Capitalism Is Cure for Health-Care Ills

Article excerpt

Just because President Bill Clinton flagged health care as a major national problem, David Frum writes in the June issue of Commentary, doesn't mean it isn't one. In the most cogent exploration of the problem I have seen, Frum offers both a diagnosis and a possible cure - just in time to remind Republicans that there are more urgent matters than flag burning.

First, the budgetary problem: In 1981, Medicare and Medicaid cost $55 billion. Today, they cost five times that amount. Unless the growth of these programs can be slowed to a manageable level, they will dwarf and eventually displace all other federal spending.

Second, the economic problem: Health care absorbs 13 percent of the gross domestic product and keeps rising - even though prices in other technology-driven fields are dropping. The average health cost per employee for large employers more than doubled between 1984 and 1993, to $3,781 from $1,645. Costs for small employers jumped even more. Robert Reich take note: "The exploding costs of benefits are gobbling up money that might otherwise have been paid to employees in cash: one important reason for the wage stagnation during the 1980s boom."

Third, the social problem: When people pass the age of 65, they enter a phase of life in which dependence on government becomes virtually universal. This breeds habits (and politics) incompatible with self-reliance.

Fourth, the political problem: Though 80 percent of Americans rate their own care as "good" or "excellent," only 45 percent rate the health-care system overall as such.

Fifth, the moral problem: The working poor do not get the kind of health care available to welfare recipients, thus enhancing the inducements of the dole.

Clinton and Co. made the assumption that the problems of the health-care system were the result of unrestrained capitalism. Wrong. Frum writes, "In fact, health care is the sector of the economy where government's power weighs most heavily." As Milton Friedman has taught, the great inflation in medical prices began in 1965, when Medicare and Medicaid began pumping huge volumes of cash into the system.

State regulations further contribute to inflation by requiring insurers to cover a smorgasbord of medical services, from acupuncture to alcohol abuse treatment. …