Health Care's Real Problem Isn't About Capitalism

In his June 6 radio address, the president highlighted “unwarranted profiteering” as one of the root causes of skyrocketing health-care costs.

Later that month, he suggested “a public option” where “we set up an insurer that isn’t profit-driven, that can keep administrative costs low” as one alternative.

Laced throughout the discussion on health-care reform is the oft-repeated belief that profits undermine care. In his news conference, the president went so far as to suggest that “[if] your child has a bad sore throat or has repeated sore throats, the doctor may look at the reimbursement system and say to himself, you know what, I make a lot more money if I take this kid's tonsils out.” The implication: Doctors are unethical shysters who’d do anything to make a buck, even performing unnecessary procedures.

Truth be told, the problems with American health care stem not from it being for-profit and capitalist, but from it not being capitalist enough.

As we first wrote more than two years back, health-care system in the U.S. is far from a free market. Between Medicare, Medicaid, SCHIP and a myriad of other public programs, it's estimated that the government already pays for nearly half the health care in this country as it is.

The insurance companies now scorned as pariahs are far from free market participants. Rather, they’re highly regulated as to the type of coverage they offer, who is eligible, what plans must cover and how services are paid. Bureaucrats control virtually all aspects of health care, including hospitals, pharmaceutical companies and doctors themselves, determining who can prescribe medicine, how much they can charge and how livers get allocated.

If your goal is improving health care, we should want as many profit-hungry companies as possible getting into the field. Profitable companies succeed not by fleecing or exploiting their customers, but by providing an actual value and service over time. Without hesitation, we understand how Toyota (TM), FedEx (FDX), Wal-Mart (WMT), Apple (AAPL) and Southwest (LUV), have each succeeded in improving quality and reducing cost within their field…while also looking to profit. Same goes for the companies we wrote about this spring, each aiming to grow their business by improving service and lowering price, even during a recession. That’s exactly what a free market does.

Health care is a commodity like any other. The same sort of competition to improve and expand service could be achieved within health care, but only to the extent government permits a free market to function.

The suggestion that somehow increasing regulation and decreasing the profit incentive will improve health care has not been born out anywhere in history. For example, since Congress deregulated domestic air travel in 1978, the cost of a ticket has risen some 63%. First-class postage has risen some 180% over the same period and college tuition at a public university has climbed 857%.

American health care doesn’t need to be fixed — it needs to be set free. That notion, unfortunately, isn’t on the table at all.