Dr. Hsiao’s “Fatal Conceit”

by Joseph P. Blanchette

Governor Shumlin has pledged to pass a physician-assisted suicide bill in 2011. Here are some questions that Vermonters might want to consider about the potential consequences of passing such a bill:

The recent report to the Vermont Legislature by Dr. William Hsiao brings Vermonters the long-awaited solution to our health care problems: single payer health care. Dr. Hsiao’s plan will provide “essential benefit” coverage for Vermont’s uninsured residents, expand benefits for everyone else, cause no “net” income reduction for health care providers and establish an integrated delivery system statewide. There’s more. The report promises to increase federal funds to Vermont, save $500 million in the first year of operation, exempt low income individuals from payroll-based funding contributions and (best of all) promises noincrease in “health care cost burden” for everyone else. Not bad.

Hsiao’s marketing prowess is enviable. He confidently lists the outcomes from this most recent example of command-and-control central planning. For example, “It’s clear that moving to a single payer plan will save Vermonters significant money in health care.” “There will be no additional overall cost under these plans for employers.” “It’s also clear that the reform will provide up to 5,000 new jobs, which is a significant boon to Vermont’s economy.” “In short, it allows Vermont to do more for less over time, and to do so more fairly.” This is easier than we thought.

Unfortunately, the same report that recommends even greater government control over our health care system inadvertently documents the historic failure of government overreach into health care delivery. Commenting on previous government reforms, Dr. Hsiao concedes, “Despite its valiant efforts, Vermont has not been able to provide high quality, affordable health care for all of its residents. It’s fair to say that the system is broken.” He continues, “Vermont has another major problem: rapid health cost escalation. Between 2004 and 2008 health care spending in Vermont grew at an average annual rate of 8 percent in comparison to the national average of 5 percent.” Yet, after describing the failures of government health care reform and high levels of uninsured Vermonters, Dr. Hsiao remarkably concludes that we need even more government intervention. “On hearing these figures, the instinct is to immediately ask how the legislature can intervene to provide adequate coverage for those who currently lack it.” Really?

Contrary to what politicians tell us, increased health care costs and access problems aren’t due to a failure of the free market. Rather, they stem from the ever expanding role of state and federal governments into every nook-and-cranny of health care: benefit design, provider reimbursement, rate setting, financing, provider taxes, marketing, claims adjudication, and much more. In the name of protecting us, government makes up most of the costly rules that employers, doctors, hospitals and insurance companies must follow. Scores of government agencies, hundreds of benefit mandates, tens of thousands of bureaucrats, and countless regulations dealing with every aspect of health care have eliminated virtually any meaningful free market influence. So we already have a clear picture of how government manages health care, and it’s not pretty. Yet legislators keep passing more laws to correct the problems they created.

In his book, The Fatal Conceit: The Errors of Socialism, Nobel Prize-winning economist F. A. Hayek explains why socialist approaches to regulating market systems always fail. The “fatal conceit” of economic central planners is their belief that social order and systems, (like health care) can be easily rearranged and effectively managed by a select group of state planners. Hayek reminds us that the information needed by central planners is far too dispersed and the reasoning capabilities of humans far too limited to manage societal behavior effectively. State and federal governments are staffed by mere mortals, like you and me. Can any of us identify a politician in either Montpelier or Washington whom we would entrust to manage the affairs of our private households? I can’t. And if they don’t have the knowledge, insight or discipline to do that, why give them control over our health care system? Why grant these same politicians and professional bureaucrats the power to determine what medical services your family will receive, and when and where they will receive them.

Remember, it’s the free market that brings together the hundreds of thousands of individuals who grow, produce, and deliver tens of thousands of affordable products to the shelves of our grocery stores, not a “single-payer nutritional system” dreaming of eradicating hunger (or obesity) from Vermont. Health care planners should heed this powerful lesson.

Joseph Blanchette was a Howard Dean appointee to the Health Policy Council and the Public Oversight Commission as a labor/consumer representative. He also served as a fiduciary and co-manager the Vermont Education Health Initiative, (VEHI) a non-profit health insurance purchasing trust serving public school employees. He lives in Charlotte.