G. Keith Smith, M.D.

I am not an economist.  I consider myself a student of the school of economics sometimes referred to as the “Austrian” school.   Having said this, it is with some uncertainty that I write the following piece.  Oh well.  Here goes.

Everyone wants to be part of a “win-win” deal, don’t they?  Mutually beneficial exchange is the hallmark of a free market and is absent in a coerced (“win-lose” deal) arrangement like government-provided services.  In a free market, parties enter the arena of exchange in anticipation of which they hope to better their current circumstances.  If no perceived future benefit is anticipated due to a proposed exchange, the exchange simply doesn’t occur in a voluntary and free market.  Some folks are happy to be in a win-lose arrangement as long as they are on the “win” end.  That is a subject for a future blog.

The “seller” wants the exchange to occur for something he values more than the goods with which he is willing to part.  The value to the seller of the money or goods for which he is trading is greater to him than that which he already possesses, otherwise, no trade/exchange will occur.  The buyer values the seller’s goods more than the money in his pocket, otherwise no exchange will occur. The job of the salesman is to highlight value and perhaps even introduce the concept of the scarcity of the buyer’s opportunity, an attempt at increasing the buyer’s time preference, a common strategy in many “sales” arenas. 

One of the most miraculous things about this entire dance is that both parties are better off/improved having undergone this exchange.  This is the basis for the formation of capital and the market activity that improves the standard of living of all people involved.  This capital formation doesn’t occur in a government-coerced exchange as one of the parties is necessarily a loser, negating the other “winning” party’s gain.

One of the radical “Austrian” contributions to the field of economics is the idea of the “subjective theory of value.”  Quite simply, a potential buyer’s assessment of the value of targeted goods is different from any other buyer.  The goods don’t have an arbitrary value, only that assigned to them by a potential buyer and a function of a comparison to the next best alternative use of the buyer’s money. “It’s worth what someone will pay for it,” partially captures the meaning of the subjective value theory.  This radical concept makes the whole concept of economic forecasting suspect, as the prediction of the actions of individuals based on changes in pricing or other variables, is different for each individual, making any assumption about future mass behavior difficult at best. 

Since rocking chairs, Steinway pianos and French Bordeaux’s are valued differently by different buyers, the sellers have an incredible challenge.  They must take into account their production costs, factor in a reasonable profit and find the “market clearing price” (that price that results in neither surpluses or shortages).  If they get it wrong on the high end, little product is sold.  If they shoot low, they can’t fill all of their orders. 

The appearance of competitors keeps the sellers in a position of constantly re-evaluating various efficiencies and production costs in order to present a value to the marketplace and potential buyers.

What does any of this have to do with healthcare?  I think that even a basic understanding of the above (and I confess to only a basic understanding) illustrates the futility of the role in which the central planners have placed themselves, engaging in price fixing, completely discounting the notion of subjective value.  Some people have chosen a higher priority alternative to the purchase of healthcare, that choice now removed from them, however.   

Also keep in mind that the lack of transparency in healthcare pricing is the equivalent of walking into a store of some kind that has turned its lights off such that none of the merchandise can actually be seen.  The information necessary to determine value is not there, so there is no way to know if an exchange is mutually beneficial and hence no way to know if such an exchange is to the buyer’s advantage and whether such an exchange should even occur.  Mises clearly showed that the absence of a rational pricing system spelled the doom for any socialist enterprise or government due to the lack of feedback this pricing information provided the producer and buyer, shortages or surpluses being the obvious result. 

Inevitable shortages and surpluses result from central economic planning, the shortages in the healthcare arena meaning neglect or death.   This is not my opinion.  This is evident in every country where central planning has been introduced into the medical marketplace.  The presence of government in any arena of exchange means that one or both parties want no part of the exchange on their own.  If the parties saw an exchange as mutually beneficial, there would be no reason for the GUNverment (bureaucrat with a gun) to “enforce” the exchange….it would occur quite simply on its own if seen as mutually beneficial. 

That GUNvernment has an even greater presence in the health care marketplace than ever before, with even more to be expected, the parties with a gun in their ribs will act differently, just as you would expect.  Robbery victims don’t typically part with their property or service with a smile on their face, wishing their mugger a nice day.  Surly, sullen and cursory.  Neglectful, dismissive and dangerous.  These are the words I’ve seen describe many physician encounters in medically socialized countries.  I believe that we will see more and more of it here in this “country.”  The idea that the behavior and actions of physicians will not change when a gun in at their head is yet another miscalculation and the predictable result of the arrogance of the central planners, those who relish in “making” people do things, rather than mind their own business.

G. Keith Smith, M.D.

Fans of universal health care and big government in general see those of us who believe in limited government with local charity helping those in need, as cold, heartless barbarians.  Some statists have difficulty with the distinction between charity and theft.  Indeed, it is one thing for me to hand $20 to someone who’s hungry and cold, quite another for a government goon to take $100 from me at gunpoint and give the hungry and cold person $20, the other $80 going to “system” costs.  Some “conservatives” would call this wrong because it is inefficient.  I would say it is wrong because I was robbed.  

Statists would say that folk’s inclination to be charitable simply can’t be trusted to meet all of the needs of the poor.  Only the government can be trusted to care for the poor.  Really?  Many economists have argued that the subsidization of the poor has resulted in…more poor people.  This really is common sense when you think about it.  Mises stated this clearly when he said that “…that which is subsidized proliferates and that which is taxed is destroyed.”  I’ve heard small government fans get into shouting matches with statists about whether charity was sufficient to help the truly needy.  ”Yes it is!”  ”No it isn’t.”  That sort of back and forth.

A thought occurred to me.  Part of the beauty of charity is the very uncertainty that characterizes it.  Just the mere thought that a charitable organization might run out of food, shelter, medicine at the free clinic, etc., interjects the necessary uncertainty that limits the likelihood that the supplies or service will be overwhelmed by demand.  This uncertainty fans the flames of self-sufficiency, just as the certainty of the arrival of the welfare, unemployment or disability check fans the flames of irresponsibility for those addicted to this form of crack.  The epiphany of “I’m going to have to do this on my own, no matter what it takes,” is not likely to happen unless the charity fails to deliver on some occasion.  Holes in the safety net deter folks from counting on it to catch them.  

So when a statist scoffs at the inadequacy of charity as an alternative to their socialist utopia, you can agree with them and describe why this is a beautiful thing.  No success is appreciated like that which has followed on the heels of failure and countless stories of welfare addicts that broke free from the shackles of the poverty pimps attest to this.  Statist politicians, on the other hand, want no one to break free from their pimp grip as this weakens their constituency.  This new healthcare plan was never intended to act as a health care providing tool.  The usual cronies have robbed the taxpayers and have left town.  Only a begging, open mouthed baby bird-like constituency will remain and the politicians’ goals will have been realized.

Cheers to the inadequacies of charitable organizations and the self-sufficiency promoted by their failures.

G. Keith Smith, M.D.

A recent article from the Tulsa World about “hospitalists,” doctors employed by hospitals to take care of patients in the hospital, points out very clearly the conflicts inherent in physicians working for someone other than their patient.  Many enter this line of work because they want no part of private practice.  Some of these folks want to raise a family or to volunteer at a charity.  The article also quoted “hospitalists” as going for better hours and better pay.  Residents in training also justified this path claiming that no one in medical school had taught them how to run a business, deal with the reams of paperwork of private practice or deal with insurance companies.  One Dr. Ziad Sous, president of the Tulsa Hospitalists said the hospitalist “movement” (italics mine) has “improved health care by making it more efficient and saving money.”  

He continues, “The traditional method became really time consuming and they weren’t providing good care in the hospital.”  Continuing from the article, “Hospitalists decrease the length of stay and costs of care partly because the doctors can order tests and look at the results throughout the day, instead of just visiting the hospital once every day, Sous said.”  Maybe he hasn’t heard of the telephone.  The article goes on to say that length of stay has been decreased by hospitalists, but that the effect on costs is mixed. This is generous.  More research points to an increase in costs with hospitalists involved than studies that show a decrease.  Less time in the hospital if your care is managed by of these folks is guaranteed, though.

That must mean the generation of hospital charges is pretty intense while you’re there!  Let me see.  You aren’t in the hospital as long and it costs just as much (or more, depending on what study you are referring to).  That translates into more available beds in the hospitals that in spite of not wanting to make a profit continue to do so, partly it seems by having their employed doctors kick people out early, but test and charge them aggressively while they are there.  Like a restaurant trying to quickly turn the tables over.  Maybe Dr. Sous (not The Cat in the Hat Dr. Seuss) meant that hospitalists can hang out at the hospital and order tests all day.  The notion that the care is somehow better from these “doctors” doesn’t deserve a response on this blog.

Another point.  These hospitalists are typically paid $200,000/year, more than the average primary care doctor out there.  Where are the hospitals getting this kind of dough?  Think the hospitals are going to pay them more than they’ll make for the hospital?  And you thought the greedy doctors were responsible for the high cost of health care?  You think the hospital is tracking whether or not these hospitalists are earning their keep?  Think there’s any performance pressure to order a little more of this test and a little more of that test?  To discharge patients a little earlier?  I’m sure there are some good people working as hospitalists.  But what do you think these folks will do when there is a conflict between what is right for the patient they are attending and what is right for their boss?  What if the administrator wants an unprofitable patient discharged and that is medically not the best thing for them?  What then?  What if the surgeons employed by the hospital aren’t any good and the hospitalist with a conscience sends the patient to someone “outside of the  family?”  Think they’ll get a visit from the “Don?”  

This “specialty” is actually a bubble, a market distortion, whereby extraordinarily wealthy and subsidized “not for profit” hospital systems throw a ton of dough to heavily indebted medical graduates, knowing that they will reap many times from the tests these kept doctors will order, all consistent with the latest practice guidelines, or meaningless use nonsense, of course.  This is the type of mal-investment that Mises wrote about, resulting in any number of unintended consequences.  One of the consequences is that faced with a cush, $200,000/yr job, with lots of time off for whatever, or pursuing the more difficult, but more honorable path where patients refer to you as “my doctor,” most graduating residents are going to act consistent with human nature and take the easy, although, short-sighted, road.  Can you say shortage of primary care physicians?  Many young physicians will never realize what working for their patients, instead of the vicious administrator, would have meant.  This “specialty” wouldn’t exist, of course, without the government’s intervention.  Provision of this no-tax status to giant hospitals has burdened these organizations with amounts of cash used now to distort the physician labor market.  Hospitals are also reimbursed disproportionately for what they provide compared to physicians and are thus inclined to pursue very intense billing practices.  Private practice physicians with a conscience are not as easily coerced into ordering countless and unnecessary tests and procedures as the hospitalist accomplice whose job depends on complying with this assault on the patients assigned to him…..hence the appearance of this “specialty.” 

A surgeon recently told me that the hospitalists at one of the large hospitals here in Oklahoma City have become “aware.”  Not aware that they are no longer patient advocates, but aware that they are going to be paid the same as long as they meet their “target production numbers.”  They will not see one single patient after that.  Regardless the circumstances. The hospital has had to hire more and more of these “doctors” as no motivation exists to entice these belligerent folks to work a little harder when there is work to be done.  Sounds like the old East Berlin, or current-day Canada to me.

G. Keith Smith, M.D.

IPAB: Independent Payment Advisory Board.  MLR:  Medical Loss Ratio.  ACA:  Affordable Care Act.  Can you say George Orwell?  Let’s take one at a time.

IPAB:  First, there is nothing independent about this proposed outfit.  Selection of the folks on this panel will make senate confirmation hearings look apolitical.  These seats, like almost everything in Washington, will be sold.  Not really sure why Blagovich is in jail….selling seats and positions of influence is standard operating procedure in D.C.  Second, there is nothing advisory about this outfit.  What they say goes.  And they will be wrong.  No one and no group can possibly determine the “moving target” of the market clearing price (that price that is “correct,” in that at this price there are neither surpluses or shortages) and get it right.  What is the “correct” price today may not be the “correct” price tomorrow.  What’s right in Baton Rouge may not be right in Camden Maine.  They should all read Mises’ “Socialism” prior to taking the job…not that it would make any difference.  Here he clearly shows that socialism’s failure is due to the absence of a rational system of pricing.  In fact any economic system without rational market-determined pricing will fail.  IPAB, however, is not a board intended to maximize the utilization of resources.  It is intended to intentionally ration care by setting a price below that required in the marketplace.  One would have to be incredibly naive to believe otherwise.

MLR:  You should know what this means.  It has two meanings.  What those in government say it means to effect and then what it is really meant to do.  Two really different things.  What the government says:  no more than 10-15% of a health insurance company’s revenue from premium collection can be used for administrative overhead.  85-90% must be paid out to satisfy claims.  HOORAY for the consumer, right?  Wrong.  Here is what MLR really does.  It puts the little insurance companies out of business.  10% of 20 billion dollars is enough to pay administrative expenses at the big boys.  10-15% of 8 million dollars may not be enough to get it done for the little player.  Result?  All of the little guys clients go to the big boys.  Less competition in the marketplace.  Consolidation in the marketplace.  Why do you think the giant insurance companies supported this aspect of the newest health care legislation?

Affordable Care Act:  Even the government’s own studies show that this legislation will add at least 1 trillion in health care spending.  This will be primarily absorbed at the state level with wildly increased Medicaid expenditures.  Companies providing health benefits to employs are anticipating huge increases in their obligations.  Many companies will begin seeking insurance products that are insurance in name only, with little or no benefits attached.  EPO’s(exclusive provider organizations) are an example of such a product, an unimaginative twist on HMO’s.  

I think that in his worst nightmares, George Orwell never imagined such unapologetic and false labels issued by the state.

G. Keith Smith, M.D.

KOCO TV, here in Oklahoma City, did a story on our facility and the center’s transparent and packaged pricing recently.  You can view it here.  In response to the question ..”how can you be so much cheaper than the hospitals..”  I said, “..we didn’t have an administrator in a $3000 suit.”  While this is true, there is a better answer, I think, to this question.  

The question posed presumes that the prices charged by the hospitals are reasonable and legitimate, when in fact, they are not.  The question is not, “how can you be so much cheaper, ” but rather, “how can they justify charging ten times what we do,” as is the case, much of the time.  Starting with the notion or idea that hospital charges are legitimate is a mistake.  The lack of the free market in medicine (well…except for places like The Surgery Center of Oklahoma!) has guaranteed the absence of rational pricing.  Mises made this point in his brilliant book “Socialism.”  Economic systems without rational pricing are always doomed to fail as the feedback to producers and consumers is faulty, resulting in inevitable surpluses or shortages.  I have told people recently that we won’t really know whether our prices are “right” until we have competitors displaying their prices, bringing about the price competition that is so sorely needed in healthcare.  I think that 1/10 of the hospitals’ price is a great starting place though!

I have been approached by insurance companies that offered payment contracts to our facility based on a super-percentage of Medicare.  ”We will pay you 125% of the Medicare rate.”  You should see the looks of consternation I get when I tell these executives that Medicare rates mean nothing to me, that these numbers are arbitrary, capricious and not legitimate. But “Medicare” pricing, which is completely illegitimate, is the standard.  Why?  Because most have weakly accepted it as such.  My point here is that hospital charges should command our scrutiny, not represent some mysterious standard.

Everyone complains about the cost of health care.  How is it that few are connecting the dots, asking whether the costs are related to what the hospitals charge and that these charges might not be legitimate?  Why is the question put to me to justify my low charges instead of spotlighting those who have been fleecing the sick for years?  

Kudos to KOCO TV for airing a piece that may help more people begin to challenge the health care giants whose prices have been foolishly trusted for so long.  Many thanks to the patient in the piece, Paul Freeman, for traveling to Oklahoma City for the interview and to Jay Kempton, as well, for his contribution and insight.  

G. Keith Smith, M.D.

“Don’t touch my Medicare!”  Ah, the battle cry of the AARP.  What a powerful political force this organization represents, powerful enough to cause some trouble for the independent payment advisory board (IPAB), an essential component of the Unaffordable Care Act.  This brake on spending  (quit paying people to do stuff and they’ll quit, sure enough) has been billed as a necessary tool to reign in out of control Medicare costs, but will, no doubt be applied to other health spending outside of the Medicare system.  House Republicans are pushing a repeal of IPAB even though this move would likely die in the Senate and certainly meet the same veto treatment as the Keystone pipeline.  

As Mises made clear in his book “Socialism,” the lack of a rational pricing system dooms all socialist regimes, as surpluses and shortages occur in undesirable sectors, lacking the discipline of the free market to provide the selling/purchasing guidelines (my apologies, once again to the Austrians out there that find my economic sound bites inadequate).  You know, not enough cancers will be treated and too many carpal tunnel surgeries will be done.  It will simply not make any sense.  No human being is smart enough to assign the “right” price to anything, much less to an entire industry.  

But that’s the point.  The price assigned by the IPAB doesn’t have to be “right.” It just has to be lower than the market demands.  That’s right.  As long as the price is lower than the market would demand on its own, the deliberate shortages, the object of this board, will result.  But think of the money we’ll save abandoning the elderly and sick!  Where was AARP when the fight to stop the Unaffordable Care Act was at high pitch?  On the side of the same bill containing this provision for the IPAB, that’s where.  Ironic that their having sold the young down the river for the benefit of their constituency has come full circle to bite them.

So welcome aboard, AARP in the fight to stop IPAB.  Never thought I’d see this outfit on the right side of anything.

G. Keith Smith, M.D.

Someone I know told me the other day that they were one heart attack away from bankruptcy.  This individual has no insurance and has been denied  insurance due to their past cardiac history.   Some random thoughts.

What is your response to this?  Do you think that the evil and rich insurance companies should be forced to provide insurance to this individual?  Do you think that others should be taxed to pay this person’s medical bills, whether through insurance or some state-administered plan?  Do you think this is a problem that should be dealt with locally, not nationally or do you think that Washington, D.C. and folks greasing those gears should be in charge of mandating a solution for everyone?

These are all interesting questions and questions that people fundamentally disagree on. Property rights advocates and fans of the free market (like me) object to socialization on the grounds of principle, whatever the touted benefits of wealth confiscation.  Some who don’t mind the robbery of taxation as much just want to be sure that this loot is spent wisely.  More radical are the folks who believe that “we’re all in this together and what’s yours is just as rightly mine.”

Questions such as those above can also reveal an otherwise latent coercive tendency in even the most staunch libertarian.  Power corrupts.  When Mises was asked what he would do if anointed King for a day, he quickly replied, “abdicate.”  Haven’t you heard the old argument, “..if we could just get the Senate and maybe the White House, we could cram stuff through.”  Well, we’ve seen both sides’ of the aisle’s ideas of what they mean by that, haven’t we?

I suggest that we don’t allow others to distract our thinking about health care with faulty premises, such as, “health care is a right,” or “everyone needs health insurance.” Do we really want everyone to have insurance that pays bills at not-for-profit hospitals, for instance, that are ten times as high as that at our surgery center?  Is the lack of insurance really the problem?  Or is it a lack of rational pricing, caused by the distorting presence of the government in the marketplace with their Ponzi schemes and price controls and insurance mandates?  Could it be that drugs are expensive and increasingly scarce because of FDA policy and government price controls through Medicare’s new part D program?

The individual I mentioned at the beginning of this blog could just as easily be bankrupted by a hernia or gall bladder surgery at one of these price-gouging “not-for-profit” facilities.  What should the treatment for a heart attack cost?  I think what it costs is one thing, what the not-for-profit cartel charges is quite another.  Free market competition raises the quality bar and lowers prices.  Every time.  Health care is no different.  Real and rational competition will reveal over time what is called the “market clearing” price of goods and services.  This price is that equilibrium price where neither surplus or shortage occurs.  Rather than attempt to discover this price, we are on the path to discovering the bankrupting price of health care through this national plan many now call the Unaffordable Care Act.  

The low packaged prices on our website are having a deflationary effect on the charges at other facilities, this reaction a predictable one, in order to stem the flow of patients away from our competitors to us.  Price transparency would revolutionize the delivery of health care in this country, lowering the cost for everyone and injecting an accountability of quality that is sorely needed, as well.  A heart attack shouldn’t bankrupt anyone.  This, I think, illustrates that the issue is not a lack of insurance, but rather a lack of market discipline in health care pricing.

G. Keith Smith, M.D.

Why am I such a fan of free markets?  Why are most people in the health care business not big fans?  Why are most people in any business not free marketeers?  I think the answer is complicated and simple all at the same time.  I mean by this that there are many reasons, each of which is fairly easy to explain.  Many businessmen start off as free marketeers only to succumb to the help that the “government” can provide.  Why is this?

Fear

Any organization or institution or business has one goal after it comes into being:  staying in business….survival.  When competition rears its unforgiving head, two paths present themselves:  the desire to improve and compete or alternatively the fearful path, one where  the business’s shortcomings will be found irremediable leading to the pursuit of “protection” from this competition.  Enter the politician/legislator.  He/she is all too willing to “sell” protection to this business by bestowing some advantage on the already established yet threatened business, or by hamstringing the upstart such that the threat if not completely eliminated is rendered a manageable threat at best.  Some choose to reject fear of competition.  Fewer choose to reject offers of protection from competitors, a devil’s bargain.  Competition makes us better than we would be on our own and forces us to examine how we value our services in terms of time and price.  If as physicians we take our oaths seriously and consider our patients’ welfare and wellbeing to be  paramount, there is no better check on our hubris and no better quality taskmaster than the free  market and we should welcome the  oversight the market mechanism provides.

Principle

Every man’s concept of justice is different.  In some men’s minds the economic mindset of conquest seems just.  In this view, taking property/goods/services by force with no compensation to the victim is justified by the notion that in the hands of the ordained/brilliant/enlightened this property or these goods/services are better distributed.  For those who value property rights and peace, the philosophy of non-aggression and mutually beneficial exchange dictates our actions.  This transition from a civilization of conquest to one of mutually beneficial exchange is equivalent to the transition from barbarism to modernity.  Fans of free markets embrace this notion of non-aggression and leaving other folks alone and to their own devices, and make their living by providing goods and services which people value enough to engage in voluntary exchange:  their goods/services/wealth/money for another’s…a fair trade, the determination of which is made between the parties involved.  If this seems like common sense, I apologize, for the very notion of non-aggression and mutually beneficial exchange and the subjective determination of value remains an elusive group of economic ideas for many, particularly those with lots of formal education.

Time Preference

Short sighted actors (those with a high time preference) are wanting to “cash in now!”  ”Get it while the getting is good.”  ”Damn the future…take what you can however you can get it.”  Those who accept government money, those who depend on this funding, those who lobby for even more….they have a high time preference.  People who start businesses, the revenue for which comes from a robbed taxpayer, have every reason to lobby for the continual robbery of taxpayers and embrace a very unstable business model, for once the taxpayer resists this robbery either by refusing to pay or refusing to work, the revenue stream is cut off for the beneficiary of this theft.  Those with a low time preference have a more stable business as the budget fights in D.C. and the impending bankruptcy of government at all levels does not represent the threat that it does for the businessman depending on this loot.  I maintain that a low time preference is a pragmatic and stable business philosophy, not unlike the tortoise and the hare.

Envy

“I want what you have” is jealousy.  ”I want what you have but know that I can never have it so I want to destroy it so you can’t have it either” is envy.  Ludwig von Mises wrote a little book entitled “The Anti-Capitalist Mentality.”  I highly recommend it.  He describes how academicians, for instance, become envious of the “haves.”  They figure that they are smarter and have more education than that “stupid car salesman” therefore should make more money.  The concert pianist cannot abide by the riches sent the rock star’s way.  People vote with their dollars.  Rock stars get more “votes” than concert bassoonists, even though the skill, practice and talent necessary to play a bassoon well dwarfs that necessary to perform even the most demanding guitar lick.  Mises says basically, “if you want to make a lot of money, don’t be a bassoonist or harpsochordist.”  The envy that results from this situation leads many to reject rather than embrace the free market.  This is a common thought process amongst those in academia and in the arts, in particular.

If I choose to embrace the free market and the discipline it provides, does that make me better (ethically or morally) than the guy who is lobbying for more and more theft of your wages?  Yes, I think so.  The thief wants your wages without having earned it.  I want to earn your wages and want you to part with your hard-earned money at my surgery center voluntarily.  I also embrace the market out of self interest as I believe it to be more stable long term.  Health related businesses that rely for instance on Medicare funds are inherently unstable as this source of funding is constantly under threat of cuts/bankruptcy.

Not exactly the same thoughts as those who created Obamacare.

G. Keith Smith, M.D.

Economists from the “Austrian” school of thought (this includes brilliant men like Hayek, Mises, Rothbard, Hoppe, Salerno, Higgs, Herbener, and many, many others) reject the idea of economic modeling, as human actors have different ideas of value.  This is called, I think, the subjective theory of value….that a painting or a bottle of wine or a mansion might be worth different amounts to different people…more for a collector or tycoon than for a monk, for instance.  Economic modeling is used to predict what groups or populations of people will do in response to a change…like a tax increase.  Governments typically rely on economists who subscribe to the validity of modeling and issue statements such as, “…an increase in the income tax for the wealthiest Americans will raise X billion dollars.”  The Austrians reject this type of analysis and so do I.  It’s really common sense when you think about it.  What the government economists are really saying is..”..we are going to change this one variable (the tax rate) and no one else is going to make a change or adjustment on their end, therefore producing the result we are predicting.”  This is not just stupid.  This is dishonest. Stupid?  If taxes are increased, what will you do?  If the rate goes to 70% are you going to continue to work hard just so you can have it taken from you?  Dishonest?  Every time taxes have been lowered, federal revenues have increased.  Why?  Because people changed their behavior.  This is what I think is an example of what economists call “dynamic analysis.”

Dynamic analysis is the prediction method used by entrepreneurs.  If their predictions about the changes in human behavior are correct, they get rich.  If they are wrong, they lose their shirt.  This is why the free market works.  Static analysis is the prediction method used by governments and ultimately why they fail.  You see, if we raise taxes on corporate jet ownership, fewer corporate jets will be flown/used/sold.  What does that mean for the aluminum welder at the plant making the jet wings?  Could one more person be unemployed by this insanity and cease to be one of the tax slaves?

“If we institute price controls on physicians so that they are paid half of what they are now, think of the money that would save and all of the people that could get health care with the savings.”  That’s if the physicians come to work at all.

“I am going to wait to have my knee replaced until Obamacare kicks in so it will be free!”  There won’t be any knee replacements if it’s “free.”

This brings me to my point.  You don’t have a right to health care.  You can’t make me come to work.  You can’t prevent me from seeking some other line of work.  You can’t make me be a doctor.  Any “action” by our wonderful government will cause consequences and “reactions” by many people affected by the change.  And the folks that continue to be doctors when health care is “free,” you won’t want to see…just ask Hugo Chavez.

G. Keith Smith, M.D.

Check out this article from the Fraser Institute.  More and more articles like this are surfacing, pointing out that economic central planning (a concept long ago devastated by Bastiat, Hayek, Mises, Rothbard and others) in health care as in any other industry, is simply a disaster.  The Canadian health care system is bankrupt, so they are eliminating services in order to stay afloat.  

The article is heavy on facts and figures.  Very tough arguments.  Then, at the end, the author shows that strange, unmistakable and inexplicable attachment and regard for the very system he has just eviscerated.  

What is it with this Canadian pride for their health care system?  The problem with their system is not that some part of it is problematic.  The problem is that, as the author says, two paragraphs before, that once government takes over health care, it becomes politicized.  That government is involved at all, is the problem!

The author “had me at hello,” but lost me at goodbye.  Not a good ending for this piece.

G. Keith Smith, M.D.