fed.  Also, there is a clear economic advantage to having an economic safety net that keeps people from falling into destitution and keeps them acting as viable players in the free-market system.

While it is true that Socialism often does lead to in increase in the number of Social Engineering reforms which ultimately erode personal liberty, we all should remain aware that the term Socialism describes a shift from private control of industry to government control of industry.  In this respect, the purchase of a controlling share in General Motors is a prime example of Socialism while having the government provide a valuable service like Medicare that either would or could not be provided by private industry is not.

Even Adam Smith, the recognized father of modern Capitalism would seem to agree that there is a legitimate roll for government in Capitalism.

 

“Smith specifically stresses three things that government should do in a society of natural liberty. First, it should protect that society against “the violence and invasion of other societies. Second, it should provide an “exact administration of justice” for all citizens. And third, government has the duty of “erecting and maintaining those public institutions and those public works which may be in the highest degree advantageous to a great society,” but which “are of such a nature that the profit could never repay the expense to any individual or small number of individuals.” Put into today’s language, Smith explicitly recognizes the usefulness of public investment for projects that cannot be undertaken by the private sector — he mentions roads and education as two examples.” Adam Smith and the Origin of Capitalism – PBS

http://www.pbs.org/wgbh/commandingheights/shared/pdf/ess_adamsmithorigin.pdf

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