Ludwig von Mises Institute

Socialized healthcare

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Socialized healthcare or socialized medicine are any systems to provide the entire population with complete medical care through government subsidization and regularization of medical and health services.[1]

Socialized medicine in the US[edit]

In a 1992 study published by the Hoover Institution, entitled "Input and Output in Health Care" (see in full), Milton Friedman noted that 56 percent of all hospitals in America were privately owned and for-profit in 1910. After 60 years of subsidies for government-run hospitals, the number had fallen to about 10 percent. It took decades, but by the early 1990s government had taken over almost the entire hospital industry. That small portion of the industry that remains for-profit is regulated in an extraordinarily heavy way by federal, state and local governments so that many (perhaps most) of the decisions made by hospital administrators have to do with regulatory compliance as opposed to patient/customer service in pursuit of profit. It is profit, of course, that is necessary for private-sector hospitals to have the wherewithal to pay for healthcare.

Friedman's key conclusion was that, as with all governmental bureaucratic systems, government-owned or -controlled healthcare created a situation whereby increased "inputs," such as expenditures on equipment, infrastructure, and the salaries of medical professionals, actually led to decreased "outputs" in terms of the quantity of medical care. For example, while medical expenditures rose by 224 percent from 1965–1989, the number of hospital beds per 1,000 population fell by 44 percent and the number of beds occupied declined by 15 percent. Also during this time of almost complete governmental domination of the hospital industry (1944–1989), costs per patient-day rose almost 24-fold after inflation is taken into account. The more money has been spent on government-run healthcare, the less healthcare was gotten.[2]

Friedman referred to this as the Gammon's Law, where in "a bureaucratic system . . . increase in expenditure will be matched by fall in production. . . . Such systems will act rather like `black holes,' in the economic universe, simultaneously sucking in resources, and shrinking in terms of `emitted production.'" As he put it: "I have long been impressed by the operation of Gammon's law in the U.S. schooling system: Input, however measured, has been going up for decades, and output, whether measured by number of students, number of schools, or even more clearly, quality, has been going down."[3]


According to a 2011 survey, physicians were increasingly attracted to the benefits offered by hospital-based employment opportunities. These benefits include relief from administrative responsibilities and stability in a business environment made uncertain by developments such as payment reforms.[4]

References[edit]

  1. Dictionary.com. "Socialized medicine", referenced 2011-11-20.
  2. Thomas J. DiLorenzo. "Socialized Healthcare vs. The Laws of Economics" Mises Daily, July 2009, referenced 2010-07-04.
  3. Milton Friedman. "Gammon's Law Points to Health-Care Solution", The Wall Street Journal, 11/12/1991. Referenced 2010-07-04.
  4. "Physician Employment Trends Will Force Payers, Hospitals and Vendors to Revise Business Strategies, According to Accenture Survey", Accenture, June 13, 2011. 2012-10-06.

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