For more than a decade now, the American political system has focused inces­santly on healthcare and health insurance. High-profile tragedies have directed public ire towards American healthcare and insurance com­panies and now foster support for a central plank in the Demo­c­ratic Party’s implicit platform — Medicare for All.

Critics of America’s free market healthcare and health insurance systems gen­erally ignore the various reg­u­la­tions and incen­tives that ham­string what would oth­erwise be a com­pet­itive system, and they fail to per­ceive the unin­tended con­se­quences of past and pro­posed leg­is­lation in the medical sphere.

While rel­a­tively free in certain regards, America’s healthcare and insurance systems are far from opti­mally com­pet­itive markets.

The Affordable Care Act, for example, pro­hibits insurance com­panies from explicitly altering the risk pro­files of their insurance plans and requires all Amer­icans to pur­chase insurance, even cit­izens that prefer not to. Insurance reg­u­la­tions require cov­erage of pre-existing con­di­tions or events like preg­nancy, cov­erage that does not con­stitute “insurance” by def­i­n­ition.

By forcibly inserting insurers as a mid­dleman into most provider-patient trans­ac­tions, the United States over­rides con­sumer pref­er­ences, weakens patient cost-sen­si­tivity, and creates incen­tives that facil­itate the higher prices inter­ven­tionists lament.

The profit motive alone can’t be the culprit for these higher prices, as com­pe­tition from firms like Walmart and CVS Pharmacy have sig­nif­i­cantly reduced primary care costs for vac­cines and other basic medical oper­a­tions in recent years.

Insulin pro­duction has received special scrutiny in recent months, and it is a par­tic­u­larly tricky subject to address. The main issue con­fronting potential insulin man­u­fac­turers — would-be com­petitors to the three current pro­ducers — is the exor­bitant cost of devel­oping new insulin products. Insulin is a bio­logic medical product, meaning it cannot be made cheaply like generic chemical phar­ma­ceu­ticals.

Insti­tu­tional bar­riers raise this cost even more. Current patent law allows firms to extend their patents, and FDA reg­u­la­tions require each new type of generic insulin, called biosim­ilars, to undergo trials and testing almost as if they were entirely new drugs. The fixed costs involved with this research and reg­u­latory com­pliance are extra­or­di­narily high.

Prices may seem unrea­sonable to some, but they are nec­essary to incen­tivize phar­ma­ceu­tical research and pro­duction in the first place. The necessity and efficacy of the FDA’s reg­u­la­tions are another matter, but critics of “Big Pharma” ought to at least acknowledge that the invisible hand can’t allocate resources ade­quately with such reg­u­latory restraints.

Reform-minded Amer­icans ought to con­sider policies that lib­er­alize the insulin market. Loos­ening reg­u­la­tions or patents on biosim­ilars and allowing con­senting patients to pur­chase products with lower safety stan­dards would cer­tainly facil­itate lower prices. Alter­na­tives to the FDA, like private cer­ti­fi­cation firms, would also incen­tivize safe drug stan­dards while stream­lining the research-market pipeline for new drugs.

To see the broader con­se­quences of inter­vention beyond the FDA, we need to only look at the U.S. Department of Vet­erans Affairs. Ter­ri­fying gov­ernment death panels are not just the stuff of dystopian fiction: Numerous waiting list-related deaths have haunted the VA, and its facil­ities are noto­rious for poor clean­liness and short-staffing.

If the VA isn’t con­vincing enough, we can look to Europe as well.
In 2017, the British National Health Service con­demned Charlie Gard, a 1‑year-old, to death by pro­hibiting his travel outside Britain for exper­i­mental treatment, even when his parents raised the money to afford it. Many cen­tralized European coun­tries also face rampant bribery to jump waiting lists and suffer from corrupt bureau­cracies that admin­ister health ser­vices.

These phe­nomena are rep­re­sen­tative of the scarcity that moti­vates all eco­nomic activity.

When gov­ern­ments pro­hibit markets from rationing resources, scarcity doesn’t just vanish. Resources must still be allo­cated, and without the price system in these markets, care and treatment is allo­cated through time (waiting lists), illegal activity (bribes or black markets), or the whims of bureau­crats who con­sider them­selves both morally and eco­nom­i­cally com­petent enough to run entire markets.

Despite the best efforts of leg­is­lators, indi­viduals and firms inevitably respond and adjust to the real­ities of scarcity, changing their behavior in ways unpre­dicted by politi­cians.

Some advo­cates of greater gov­ernment inter­vention in American health ser­vices contest that no one should die from “pre­ventable” health con­di­tions. On the surface, this sounds ideal, and it is.

Clearly, we all want Amer­icans to live long and healthy lives. This con­tention, however, when examined crit­i­cally, is actually quite vague. What exactly con­sti­tutes a “pre­ventable” health con­dition? After all, most con­di­tions are likely “pre­ventable,” but only at great cost. And no com­mitment, however laudable, is worth pro­hib­itive costs to achieve.

Blind com­mitment to such intu­itively appealing ideals inevitably comes with unforeseen costs and unin­tended con­se­quences. A com­mitment to elim­i­nating all “pre­ventable” medical deaths through any cen­tralized system will require sac­ri­ficing the work pref­er­ences of doctors; the pref­er­ences of insurers, the insured, and the unin­sured; and the foregone pro­ductive capa­bil­ities of all the resources employed in such mass coercion.

F.A. Hayek wrote, “The curious task of eco­nomics is to demon­strate to men how little they really know about what they imagine they can design.” All pro­po­nents of Medicare for All should con­sider the limits of what they or their rep­re­sen­ta­tives can control, under­standing that the system they loathe is in many ways the result of the political forces to which they now appeal.

Trevor Vogel is a junior studying eco­nomics.