Health Care and the Road to American Serfdom

The late F.A. Hayek and his very active archconservative disciples have been pulling wool over the eyes of virtually all the people living in the United States today.

They have been trying to convince us that we are minions in the claws of an all-consuming government. And that government, so say many Republicans serving in the U.S. Congress, is intent on robbing us of the last vestiges of freedom, individuality and meaningful choices.

If only it were so. But freedom and individual rights in the United States are not threatened because government is too oppressive. The real problem is that government is too weak and does not act in muscular and farsighted enough a manner to protect citizens’ and consumers’ interests.

Case in point: The U.S. health insurance system and the exorbitant price increases now experienced by many Americans. A couple of days after the reelection of Barack Obama, we received the insurance renewal statement for our health plan, which we have had for well over a decade.

It is offered by CareFirst, the regional version of Blue Cross Blue Shield, the largest healthcare insurer in the U.S. capital city of Washington, D.C. — as in many other major cities of the country.

Having the advantage of size and scale, one would assume the company would offer attractive prices to its insured clients. Well, the notification we received was an increase solidly in the double-digit range.

Rest assured that nothing had changed in our health status or our consumption of medical services. I was especially puzzled because I had just read stories in the business press recently about U.S. healthcare inflation, which used to run at a rate of close to 10% a year but had now subsided somewhat — an apparent benefit of the recession.

I realize that stories about frustrated employers and health insurance customers or about these firms’ often-outrageous business practices are legion. Why then tell another one?

First, isn’t real insurance reform upon us? Wasn’t that what the Supreme Court decided in the summer of 2012 — and what U.S. voters validated with Barack Obama’s reelection the following November?

Second, how on earth could our provider come up with yet another double-digit increase? Aren’t the media headlines full of worries about deflation? Why then such a steep increase?

And third, what about transparency? How could the increase be justified? Where can one look into the insurance provider’s expenses and calculations?

As a general note, it is amazing to observe that in this freedom-loving country basically the only thing a consumer-citizen can do is either walk away (and find a new insurer, unlikely to be any more reasonable) or take it on the chin.

Where are the — lo and behold — government authorities charged not just with probing such steep increases, but equipped with the right to reject them?

One would have thought that Mr. Obama’s health reform law would have put an end to all those abuses of corporate power. Not so. In his effort to get most Americans insured at long last, it turns out that the Obama team ended up offering the health insurance industry a great deal.

For a few consumer-friendly insurance reforms, such as not excluding people for pre-existing conditions, the industry would get a load of new business through newly insured people.

Another key provision of the reform is the establishment of healthcare marketplaces, called exchanges, which are theoretically based on the idea of competition and are supposed to transparently offer consumers choices among health plans. Those start in 2014.

Disregard for the time being the fact that there is very little competition in the health insurance markets — because one or two insurers dominate most markets. Insurers are claiming that the new insurance reforms and expansions of coverage cost them so much more that they have to pass them on to their current customers.

Any rhetoric aside, health insurance companies are basically free to do rate-wise as they please — and it turns out that they are extremely busy ratcheting up rates.

So, will things get better in 2014 and thereafter? Will the much-advertised competition among U.S. healthcare providers put an end to these all-too-common and all-too-high rate increases? That is the hopeful scenario. But it is far from a certainty.

Also note that the operative word in the previous paragraph was “competition.” That word, mind you, does not mean the same thing as prices coming down, even though you would think so.

In lucrative markets such as Washington, D.C., the expectation is that other firms will enter the market. But whether that will really lead to lower prices or whether it will just end up as a fight over market share among high-priced providers remains to be seen.

Most experts believe that, in any market with high levels of concentration among existing health insurance companies, it will be the latter rather than the former.

What all of this gives rise to is a fundamental reconsideration of a longstanding narrative in the American body politic. It is not government that oppresses people and their economic needs and desires.

Rather, the oppression hails from a corporatist state, formed by an unholy alliance of politicians and corporations that finance their reelection campaigns.

That machine skillfully detracts from its own pattern of malfeasance by pointing fingers at supposedly malicious government “bureaucrats.” What is left unsaid is that the latter are, for the most part, thoroughly neutered to ensure that they are powerless in opposing the ways and means of the powerful and asset-rich.

And so it is only in very few U.S. states that insurance commissioners have any real power to act as a counterweight to the industry on behalf of the consuming public.

That matters a great deal for the future. While the Affordable Care Act establishes many rules about health coverage, the states are still the primary enforcers of those rules.

Among the few states that have real pro-consumer teeth are Rhode Island, Oregon, Maryland and California. As things stand, it is therefore largely the few progressive states in the country where citizens are equipped with any rights and defenses — and not just relegated to the hapless status of a disempowered consumer.

Living the lives of serfs

What is so strange about this turn toward corporatism is that it runs counter to the original promise of U.S. business. That promise was to use the vast scale of the U.S. market — especially when compared to the many other, often much smaller national markets — to offer goods to U.S. consumers at very reasonable prices.

That is no longer the case. Business lobbies now have a near-chokehold on the U.S. political process through the corrupting monster that is the system of campaign finance. This form of patronage, which puts politicians of both parties largely at the mercy of corporations and the rich, is a true oddity among civilized nations.

As a result, it is no real exaggeration to say that Americans, by comparison to the citizens and consumers of other advanced countries, are living the lives of serfs. That statement may not apply to the entire 99%, but close to it.

We may not realize it, but — at least when translated to the much higher level of individual freedoms and citizen rights in much of the developed West today — American consumers often find themselves in a truly deplorable position. They have just about as many rights as the serfs did in feudalist, pre-revolutionary Russia.

U.S. health insurance companies continue to treat their customers in essentially the same manner. Back then, the near-almighty landowner always knew best what was good for his serfs and arranged everything, no questions asked.

What emerges from this analysis of the power distribution in the healthcare industry is vitally important for the idea of freedom and individual rights. Given that health care consumes close to a fifth of the nation’s GDP, this one industry not only makes up a vital part of the U.S. economy, it accounts for a very sizable share of American families’ household budgets.

Against that backdrop, it is important to rob American conservatives at least of one falsehood. They should not use F.A. Hayek as a crown witness for their desire to act as apologists for their vision of, and desire for, a corporatist state.

Hayek opposed central economic planning for very good reasons. But he did endorse the regulation of business, social welfare legislation and similar “mortal sins” in the eyes of conservatives.

Hayek thought that doctrinaire laissez-faire positions were foolish and, perhaps presciently, even wrote an essay that was entitled Why I Am Not a Conservative.

He concluded that piece sagely by stating: “Conservatism may often be a useful practical maxim, but it does not give us any guiding principles which can influence long-range developments.”

And specifically in the context of health care and social insurance, Hayek wrote in The Road to Serfdom, his most important work:

Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance — where, in short, we deal with genuinely insurable risks — the case for the state’s helping to organize a comprehensive system of social insurance is very strong…. Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make the provision for the consequences, such communal action should undoubtedly be taken.

What this makes clear is that Hayek is a victim of post-mortem hijacking. Unlike those who see him today as their government-devouring godfather, he was no scrooge.