We Can’t Have Government Healthcare AND Social Security

– April 3, 2020 Reading Time: 4 minutes

In posts for AIER and elsewhere, I have noted time and again that it is absolutely daft to entrust one’s healthcare or health insurance to the same entity that also pays one’s life annuity (a stream of payments payable while the recipient, called an annuitant, remains alive). Most people immediately see the conflict of interest, concede the point, and refrain from buying health insurance and annuities from the same company.

But when it comes to the government, many people forget this common-sense rule and blithely argue for the continuation or expansion of Social Security and the adoption of a socialized, single payer, or universal healthcare system.

That’s not a good idea.

The system we have already, Social Security and Medicare for the elderly (and federal trust funds and Indian Health Services for Indians living on Reservations), is bad enough in this regard.

So there is no misunderstanding, I do NOT believe that the U.S. government deliberately botched COVID-19 containment in order to reduce Social Security payments.

I think the lack of sufficient, accurate tests, the key to stopping the spread of an infectious disease in its tracks, occurred because most U.S. government officials are incompetent, not as human beings but as cogs in the Great Machinery of State.

What the combination of Medicare and Social Security creates are not Bond villains hellbent on murdering our memaws and pop pops but a bewildering array of policies that tend to lower the life expectancies of those drawing Social Security, or who are about to.

Those policies include, but are by no means limited to:

Certificates of Need, aptly nicknamed CONs, limit the number of nursing home beds, driving up their price and reducing their quality over what a free market would provide.
Guardianship laws allow unscrupulous guardians and attorneys to lawfully extract resources from wealthy elderly and incapacitated persons. While states control most guardian laws, the federal government has done little to quell the pernicious practices, which of course have an adverse effect on the mortality of the flawed system’s victims.
Prescription drug prices are kept artificially high by a panoply of policies, including the long toleration of an oligopoly of drug wholesalers called Pharmacy Benefit Managers (PBMs) which controls almost 80 percent of the market. Why PBMs have not been disintermediated I know not, but high prices, whatever their causes, lead to increased mortality for those who cannot afford to pay for needed drugs at all, or who have to forego other consumption (of food, heat, hand sanitizer!) in order to pay for their meds.
Misplaced trust in the American government’s intentions and capabilities, often inculcated by the public K-12 school system, induce many Americans to believe, erroneously, that all products are safety-tested before their widespread dissemination and that pollution regulations are effectively enforced. In many cases neither assumption is true and as a result chemicals, including plastics with unknown or carcinogenic effects, infest our bodies, water supplies, and food chains.
The food pyramid fiasco injured the health and development of most Americans for decades, increasing mortality from diabetes and other metabolic disorders later in their lives.
The government-medical research complex (the analog to the more infamous military-industrial complex) spends billions every year producing research so bad that it may actually create negative externalities by spreading falsehoods under the guise of “science.” Noted epidemiologist John Ioannidis explains.

Again, this is not a conspiracy so much as a tendency. Recall that elections do not much influence politicians because even if they lose, which is unlikely, they land on their feet socially and economically. The Founders knew that the most effective check on government power is government itself. But government officials understand that Social Security constrains their power by diverting taxes that could end up in their budgets. They can’t touch the third rail directly, of course, but they certainly are not going to use up valuable political capital to quash policies that tend to bring about the early death of the government’s many annuitants.

If America retains Social Security while simultaneously turning over healthcare for all to the government, the government’s incentives will change somewhat, becoming more Logan’s Run-like. In other words, it will have an incentive to select policies likely to keep people healthy and paying taxes until right around retirement age, when with luck their hearts will explode or they will kill themselves out of despair. That may sound a bit Rube Goldberg-esque but, again, I refer to tendencies rather than dastardly plans.

It would make a lot more sense to link health insurance or healthcare to life insurance because then the insurer, be it government or a commercial entity, would have incentives to keep people alive and well for as long as possible.

Private life insurance works so well that the federal government is barely involved (it pays $255 to the estate of deceased Social Security annuitants), so the best way of achieving the proposed common sense nirvana would be to keep healthcare and insurance private but marry it to private life insurance. But regulators do not allow such nuptials, presumably because it would strain Social Security further by increasing Americans’ life expectancy.

If nothing else, the COVID-19 crisis (the combined effects of the pandemic and panic) could lead to more people thinking about these issues and seeing that the best way to avoid a long, painful L or U-shaped recession is to deregulate key industries like insurance and increase economic freedom more generally. I call it a check market recession, a sharp brief downturn that leads to fundamental policy reforms (aka “economic repression easing”) that stimulate much higher levels of output by unleashing torrents of innovation.

But the crisis also could lead to social unrest/revolution and/or, as Richard Salsman fears, the ascension of a coalition of Republican Nationalists and Democratic Socialists, or Nazis for short. If you think that impossible, check out the latest HBO miniseries from David Simon, the creator of The Wire and other great, gritty tales of urban decay and failed reformation. It’s called The Plot Against America and it presents a plausible counterfactual scenario wherein the United States turns fascist in 1940.

I’m guessing you do have time to watch it, at least for the time being, but stay up with AIER’s latest essays and videos on the COVID-19 crisis first.

Robert E. Wright is the (co)author or (co)editor of over two dozen major books, book series, and edited collections, including AIER’s The Best of Thomas Paine (2021) and Financial Exclusion (2019). He has also (co)authored numerous articles for important journals, including the American Economic Review, Business History Review, Independent Review, Journal of Private Enterprise, Review of Finance, and Southern Economic Review. Robert has taught business, economics, and policy courses at Augustana University, NYU’s Stern School of Business, Temple University, the University of Virginia, and elsewhere since taking his Ph.D. in History from SUNY Buffalo in 1997. Robert E. Wright was formerly a Senior Research Faculty at the American Institute for Economic Research.