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  • Writer's pictureAlan Stevens - AWAH - Libertarianism, Freedom.

Healthcare in a Libertarian Society

Updated: Oct 28, 2020

A first approximation to what the institutions of future libertarian societies would be like is to look at arrangements in Classical Liberal Britain and America before the advance of Democratic Socialism snuffed them out, generally around the time of the First World War.

A first approximation to what the institutions of future libertarian societies would be like is to look at arrangements in Classical Liberal Britain and America before the advance of Democratic Socialism snuffed them out, generally around the time of the First World War.

And yes, people were poorer a century ago. Since then we have benefited from their economic momentum, and another century of technological advance. Victorians looked at themselves, rightly, as members of a free, prosperous, successful society. They didn’t go around lamenting how poor they were compared to people in hypothetical future periods. Assuming that you can’t learn from people who are poorer than you is a type of snobbery.

Classical Liberal states had a limited role in protecting persons and property from internal aggressors (i.e. law enforcement) and from external aggressors, (i.e. ‘defence). The outcomes in the case of law enforcement were deeply imperfect but mostly workable. The result in the case of ‘defence’ was ultimately the total disaster of WWI. Much thought has therefore been put into what libertarian legal and defensive arrangements might look like.

In nearly all other areas of life in Classical Liberal societies independent, high quality (for the time) provision was the norm. A key myth of Democratic Socialism is that there was no independent general provision of welfare and healthcare (or education) before the Welfare State. Fortunately there was. By the Liberal and Labour election victory in 1906, practically all working men were members of friendly societies.

A friendly society is a mutual association whose members pay regular subscriptions for a common purpose. By 1906 some were national organisations like the Sherwood Foresters or the Odd Fellows. Members received sick pay when unable to work, funeral benefits and medical care.

The friendly societies (and their equivalents in the US) contracted with doctors to serve their members. Naturally the medics had to provide good value – refusals to make house calls for example would not be OK. Societies might have dispensaries and/or arrangements with the (generally charity) independent hospitals.

They offered no unemployment benefits because nobody could solve the moral hazard problem. (‘Moral hazard’ is an insurance term meaning people do the wrong thing – not getting a job for example - because someone else is paying, like the insurance company or members of your friendly society.) The larger societies did pay allowances to men travelling to places where work might be more plentiful.

In any case, mass unemployment in an industrial society is yet another unintended consequence of state intervention. It is true that there was also mass unemployment in the Classical Liberal nineteenth century during credit cycle downturns. It did much to turn working people against economic freedom. However credit cycles (‘boom & bust’) were, and are, caused by unsound state sponsored banking and monetary arrangements, not the natural legal arrangements of a free society.

In the event, successive governments and the medical profession, aided by its state backed closed shop the British Medical Association, managed to finish off these affordable and effective mutual institutions. The State created effectively a monopoly friendly society which was free at the point of use (actually like the real friendly societies) but had no incentive to stand up to medical practitioners and suppliers.

The independent friendly societies were undercut and basically put out of business. Of course the new monopolist arrangements are not free at all. Taxpayers are coerced into paying for arrangements which suit professional and unionised medical employees much more than working people. And don’t think this was always popular. Miners in South Wales reportedly rioted when their dispensaries were taken from them when the healthcare sector was finally nationalised after WWII. As more and more insider deals, restrictions, laws and interventions have accumulated the costs of healthcare have mushroomed.

This effect of steady, coercive intervention in healthcare is clear in the case of the US. Instead of a monopoly healthcare system burdened by its share of Spanish customs in Britain, the Americans pursued state sponsored support of healthcare crony corporates and associations, who also happen to be major donors to politicians. Notable amongst them are doctors and lawyers associations and insurance and pharmaceutical companies.

Tax subsidised, insurance based care has enabled a system full of overt restrictive practices. Doctors’ incomes have been pushed up by allowing the medical profession to restrict medical school capacity. Unnecessary testing and procedures pad-out hospital expenses driven up by massive moral hazard. The result is a drain on Americans’ living standards. Compare the marketable goods and services sector in the US, say 50%-60% of reported national production, to the healthcare cost at over 15% (around half paid by Uncle Sam just in case you thought US healthcare had anything to do with free markets). Healthcare exacts about one dollar in four of marketable productive effort. The word ‘tumour’ springs to mind.

And we may believe, based on places like Singapore now, and Classical Liberal societies back then, that this may be three times too dear for similar health outcomes.

In a libertarian set up there would be less expensive healthcare. For example, there could be no trades unions or professional closed shops – at least none that depended on breaking employment contracts with legal impunity or otherwise threatening violence. There would be no restrictions on medical school capacity and no requirements for any more medical qualification than each employer deemed necessary. And, as ever in a properly free society, there would be no direct or indirect taxation costs.

Healthcare enterprises would be liable to be sued for restitution in cases of accidental or negligent harm. However, competing legal judgement agencies would ensure that plaintiff and defendant interests were efficiently and effectively mediated. There would be no patents for drugs (though there would probably be copyright protection against imitators). Testing of new drugs and treatments would be no more exhaustive than medical risk insurers required. There would be no pushing expensive, nearly useless, patentable drugs, or opioids on the basis of, in effect, kickbacks. In free systems, bureaucracy and corruption are luxuries that people who must satisfy their customers cannot afford. Nor would there be restrictions on competing new entrants, just to keep everyone on their toes.

Friendly societies would once again go in to bat for their members rather than for doctors or drug companies. Not to do so would result in providing members with poor service. That is the route to bankruptcy and loss of employment in conditions of Liberty. Honestly, would you expect better service from people who get paid regardless, or from independent providers that need your custom?

By the way, let’s just address the question of people who can’t afford healthcare. The possible answers include; healthcare would be much more affordable absent government theft and coercion; our ancestors managed to pay for healthcare, welfare and education despite being poorer; and free societies have a lot of formal and informal charitable giving to help out hard cases.

Back to business, as it were. It is easy to see that healthcare would be better value and more responsive in conditions of Liberty. But the benefits of getting Politics out of health would go beyond this.

Let’s try to be fair to politicians on this one. It doesn’t come naturally. Enough voters suffer from infantile delusions to make it necessary for politicians to pander to them. A common one is that no cost is too high to prolong even a single life. This delusion has led to the coronavirus lockdown. It is another spectacular example of central planning failure at every level - economic, moral and practical. It’s more inflexibility, waste and heedless cruelty. Top down one-size-fits-all approaches do not work. But they are all that the state can offer. That and offering a cushy deals for its employees (they are the real beneficiaries of the state’s monopolies).

Key to getting politicians to extort more resources from productive people is to prevent anyone, including ministers and the Treasury, from working out whether current take is being properly well spent. Spending ministries exist to enable trades and professional unions and crony corporates, for example pharmaceutical companies and medics, to jack up their share of the proceeds of extortion. And remember these people are, often indirectly I grant you, donors to the ‘Republicrat’ duopoly in Washington or the ‘LibLabCon’ ‘two and a half-opoly’ in England. So they do actually matter to politicians, unlike, ahem, us.

So what about healthcare in a free society? In a free society you wouldn’t just get better healthcare, much of it free at the point of use. You would get the healthcare option you believed in without paying for behaviours and approaches you don’t agree with. For example, people value the NHS for providing excellent acute care if you have a serious accident, or serious illness. Which is great, but is most of the NHS’s money spent on infrequent acute care of healthy people? Not remotely, I believe. More seems to be spent on people who have unhealthy lifestyles, or who are basically worn out and dying of old age.

Radically unbundling health services would become feasible in a free society. This would make it possible to manage each sector better. In the present system predatory interest groups - busy helping themselves freely to productive people’s money - have no incentive to think critically about how they provide their services. They get paid every month anyway, with an index-linked pension too, so no boat rocking here.

In a properly free society, if you won’t radically review what you are doing, some other son of a gun will do it instead. They will take you and your business or employer down by offering more value. It’s a crucial difference. Political power is fundamentally the legal right to use violence with impunity. It is always exerted to protect the past, the established, the unviable and the idle. This is inevitably done at the expense of the future, of necessary disruptors (often ‘minorities’) and of viable ways of being in the world.

I have set out below a hypothetical alternative approach which might be offered by modern day medical friendly societies, had they been allowed to survive. Not all the points may be valid. But ask yourself this; would this kind of innovation be more likely in a Libertarian society or in today’s Social Democracy? So you can choose either:

1) You can subscribe to a standalone independent NHS under the current deal and pay around 7% on a roughly £40,000 average annual income in the UK. That is about £2,800 a year, which is roughly what people are in fact paying.

2) You join a mutual friendly society for, say, £1,000, with the following stipulations:

-The use of expensive GPs who mainly sift out hypochondriacs and attention seekers and refer the genuine cases, or of very expensive hospitals where you catch other diseases and hospital superbugs, is to be minimised. You agree to pay a refundable amount for justified GP visits and to be treated as far as possible at home, including giving birth there in most cases.

-The Society certifies its own medics and paramedics to avoid employing expensively over-qualified personnel. And (by definition in a Libertarian society) there are no unionised or ‘professional’ employees or resulting restrictive practices.

-You use a specialist A&E operator or network with dedicated facilities in every town.

-You agree not to smoke or indulge in certain drugs, or at least not more than a certain amount. If you turn up drunk, stoned or with sooty lungs expect your subscription to be cancelled next year.

-The Society helps you on to the next world, as it were, at your request if you are of sound mind but in pain etc. And it promises to do so anyway if you become mentally incompetent. This is difficult stuff but I am not the only one who has visited a parent in a nursing home for years not knowing whether they were aware of anything at all. And the costs of tip-toeing around the end of life issue are crushing.

In a properly free country you would be able to choose what you actually want. It might be a service tailored for drunks and heavy smokers if your inclinations lie that way. Or it could be a service developed for prolongers of life at any cost. You take responsibility, you decide, and you meet the true costs of keeping yourself as healthy as possible. You don’t pay monopoly prices jacked up by state-sponsored vested interests, but nor are you bailed out by people who don’t agree with you.

And remember this, again. There would be no taxes of any kind in a Libertarian society, including none of the indirect taxes embedded in everything you buy. Taxes cost most people an average of 40% of their spending power in Britain according to the Taxpayers’ Alliance, so it is a big deal. Partly for this reason, incomes would be much higher and prices lower and steadily falling in a free society. This makes better value healthcare still more practicable, sensible and affordable.

Oh, and one last thing. What if this were a world in which improved health was mainly the result of investment in clean water, sewerage treatment, and better food distributed in refrigerated supply chains? Certainly, new drugs helped, above all antibiotics, but what if proper diet and addressing chronic Vitamin D or C deficiencies counted for more than costly patentable drugs and end of life care?

I do not know whether we live in such a world. I am just asking if you think competing independent healthcare providers, as opposed to Democratic Socialist monopolistic vested medical and pharmaceutical interests, would be more likely to explore the scope for downsizing healthcare costs on your behalf?

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