Why the Health Care Solution Is "Ridiculous" Profit-Seeking
Text by David Baucom | March 2012 issue
When I responded to a friend's post about her own rising health insurance premiums by calling for the free market solution and repeal of Obamacare, her friend posted a negative response about big business, profit-seeking, and morality, which I think well expressed the views of perhaps half of the country. She said that free-market approaches wouldn't work because "every health insurance company is guilty of the same abhorrent acts," and she expressed scorn at their only interest in "raking in ridiculous profits" and "milking customers for all their worth." She concluded, "Health insurance shouldn't be a for-profit industry simply because helping the sick afford medical attention and making a profit are mutually exclusive goals. That's the bottom line." Her words summed up the perspective confidently held by many Americans. If you're among those who hold these views, I think conservatives have dropped the ball in making a good case to you otherwise, and I think the following is what you should consider.
All industries are run for profit, to the degree they are competent, honest and productive. When profit isn't the guide, companies and customers lose. And without profit as the prime goal, there'd be no shareholders, i.e., capital. The idea that "ridiculous profits" come from low quality and unaffordable prices contradicts all economic evidence and reason. Productive service and profit-seeking are practically and morally inseparable — to the degree individuals and industries are free to perform and seek them.
The "interest in raking in ridiculous profits" is a hallmark of a wholesome, society-enriching company. Look to the freer tech industry, where Apple rakes in ridiculous profits with its ridiculously fabulous iPhone. By producing such a sensation, praised as "beamed to us from five years into the future," for such a considerably affordable price (even below Apple's cost, in some cases, because of Apple's freedom to contract with phone companies), Apple has, to the admiration of all (especially their stockholders), "milked consumers for all their worth." How wonderful that it could and did, because we have been able to milk Apple's remarkable productivity for all its worth! We are milking the bounty of Apple's profit-seeking, and its freedom to do so. Everybody wins, including a new industry of software writers, and even competitors, because of the wide industry Apple pioneered. Such corporate benefaction describes the ever-expanding arc of economic freedom in a truly capitalist society, of which insurance companies should be a part.
But you claim they do "abhorrent things" and should be run "for the good of the people," not profit. Health insurance companies are not fundamentally different from other companies, either in corporate nature or goals, or employees' moral character — and are subject to the same economic principles. If your characterization was correct, it should be true of the wireless industry too, and we'd now be enduring inferior flip-phone technology, incomprehensible service plans, sparse coverage, at sky-high prices. The truth is: only government intervention makes things so bad.
And why shouldn't companies have the right to pursue business any way they choose (while respecting contracts)? Should they be the servants of society? Half-servants? Just as I believe it's wrong to force you to pay my medical bills (or my mortgage), I believe the same about companies. They're not here to be sacrificed at society's altar, but to seek as much profits as they can for themselves and their stockholders through freely-traded value.
Emboldening the view of health care companies as public charity workers are popular misconceptions demonizing business for "flaws" which really are government-created.
Like the unfair power of lobbying. You condemn it, and I do too. In a free market, there can be no lobbying, since there is nothing to lobby for, no special government favors to court. Companies are left with only one possible path to long-term profits: offering customers better services and better prices. They follow it, or fail. If one company charges more than another for the same service, it loses business, and may go under. "Price-fixing" between big companies self-destructs: smaller outsiders sweep in and capture the market. It is economic law that freer competition means lower prices and higher quality — and that more regulation means more lobbying.
Know of many small health insurance companies? Labyrinthine regulations and corollary lobbying keep them from existing. Ever-expanding regulations necessitate corporate lobbying. (Look at what Microsoft spent on lobbying before it was hit by antitrust regulation (zero), and the money it spent afterwards (lots and lots!). It's regulation which turns companies into unholy "corporatist" entities, like half-Borg humans, exploiting government protections for stagnation and plunder. Bound by tight controls, unable to fully compete legitimately, they're left to compete illegitimately. If the huge controls and bureaucracy were lifted, companies could cut vast departments, procedures and legalities to dramatically improve pricing and quality in their honest competition for profits.
All businesses deserve their freely-earned windfalls, but for insurance companies particularly, huge profits are vital. Insurance companies don't have the predictable cycles of other business, since they're charged with directly dealing with the worst of unforeseen disasters, including terrorism, epidemics, natural disasters, economic depression, etc. Consequently, insurance companies must have vast reserves of funds to meet their obligations to protect clients in potential cataclysms. It may take five or ten years of soaring profits to offset a "Katrina year" — to say nothing of an "AIDS decade."
Yet despite this truth and the more basic one that high profits reflect freely-traded, high productive value, politicians and media routinely demonize profits as suspect and tainted, and people are continually taken in — hearing echoes of their religion's view of money as "the root of all evil."
Have you considered where we'd be without the "abhorrent" health insurance companies? They allow millions access to life-saving medical tests and procedures they might otherwise lose, and a sense of security for living and planning. We should appreciate their existence and give them every freedom to compete, earn money, and serve us better. Coercing them into public slaves withers their productivity, the economy, and the country's moral fiber, by destroying motivation and independence, and corrupting vital industry into yet another inept government scheme like those already bankrupting us.
That society's enrichment is "mutually exclusive" with profit-seeking is a gross Marxian falsehood vigorously entrenched in culture by media, politicians, and (worst of all) academia — yet one debunked by basic analysis, and by every historical example of every economy of every country that has ever existed. Underneath it all is the misguided popular idealization of collective sacrifice, which is what I see underpinning your "bottom line."
Mine is: All alternatives to freedom are forms of slavery. All human interaction is either freely-chosen exchange or coercion. Until we reject the latter, it's going to get worse. Each wave of decline means more blaming of "greedy" producers and calls for regulation and sacrifice, with more political graft and less real work, more dependence and less independence, more "needy" hands demanding more burden-carriers. The natural incentives and disincentives toward productivity vs. stagnation invert.
The full-blown alternative would create health insurance of unimaginably innovative service and pricing, as if "beamed to us from a bright future." This alternative, which spawned America’s historic success, is economic freedom — the unleashing of the profit motive for "ridiculous" prosperity.
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