Dr. Sennholz heads the Department of Economics at Grove City College and is a noted writer and lecturer on monetary and economic affairs. This article is reprinted by permission from the December 1977 issue of Private Practice.
The advocates of socialized medicine are mostly daydreamers who neither understand the intricacies of medicine nor the economic facts of life. Their words may sound compassionate and noble when they expound the virtues of a national health service that is "to secure that everybody in the country, irrespective of means, age, sex, or occupation, shall have equal opportunities to benefit from the best and most up-to-date medical services available." But in reality, the medical system they can deliver, even when the considerable resources of the Federal government are put at its disposal, is inhuman and highly discriminatory. It puts politicians and their appointees in charge of an extremely important service. It is wasteful of human labor and economic resources, and above all, it generates bitter political conflict harmful to social peace and cooperation.
Medical services, like other services, are subject to a basic economic principle: the demand for any "free" service outruns any possible supply. After all, it is basic to human nature and action that the demand for any economic good or service is unlimited as long as it is "free" and obtainable merely by asking.
When the demand greatly outstrips the supply, the political authorities offering the free services and thereby creating the imbalance then face agonizing decisions. They may choose to suppress the unlimited demand by rationing and regulation, and simultaneously expand the supply through ever larger outlays of public funds. Nevertheless, the imbalance can never be corrected as long as the services remain free and their potential demand unlimited. But it is likely to create serious political conflicts on the measures to be taken.
Limited Funds
Government resources are always limited to the income and wealth that can be taken from its people by taxation, borrowing, or inflation. When a national health service is to receive more public funds, they must be taken from the people. The victims resent and oppose the measure that reduces their income and wealth and limits their spending discretion. It provokes a serious political conflict between the advocates of national health service spending and the victims who are supposed to provide the financial means.
But, the sharpest conflict is likely to ensue between the various recipients of public funds. The growing needs of a national health service are in direct competition with the demands of social security, government spending on education, welfare, housing, and all the other demands on the limited resources of government. All will fight over the government dollar, proclaiming emergencies and clamoring for top priorities.
The fight over public funds is a political fight that is decided from year to year on the floor of the U.S. Congress. When the Congress adopts the U.S. budget, it imposes a ceiling on total government medical expenditures. The very existence of a ceiling denies and refutes the lofty pretension that a national health service will provide all the needed medical care.
The spending ceiling itself then generates an ugly conflict between the numerous branches of the health service. After all, there are 101 different aspects to medical care and 1,001 specialities that are deserving of the government dollar. And once again our politicians on the floor of the U.S. Congress, most of whom have no medical knowledge, must vote on priorities from eyeglasses to false teeth.
Politicians always follow the line of least resistance. They readily give in to medical demands that yield their results quickly and visibly and make a political splash. Inversely they discount and neglect slowly maturing results that are not quickly noticed and pay no political dividends. The pressures of immediate demand always conflict with the preparations for the remote future when the present politicians may no longer be in office. Therefore, politicians rarely take a longer view, which in medical matters causes them to discount the importance of preventive medicine, the construction of new hospitals and medical schools, occupational health services, and medical research. Instead, they tend to opt for a free supply of drugs, of doctors’ services, and of hospital care.
Deteriorating Service
In a political medical care system, the hospitals tend to deteriorate and the number of hospital beds declines. The system suffers from the insufficient medical equipment, especially newly invented machines that revolutionize established procedures. In short, it suffers from all the rigidities and lethargies that characterize centralized political management.
But the worst consequence of such a system is the inevitable shortage of hospital beds, medical equipment, and doctors. This creates long waiting lists for medical care people want and need. In England the National Health Service has an average list of more than half a million people waiting for what NHS calls "non critical surgery." Many people have to wait for years, or never receive medical help in time. British medical literature is full of horror stories about the consequences of such delays.
The doctors themselves are crushed by a huge burden of work. They have so many patients demanding free medical attention that there is only time and strength for minimal mechanical practice. Doctors see one hundred or more patients a day for a few minutes each, give cursory examinations, and hastily prescribe something that they hope will do no harm until the problem goes away. The patients complain about their careless treatment, and the doctors complain about the patients’ attitude. The doctor is expected to be available to all, at any time and for any ailment, real or imagined.
Morale among physicians in a national health system tends to be very low. After all, no matter how they serve and labor, their remuneration is determined by budgetary considerations and political deliberations of fairness and adequacy. A given allocation of funds for remuneration must then be divided among the various groups of doctors in the national health service, the general practitioners, the specialists, the hospital staff from the senior surgeon to his junior assistants. With limited total funds, the health service administration must make most unpopular decisions of division between the various groups and its individual members.
Even if the administration does not use its remuneration power to divide and conquer, which it may be tempted to do, it cannot avoid creating suspicion and discontent. The physicians, on the other hand, with this great economic power of the health service administration over them, have no choice but to organize and resort to collective force. In the end, the problems of medicine become largely political, the physician a politician who is lobbying for the economic interests of his group. In Great Britain junior hospital doctors are frequently picketing their hospitals when they are not lobbying for political action.
A redistributive society that transfers income and wealth by political force is a conflict society. A national health service that allocates benefits and determines remuneration by political force not only is harmful to national health, but also breeds social conflict.
Hans F. Sennholz
Hans F. Sennholz (1922-2007) was Ludwig von Mises' first PhD student in the United States. He taught economics at Grove City College, 1956–1992, having been hired as department chair upon arrival. After he retired, he became president of the Foundation for Economic Education, 1992–1997.