Libertarian’s Corner:

A Philosophical Argument, and

Runaway Medical Costs

 Joseph S. Fulda

Joseph Fulda is a freelance writer living in New York City. He is the author of Eight Steps Towards Libertarianism.

Classical liberalism consists of two tenets of coequal importance: First, that it is necessary and proper for the state to secure life, liberty, and property, and, second, that it is both unnecessary and improper for the state to assume more powers than these. It is thus, in the classical liberal view, the function of the state to serve rather as a night watchman, but not to provide for the health, education, or welfare of its citizens.

Traditionally, classical liberalism has been grounded in the theory of rights, which addresses only the “proper” and “improper” parts of this formulation—the arguments normally made for “necessary” (when these are made at all) and “unnecessary” are each empirical. Hence, Jefferson’s declaration that governments were instituted among men to secure the rights to life, liberty, and the pursuit of happiness, which originates in the doctrine of natural rights first articulated by John Locke. Likewise, Jefferson declared, the state’s assumption of additional powers, powers that are destructive of the ends of government—namely, the security of natural rights—is sufficient grounds for the state’s overthrow.

Recognizing the limitations of a theory which does not address the question of whether the state is necessary in its proper functions and unnecessary when it goes beyond them, philosopher Michael Levin has developed a simple and elegant theory of the night watchman state that addresses the other half of the formulation of classical liberalism. His theory is the only philosophical (as opposed to empirical) argument I know of that addresses the “necessary” and “unnecessary” parts of the traditional formulation of classical liberalism, and is therefore extremely valuable. Yet although this gem has generated considerable discussion among academicians working in technical political philosophy, it has yet to be brought to the attention of the audience that could most profit from it, thoughtful individualists. We remedy this oversight here, with a brief exposition of Levin’s theory of classical liberalism.

Basing his theory on Hobbes’ state of nature, rather than Locke’s, and using the sword as a metaphor for security of life, liberty, and property and the plow as a metaphor for economic security, Levin asks:

Is there something special about surrendering one’s sword [to the sovereign] that does not apply to [so] surrendering one’s plow, or does this particular Leviathan merely reflect Hobbes’. . . preoccupation with the fear of violent death over . . . fear of starvation?

His answer to this question is the crux of his theory.

By surrendering the liberty to use our swords to the State, the intention is that “now this liberty need never be exercised.” That is, a state powerful in its proper functions precludes the need for the individual to retaliate against wrongs done him and, for the most part, also, his need to prevent them, since the State is a strong and fearsome deterrent to aggression. “By contrast,” Levin writes,

. . . giving [the sovereign] our plows will have no like effect. The need [for] food—the need which up to now we have severally used our plows to meet—will persist unchanged after the surrender.

Any self-interested person who wants out of the war of all against all will surrender his sword, but no matter how much one may want out of the necessity of work, surrendering his plow will not result in this, only in the sovereign’s power to set the distribution of work, and in the state of nature not every self-interested person will perceive that as an advantage. Thus the only compact that all calculating, rational men would agree to form is for a night watchman state. As Levin concludes,

The point of surrendering one’s sword does not, therefore, apply to surrendering one’s plow, or indeed to any other liberty but those whose surrender eliminates their need. (Emphasis added.)

Although this is the heart of Levin’s argument for classical liberalism without rights, his treatment is considerably more sophisticated than this and counters such possible objections as the statist belief that perhaps the surrender of the plow, while not obviating its need, lessens it. For more on this and other aspects of his theory, the reader is referred to Levin’s own sixteen-page treatment.

The Case of Health Care

It is well to argue abstractly that government ought not to be involved in the provision of “the health, education, and welfare of the citizenry.” But with the cost of health care skyrocketing and insurance unaffordable for many, it often seems that at least partial provision of necessary medical services must be subsidized by the state for humanitarian reasons, and never mind whether folks in Hobbes’ state of nature would or would not compact to give the sovereign authority in the area of medicine. Certainly, that is the view of a considerable majority of our countrymen, both those who label themselves “liberal” and those who label themselves “conservative.” What might someone with a libertarian bent reply to allay the common concerns of middle-class America?

Before answering that question, one must explore just why medical costs are skyrocketing and insurance becoming unaffordable. It is not that physicians and surgeons are making better and better livings; indeed, a profession once considered golden now yields an average salary with just five figures. What does keep going up are doctor’s fees (but not their income), hospital fees, drugs, and medical technologies such as those used in diagnostic imaging. Medical fees and hospital fees have gone up—without any concomitant recompense to the professionals rendering the services—in part because malpractice insurance premiums have skyrocketed, as more and more judgments have been rendered because treatment has had bad results, even though there was no genuine fault. I do not support capping awards or limiting damages for pain and suffering; indeed, it is my own belief that damages for lost lives, destroyed lives, and impaired lives are generally too low—when they are justified at all. But in a large number of cases, it is nature and nature’s God that has decreed the outcome, and not any negligence on the part of the physician or facility providing the service. Tort reform involving strengthening the burden of proof from “a preponderance of the evidence” to “clear and convincing evidence” would be a start in controlling judgments and therefore malpractice insurance premiums and therefore hospital and medical fees.

Another reason for ever-steeper medical and hospital fees is the enormous regulatory burden imposed by states, Medicare, and Medicaid on medical providers. Hospitals have large staffs doing nothing but filling out forms, and most physicians employ at least one person full-time just to do the paperwork. This is not the way medicine used to be practiced, and we are not better off because of the paperwork. Someone has to pay the salaries of what might be termed “the medical bureaucracy.” That someone is you and me.

Another area of concern is prescription drugs. As Arthur E. Foulkes demonstrated in the summer 2004 issue of The Independent Review, a great many FDA regulations, especially those known as CGMPs (Current Good Manufacturing Practice), do nothing to add to safety but drive prices sky high and have even driven a number of manufacturers out of business. Of course, the fewer the manufacturers competing to bring new drugs to the market, the higher the prices will be. These regulations should be scrapped, the sooner the better.

Another reason drug prices are so high is that drug companies have a heart. You would not imagine this, if all you read is the daily newspaper. But that is exactly what I said. Many countries mandate caps on the prices that drug companies can charge, caps that do not allow these companies to recover the enormous costs of the research and compliance necessary to bring a new drug to market, not to mention all the potential drugs developed that turn out to be dead ends. In an earlier age, drug companies would simply have refused to sell their wares in those countries. No drug manufacturer today does that, but by complying with those caps, the prices for medicine in those few parts of the world where they are not capped must be much higher for them to recoup their costs. In other words, if we want lower drug prices we should not lobby our congressmen to allow importation of drugs from Canada—that will only destroy the golden goose that is producing miracle drug after miracle drug, veritable elixirs of life. Rather, we should lobby our congressmen to urge the executive branch of government to seek an end to such caps as part of our overall trade policy. With the costs of drug development spread around the globe among a much larger customer base, U.S. citizens will not be left paying for everybody else’s drugs.

Medical technology is also expensive, very expensive. Why is it that computer technology has gone down in price by orders of magnitude, while medical technology just gets more and more expensive? Gary M. Pecquet in the May 2002 issue of The Freeman provides an answer. Technologies such as the computer are first available only to the very wealthy or to large institutions. Then, as the producers seek to expand their market, they search for efficiencies of all kinds to make the product more and more affordable to ever-greater numbers of people. The result, in the case of computers, is that almost all homes now have one. As David Howard argued in a 1994 piece in Computers and Society the same was true of the automobile. Henry Royce and his partner Charles Rolls made a vast fortune with their expensive automobiles. But Henry Ford who came later did far, far better by endeavoring to bring cheap cars to common people. In his words, “History has shown that profits go up when innovators drive technology down to poorer people, since the market expands faster than profit margins erode.” As Pecquet shows, this has not happened with medical technology because the government—in its misguided sense of compassion—mandates that everyone have access to new medical technology as soon as it is proven safe and effective. This has the paradoxical result of making medical technology very nearly unaffordable for everyone, rather than simply temporarily unaffordable to the masses as the market drives prices down.

Now, why are insurance premiums going up? Mostly because medical fees, hospital fees, prescription drugs, and medical technology are going up and the premiums have to at least cover these expenses on average. But there is also another, if lesser, factor: Employer provided health insurance is not taxed, as is all other income. When a particular benefit is not taxed, the demand for it goes up and this, in turn, raises the price, with the result that those whose employers do not provide health insurance have to pay higher prices than they otherwise would have had to pay on the market.

These are the reasons for the steeply increasing cost of medical care. If the underlying government interventions causing the spiraling of health care costs are not dealt with, subsidizing medical care in its stead is akin to applying a bandage in a case of melanoma: It will temporarily mask the problem, but the problem is sure to grow worse and worse.     *

“I bet after seeing us, George Washington would sue us for calling him ‘father.’”—Will Rogers