At the beginning of the 20th century, about 90% of all American hospitals were private, for-profit enterprises, today it is 10%

Excerpts from: American Healthcare Fascialism from Mises Daily by Thomas J. DiLorenzo

. . . The problems of the American healthcare system are caused entirely by the fact that the government subjects the system to massive interventions, some of which are fascist in nature, while others are socialist.

In 1992, the Hoover Institution published an essay by Milton Friedman titled "Input and Output in Medical Care," in which Friedman documented how, at the beginning of the 20th century, about 90% of all American hospitals were private, for-profit enterprises. State and local governments then began taking over the hospital industry. So, by the early 1990s only about 10% of all American hospitals were private, for-profit enterprises. Socialism characterizes at least 90% of all hospitals. Many other hospitals have received government subsidies, and with the subsidies come reams of regulation, making them fascist by definition.

"The problems caused entirely by the fact that the government subjects the system to massive interventions, some of which are fascist in nature while others are socialist."

The effect of this vast government takeover of the hospital industry, Friedman documented, is what any student of the economics of bureaucracy should expect: the more that is spent on hospital care, the worse the quality and quantity of care become, thanks to the effects of governmental bureaucratization. According to Friedman, as governments took over an ever-larger share of the hospital industry (being exempt from antitrust laws), hospital personnel per occupied hospital bed quintupled, as cost per bed rose tenfold. . .

"The U.S. medical system, in large part, has become a socialist enterprise," Friedman ended. Friedman also once suggested a syllogism to explain the bizarre spectacle on display today of responding to problems caused by healthcare socialism with even more healthcare socialism.

The syllogism goes as follows:

1. Socialism has been a failure everywhere it has been tried;
2. Everyone knows this; and
3. Therefore, we need more socialism.

Layers of regulation plague every aspect of medical care and health insurance in America. In the health-insurance industry, for instance, each state imposes dozens of regulatory mandates on health insurers, requiring them to include coverage of everything from massage therapy to hair implants. . .

Each mandate increases the cost of health insurance and probably increases the typical health-insurance policy by hundreds, or thousands, of dollars yearly. . .

Government policy in the health-insurance industry applies both the brakes and the gas at the same time. While imposing onerous and cost-increasing regulations, government also limits legal liability in some cases where an insurer refuses to pay for a particular procedure or treatment that costs a patient his life. The state also creates state-wide cartels with laws prohibiting the portability of some aspects of health insurance. . .

Getting back to pure socialism, Medicare, Medicaid, and the Veterans Administration hospitals socialize a very large portion of healthcare in America, with the same predictable results as the socialization of hospitals: runaway costs for decade after decade, coupled with massive fraud, as is often the case when politicians are enabled to spend other people's money. Even the federal government admits that there is currently about $60 billion in Medicare fraud. Since government always understates the cost of everything it does, it is likely that the real number is at least two or three times that amount.

Having taken over most of the hospital industry, government-run or government-subsidized hospitals have created regional monopoly power for themselves with so-called "certificate-of-need" (CON) regulation. How this regulatory scam works is that an existing hospital in an area will give itself the legal "right" to decide whether there is a legitimate "need" for more hospitals. They have given themselves, in other words, the right to veto new competition in the hospital industry. . .

Not surprisingly, research has shown that CON regulation has increased hospital costs. CON regulation is also used to block competition in various healthcare professions as well, from nursing to home healthcare. . .

Physicians have long enjoyed a degree of monopoly power derived from state legislatures that delegate to the American Medical Association (the doctors' union) the "right" to limit entry into medical schools through accreditation. Only graduates of accredited (by the AMA) medical schools are licensed to practice medicine. The AMA has used these state-granted privileges to limit both the number of medical schools and the number of medical-school graduates. The reduced supply of doctors drives up the price of medical care and the income of AMA members. .

Government regulation of pharmaceuticals and medical devices, primarily by the Food and Drug Administration (FDA), increases healthcare costs, denies the benefits of myriad helpful drugs and devices, and creates monopoly power. It has literally been responsible for the premature death of thousands of Americans who have been deprived of drugs that were long available to people in other countries. . .

The government's legal system is also responsible for what used to be called "the liability crisis." The genesis of this crisis began in the 1960s. The government courts began accepting the Chicago School Law and Economics argument that assigning all liability in product-liability cases to manufacturers would be a good way to minimize the "social costs" of accidents. Manufacturers know more about products such as medical devices than anyone else, the argument went, so contract law and shared responsibility for accidents with the users of the products were thrown out the window.

So, when accidents occur, slick trial lawyers have had an easy time convincing dumbed-down juries to award millions, or hundreds of millions, of dollars in liability lawsuits. These lawsuits have bankrupted the manufacturers of many medical devices, while convincing others that the devices are too risky to make. The effect on the healthcare consumer is poorer healthcare and higher prices. . .

The only sensible approach to healthcare "reform" would be massive privatization of America's socialized hospitals, combined with deregulation of the medical professions to introduce more competition, and deregulation of the health-insurance industry. Free-market competition would produce medical "miracles" the likes of which have never been seen, while dramatically lowering the cost of healthcare, just as it has done in every other industry where it is allowed to exist to any large degree.