Farewell to Government’s Iron Grip on Healthcare

MercatorNet was launched one year ago, on May 27, 2005. To mark our first anniversary, we are inaugurating the annual MercatorNet IdeaFest, a collection of pot-stirring, counter-intuitive, mind-bending essays. We have asked several creative people to answer a single big question: “What big idea of 2006 will be extinct in 2036?” Here is a response from the president of a Canadian think-tank, Michel Kelly-Gagnon.

Everybody knows that monopolies are bad. Without competitors to offer an alternative, they keep consumers hostage. They can raise the prices or lower the quality of the products or services they sell with impunity. They can generate huge profits for the lucky few who control a market.

That’s why we have antitrust laws – although these do not really apply to real monopolies, but usually to companies that have only a temporarily dominant position in a given market. This was so in the case of Standard Oil a century ago, whose share of the oil market was only 64 per cent at the time of its famous trial. Nor has Microsoft a real monopoly over software, despite all the inquiries, lawsuits and fines it was subjected to in the past couple of years. Anybody can create and sell better software if they want, and many do.

Strangely enough, government monopolies do not face the same type of opposition. These are real monopolies in the sense that competitors are forbidden by law to enter a market. They are believed to be necessary to tame an anarchic sector of the economy, to reduce costs by rationalising production and trade, to offer the best deal to consumers instead of the most profits to capitalists or to distribute services fairly among citizens.

This is one big idea that has survived centuries of intellectual assault from economists. In the heyday of mercantilism in the 17th century, European monarchs would hand out monopolies to their cronies for the production and trade of all types of products and services. Today, governments around the world still have more or less absolute control over several sectors of the economy, from alcohol sale and electricity distribution to education and health care.

The essence of control is to keep watch over all activity going on within a self-contained entity. The more numerous and varied the activities, the more difficult it becomes to control everything. The more exchanges take place with the outside world, the easier it becomes to circumvent control.

There is at present a heated debate in Canada over the future of the health care system. Canada is the only country in the developed world where government has a monopoly over so-called “necessary medical services,” including most hospital care. The rationale for this is that everybody should have equal access to services, regardless of their capacity to pay. Essentially, the system is run along Soviet central planning lines, with government bureaucrats deciding how to allocate human and physical resources, and patients having to pay nothing.

The perverse effects that we can expect from any monopoly are very apparent. There are huge waiting lines for several types of medical procedures and emergency rooms are overcrowded most of the time. Health care costs are skyrocketing and governments have to devote an increasingly large share of their budget to this item, at the expense of others. The health care sector is under rigid control from bureaucrats and trade unions. Of course, the rich, famous and well-connected can get faster access and VIP treatment, but ordinary citizens have no choice but to wait.

The system is under pressure from all sides, financial, legal, and political. A private parallel system is slowly emerging in the legal grey areas that allow for some competition. The very rich can always go to the USA and get treated in private clinics.

One promising area where competition is fast increasing however is “medical tourism” in such countries as India and Thailand. More and more Canadians – and patients from other rich countries – choose to be operated in luxurious hospitals in these countries that offer the latest techniques at a cost five to ten times cheaper than what you can get in American clinics. Of course, you have to travel a long distance, but you can still save a lot and get the best treatment. For those who can afford to spend several thousand dollars to get fast medical treatment instead of waiting months in Canada – admittedly still a small percentage of the population – there is a real alternative there.

Now, think what will happen when anybody will be able to buy a cheap ticket to go anywhere in the world in one hour in one of those “bullet jets” invented in the late 2020s, to be treated in one of the thousands of private hospitals that will have sprung up in China, India, Brazil, and other countries? If present trends continue, medical technology will have made impressive improvements by then. With worldwide competition in health care services, prices will have remained reasonable or even gone down for common treatments. A quick search on the internet will give prices for hundreds of health care travel packages. Of course, standards of living having continued to rise, most Canadians will by then be able to afford medical trips anywhere in the world.

How will governments be able to control citizens’ health decisions in such a context? How will they be able to maintain their creaking monopoly on services? They won’t of course. It will have disappeared long ago by then. And not just in health care, but in education and in any sector where cheap and easy communications and transportation will make alternatives available.

The 20th century was the era of big government, monopolies having a central role to play in their control over the population. By 2036, thanks to technological improvements, the self-contained entities that we used to call “nation states” will have been shattered. Monopolies will have become a thing of the past.

Michel Kelly-Gagnon was President of the Montreal Economic Institute when he signed this article.

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