Updated: 1/13/20
Christian Economics: Teacher's Edition
And the Lord will take away from you all sickness, and none of the evil diseases of Egypt, which you knew, will he inflict on you, but he will lay them on all who hate you (Deuteronomy 7:15).
Healing is an aspect of covenantal ethics, according to the Bible. Health is a blessing of God; sickness is a curse. This is why the early church in the New Testament used healing as a way to demonstrate God’s new work of redemption, which was evidence of the church as God’s ecclesiastical representative in history, the replacement of Israel.
Now Peter and John were going up to the temple at the hour of prayer, the ninth hour. And a man lame from birth was being carried, whom they laid daily at the gate of the temple that is called the Beautiful Gate to ask alms of those entering the temple. Seeing Peter and John about to go into the temple, he asked to receive alms. And Peter directed his gaze at him, as did John, and said, “Look at us.” And he fixed his attention on them, expecting to receive something from them. But Peter said, “I have no silver and gold, but what I do have I give to you. In the name of Jesus Christ of Nazareth, rise up and walk!” And he took him by the right hand and raised him up, and immediately his feet and ankles were made strong. And leaping up, he stood and began to walk, and entered the temple with them, walking and leaping and praising God (Acts 3:1–8).
The ability to heal miraculously has always been regarded by the masses as evidence of a person’s special relation to God. This same attitude prevails today in an era of scientific medicine. Medical missionaries are granted access into nations that are otherwise closed to missionaries. Political leaders regard the benefits of healing as outweighing the negatives of evangelism. Jews understood this principle in the Middle Ages. They became physicians to gain acceptance in the gentile world. Moses Maimonides, the Rambam, was the most famous Jewish theologian and philosopher of the Middle Ages. He was also the senior physician of the sultan of Cairo in the late twelfth century. Christian hospitals in the later Middle Ages were ministries of churches and ecclesiastical orders. Then there is the remarkable account written by Álvar Núñez Cabeza de Vaca of his eight-year trek from Florida through Texas into Mexico, 1528–1536. He describes the strange fact that he and his companions gained the power of healing halfway through their journey. They were welcomed by Indian tribes from Texas country to Mexico because of this. Word spread in advance that they were coming, tribe by tribe. They would probably have been killed had they not possessed this power. Instead, they were supported with food and water.
The power to heal is a mark of authority. This is why the state in modern times establishes healing programs of all kinds. It insists on collecting taxes to fund these programs. The concept of healing is associated with salvation. The root word for salvation and salve is the same. The modern state rests on secular foundations, so it does not preach eternal salvation, but the state claims the ability to heal society through legislation and regulation. It sets up hospitals, medical schools, and health insurance programs as aspects of this messianic impulse. Its claim to be able to heal society’s institutions also requires its ability to heal individuals of sicknesses, including mental disturbances that are defined as mental sickness.
The costs of state-funded healing are among the largest expenses in most national government budgets in the West. In the United States, one-quarter of the national government’s budget goes to funding old-age medical care: Medicare. Residents become eligible at age 65. Companies that sell health care insurance refuse to cover expenses that would otherwise have been covered by the Medicare program. This forces all people age 65 and older into the Medicare program. They cannot buy private health care insurance for major medical problems. The percentage of the budget devoted to Medicare is expected to increase.
The United States government is now trapped by a wave of retirees: 10,000 per day. The average cost of Medicare is over $12,000 a year until the person dies—on average 19 years after entering the program. (Life expectancy is shorter for blacks and Hispanics.) No funds have been set aside to pay for these services. These future obligations will have to be funded out of future government revenues. They will overwhelm the government. The present value of these liabilities exceeds $150 trillion. At some point, benefits will be reduced. There will be no other choice. The money coming into the government from taxation and borrowing will not be sufficient to pay the medical expenses of the aged and Social Security pensions. But no politician ever speaks of this in public. Similar increases in costs threaten other Western nations.
Then there are the costs of funding medical care for people under age 65. This is a major threat to the West’s stability. The public has been promised affordable health care. But costs exceed revenues. If the government cuts back, this will cause political confrontations. Cutbacks will be seen, correctly, as threats to the government’s healing function. They will inflict a loss on the government’s legitimacy.
These budget cuts will overturn personal budgets. People have taken seriously these political promises. Few retirees own sufficient resources to cover major medical expenses, other than the value of their homes. They will have to sell their homes or mortgage them to pay the bills. This will eliminate expected inheritances of their children. In some cases, the parents will move into the homes of their children. Their children have not set aside money for this. They have not saved for their own medical expenses in old age. They have assumed that the government will cover most of these costs.
This inverted pyramid of expenses has come as a result of politicians’ promises, beginning in the United States in 1965. The estimates of these costs were underestimated by everyone. They are still underestimated by the vast majority of Americans. As a result, the government has accepted its role as a healer. Wherever governments have done this, they will inevitably face this rhetorical challenge: “Physician, heal thyself” (Luke 4:23). The resources will have to come out of other programs. Then the government’s budget will be unable to cope with the costs.
The assertion of the state as healer is inherently a claim of divinity. In a world of atheism, which is the confessional and cultural world of the West’s humanist elite, this is divinity by default. The state is seen as the only institution with sufficient power to structure the social order. This faith reached its high point in the early decades of the Soviet Union, and again in the 1960s in Communist China. But with the collapse of the Soviet Union in December 1991, and with the replacement of Communism by state capitalism in China, this faith has declined worldwide. The state is seen as the economic stabilizer. In the area of health care, the state still retains its reputation as healer of last resort for the masses, and healer of primary resort for the aged. The state is the primary care physician for the elderly. In fact, it is a witch doctor, fiscally speaking. It will be exposed as such before the twenty-first century reaches the halfway point.
The result of the intervention of the state into the health care delivery system has been escalating prices. Those who are not recipients of state subsidies must pay these prices. This has taken place in the West since 1980, but the increase has been greatest in the United States by far: from under 9% to over 17% of GDP.
There is always greater demand for health care than there is supply at a below-market price. So, there is a never-ending demand for health care services that are funded by the government. Politically, politicians can gain support for promised increases in health care services at the same prices or even lower prices. Voters always want to hear that the state will pay for even more of their health care needs. They do not enquire as to how the government will pay for these services. Similarly, no politician dares call for the voters to pay more for their health care, either through a reduction of payments by the government, or an increase in taxation, or both. Voters are not interested in the reality of government budgets. They have been led to believe that deficits don’t matter, that the government can always find the money to pay for medical care for the aged. At the same time, they are deeply interested in the reality of their own budgets. They know how vulnerable they are to unexpected or even expected medical costs. They are interested in obtaining healing at below-market prices.
In matters of life and death, the issue of price is not a major inhibiting factor. The stakes are too high. There is no fallback position from death. People will pay whatever is charged. Whenever the state steps in and promises to pay, that offer will be accepted. The offer becomes permanent in mandated programs. Nothing can reverse this politically other than bankruptcy.
A private buyer of medical services is in competition with other buyers. If other buyers have access to funds from the government, the buyer without such access must find ways to pay. As the competition increases because millions of buyers gain access to medical care because they have reached age 65, the buyers who have not reached 65 will face increased prices. Prices rise in response to increased demand that is greater than new supplies of physicians and hospitals.
These increased costs of health care services create a political market for promises of extended aid from the government to groups that do not yet have access to subsidized medical services. Politicians find enthusiastic responses to such offers. If a particular voting bloc does not have the funds to buy health care insurance, politicians can promise this. Once any group receives such support, it becomes politically impossible to repeal the legislation. There is an organized constituency to continue the subsidy. People have adjusted their budgets in response to the subsidy. They do not want to return to the older political world that did not offer the subsidy. They will organize to fight any reversal. So, the subsidies continue. Those voters who were not granted subsidized health insurance now pressure the government to extend the subsidies to them.
This is why we do not see successful political movements that achieve a rollback of previous expansions of health care subsidies. Financially hard-pressed buyers turn away from political calls to repeal the earlier laws to calls to extend comparable subsidies. The political pressures to extend subsidies are stronger than the calls to repeal previous legislation. The two positions are politically asymmetric.
A buyer who is concerned with his health or his family’s health cannot afford to purchase all of the health care services that he would prefer. In the aggregate in any society, this is true of all scarce resources. At zero price, there is greater demand than supply. This is why resources command prices. Yet individuals facing medical threats are willing to curtail other spending in order to purchase medical care. This is why the demand for medical services does not fall sufficiently to offset rising prices. People will not pay for an operation just because it is 20% cheaper. So, it does not pay a hospital to run monthly specials. “This month only – 20% off on a gallbladder operation. Act now!” But if people need an operation to live, demand will not fall by 20% in response to a 20% increase in the price of the required operation. This is why there is upward pressure on the prices of medical services greater than increased demand for most other market-based services.
A seller of medical services is in favor of more buyers competing against each other. He is also in favor of existing buyers obtaining more money with which to place bids. He is also in favor of greater demand for the services he sells.
The health care industry favors the government’s entry into health care delivery, as long as the government does not try to set prices and standards. The industry favors free money for itself. But the government always wants to set prices and standards of anything it subsidizes. It may not enforce these standards. It does not enforce standards in military expenditures. The only sure way to run real-world tests is in a war. But in the area of health care, some voters and some journalists complain that care is substandard in this or that hospital. This pressures politicians to extend quality controls, which raises delivery costs. Then, when prices rise, politicians start campaigning on a platform of cutting costs. The government giveth, and the government taketh away.
In the case of medical care, the industry is heavily regulated. It is also heavily licensed. This restricts new entry. This reduces competition. This keeps prices high and rising. The sellers of health care services profit greatly early in the process: rising demand because of government subsidies, and reduced competition because of barriers to entry. This drives up prices. Then the politics of cost-cutting takes over. Eventually, price ceilings and rising regulation-based costs create shortages. This leads to rationing by the government.
The seller of health care services is in a profession that is fenced in by government controls. The government regulates the supply. It regulates the terms of sale. It regulates standards. By regulating the insurance industry, it regulates payments. It regulates payments when it subsidizes buyers. Therefore, the medical profession and the health care industry are more heavily regulated than most.
Sellers find that their lives are filled with paperwork. Government demands official reports when it hands out money, either directly or indirectly. As the costs of filing paper increases, the industry turns to computerized files. Privacy disappears for most patients, and along with it, the older physician-patient relationship suffers.
The pencil is not a matter of great concern. No one buys a pencil because it is life or death. No one worries that he will not have enough money to buy if he ever needs one. He does not seek for a policy to guarantee him a sufficient quantity of pencils in a crisis. He does not pressure his political representatives to intervene into the pencil market to guarantee that there will be enough pencils in his old age. He does not call for pencil quality standards enforced by an agency of the government. So, the market for pencils is not heavily regulated or heavily subsidized. This is why pencils are cheap, available everywhere, and never in short supply.
Because pencils are not regarded as crucial to society, they are widely available in society. They are not in any way comparable to medical services.
The supply of medical services is restricted by government intervention. The demand for services is increased by government intervention.
Buyers and sellers work together more closely than in most fields. But because of the steady intrusion of the state into the physician-patient relationship, medical care is becoming more managerial than personal. The state demands reports from those receiving its support. It tracks the money. The state has a supposed fiduciary relationship over the public’s money. It is supposed to take care with this money. In practice, this is ludicrous. The modern state spends more money than anyone can trace. But the authority and responsibility of bureaucrats to trace the money then becomes the justification of the spread of paperwork. The bureaucrats use paperwork to protect themselves from political charges of reckless spending and waste. They spend vast amounts of money, most of which is wasted. But they never get fired. They can always point to a trail of paper. “We did it by the book!” So, they force those on the receiving end of the money to do it by the book. The state’s bureaucrats replicate themselves in the private sector. This has become true in health care services.
The modern world has seen the state as an agency of social redemption and salvation: the healing state. This false religion has led to the creation of the state in the model of the caretaker at an insane asylum. The state cares for the patients, who are seen as incapable of caring for themselves. They are seen as lifelong inmates. The medical profession is an intermediary between the healing state and the masses, who are seen as in need of healing. The savior state and the technicians of healing are linked together by the state’s money.
__________________________________
For the rest of this book, go here: https://www.garynorth.com/public/department193.cfm
© 2022 GaryNorth.com, Inc., 2005-2021 All Rights Reserved. Reproduction without permission prohibited.