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Tuesday, August 25, 2009

Want to Fix Health Insurance? Turn to Marx

Patience, I'll get there....

My wife Erin is reading Methland, Nick Reding's account of the destruction wrought by methamphetamine in rural America. Reding connects the increase in meth use to the consolidation wrought by Big Ag (see also commentary by Patrick Deneen).

Over buffalo burgers last night (yes, we live well), Erin explained how Reding also manages to work Karl Marx's critique of Adam Smith into the argument:

Smith's capitalism depends on lots of small actors in the market, none of whom individually can wield enough influence to skew prices... or to unduly influence the government that regulates the market. The "Invisible Hand" is invisible because it is the product of umpteen Main Streets, not one Wall Street. The Invisible Hand doesn't require much regulation, since real competition is a pretty good check on individual power.

But Marx says the market's mandate to "grow or die" means all those competing actors start cannibalizing each other. Capital consolidates, and the Invisible Hand becomes visible: we can identify a few big firms that dominate the market, unduly influence prices, and (worst of all) mingle and merge with government just when we need government more to check the power of these growing gargantua.

And then I thought about health insurance. The Invisible Hand cannot work in health insurance. Thousands of tiny firms would have thousands of tiny risk pools that couldn't cover their costs, espcially not when we're talking the high costs of modern medicine. Insurance depends on spreading the risk; the bigger your pool, the better you spread the risk. Insurers have to eat each other—grow or die. That's why health insurance now lacks competition. It doesn't require an evil plot (though you can argue that); it just requires insurers to act exactly as Marx said they would. Consolidate, get big, control the government with lobbyists.

The conservatives opposing health coverage reform by chanting "Let the market solve" assume that Adam Smith's principles still apply. But the free market can't work in health insurance. There is no Invisible Hand, only big Visible Fists like Aetna and Cigna.

The only way you check the power of those big actors in the market is through stronger government intervention. Uncle Sam Insurance offered as an option alongside private insurance might help, but Marx's critique strengthens my belief that, in health insurance, the best solution is to carry the logic of consolidation to its inevitable conclusion: combine everyone into one nationwide risk pool, a single-payer system for all Americans.


  1. I just saw the best arguement ever for a single payer system:


    @ about 15:00 minutes in. The point is that if we simply took all of the dollars wasted by private insurance companies "overhead" rates, we could pay for all of the uninsured people's health care costs. We currently pay in enough to cover everyone, but instead of covering everyone, we give a bunch of it to middle men!

  2. Steve Sibson8/25/2009 4:43 PM


    Finally you agree that the Progressive movement is Marxist in nature. And the google juice you talked about really kicked in today a a post with Van Jones, Green Czar, and radical in the title. AOl and bing and other search engines are pounding that post very hard. Look for the Marxist charge being elevated to revolutionary communism in regard to Van Jones.

  3. Hold on, Steve. I don't prove anything about any person or party. I simply make an economic and philosophical case that health insurance can't operate effectively according to Smith-style capitalist principles and that Marx's critique better explains what we see in the status quo. I will also go so far as to say the problem is that there aren't enough Marxists around to make that perfectly logical case and turn it into legislation. I do not agree that the Progressive movement is Marxist in nature. I would argue my fellow Progressives need to be more Marxist on health care.

    I think I'm a Progressive in your book. I'm also a South Dakotan. But I do not conclude (nor should anyone else) that South Dakotans are Marxists Gotta watch those hasty generalizations, Steve.

    And Tony! Thanks again for the Moyers link! I'm sorry I didn't catch and comment on that sooner!

  4. Steve Sibson8/25/2009 8:08 PM


    You can't have your Marx and deny it too.

  5. But Steve, I'm doing no such thing. On this argument, I want my Marx, more Marx, and I'm not denying it.

    You said that I agree "the Progressive movement is Marxist in nature." The post from which you derive that conclusion says no such thing. I make no claim to speak for or be typical of the entire Progressive movement. I make no comment any political movement. This post is an economic argument.

    But neither do I deny that I would support a Marxist approach to the situation.

    Also of interest: you have done exactly what I expected: focus on the word Marxist to raise the irrational fears of typical readers (and yes, I am keenly aware that declaring Marx was right is probably the worst way to try winning a policy argument in America) instead of actually refuting the logic of the argument. Call me whatever you want: I would like you to point out the failure of the logic in my observation of the inherent contradiction between the capitalism we think Smith dreamed of and the reality of the insurance oligopoly.

  6. Steve Sibson8/25/2009 9:27 PM

    "I would like you to point out the failure of the logic in my observation of the inherent contradiction between the capitalism we think Smith dreamed of and the reality of the insurance oligopoly."

    Fair enough. It is very simple. The oligopoly was created by government regulation (that prevents smaller less capital rich entities from entering the market place) that were put in place with the approval of those who are also in control of the oligopolies. This practice was the very agenda of FDR's NRA. The consolidation is due to socialism, and the abandonment of free-markets. The government's Natural Law duty is to protect the small guy, not create private/public partnerships with the big guys. The "rip-off" is that the redistribution to the poor is minor compared to the redistrbution to the corrupt plutocrats. And what the poor gain in government welfare, they lose more due to the inflation that arise because the game is financed with printed money via the Federal Reserve.

    The Progressive movement was created by the rich plutocrates who control the universities and the government. The philosophies came from the same German thinkers that produced Marx. Yes, Marx was for the small guy, but his solution created the system that is being used to screw the small guy. Marx's error was creating a solution that left God's Natural Laws out of the equation.

  7. Wait wait wait! Back to Earth for me and my humble readers, Steve. Your response said nothing about health insurance. I said nothing about every existing industry. I'm not even claiming that Marx's critique applies to every industry.

    Read my post again (you know, all the stuff that comes after the word Marx). I'm speaking very specifically about health insurance, which by its very nature depends on larger risk pools.

    Are you telling me that FDR consolidated the insurance companies, and not the competitive pressure to get big? And are you telling me that health insurance could work sustainably with a million mom-and-pop corner insurance stores, each with a risk pool of 30 people, and no government regulations?

    Note we might find some common ground here: there are government policies favoring the oligiopoly. Those policies exist because the oligopolies got big enough to push government around and get favors that prevented the last logical step from playing out: everyone in America forming one big happy risk pool.

  8. This discussion fascinates me, for it reveals a rift between sparring factions within my own mind! I love paradoxes, especially when my own brain tries to second-guess itself. (But hey, I love canned squid, salted cuttlefish, and octopus as well. Go figure.)

    As an academic, I sympathize with those who would favor a complete socialization of our medical delivery system, such as Dennis Kucinich and the deceased Paul Wellstone.

    As the sole proprietor of a small business, I am wary of "wonks" who sit in "ivory towers" and presume, from that vantage point, to know what is best for the folks "in the trenches."

    Cory, we can truthfully speak of the merits of "socialism" and the wisdom of "Marx," but at the same time we have to keep in mind that both of these words trigger reactions of fear, loathing, and even paranoia in a large part of the U.S. population.

    I've heard a bit of wisdom which I'll pose as a rhetorical question: "Must we slash with the sword of truth when pointing with it may suffice?"

  9. Steve Sibson8/26/2009 6:01 AM


    One element of government intervention in heatlh care that reduces free-market competition is not allowing compaines to compete across state lines. Who do you think that favors?

    ANd then there is the redistribution of Medicaid, which forces providers to cost shift to the private sector.

    And how many government regulations do health insurance companies have to comply with?

  10. Steve, you're right: I cannot argue that health care companies completely control the agenda and have successfully imposed total anarcho-capitalism. Insurers do have to follow some regulations (but not enough! Let's see some timely payment requirements like in France and Switzerland, so doctors can get their money fast with minimum effort!).

    State-line restrictions: wouldn't that favor the existing players by reducing competition? Isn't the reduction of competition exactly what the current big players want?

    Medicaid and Medicare: maybe doctors don't like it... but do insurers want those high-risk low-return customers?

    Stan, I can't tell if I'm just pointing the sword or slashing with it. But I know the sword in my hand is an ugly one.

  11. Cory, you stated, "The only way you check the power of those big actors in the market is through stronger government intervention. Uncle Sam Insurance offered as an option alongside private insurance might help, but Marx's critique strengthens my belief that, in health insurance, the best solution is to carry the logic of consolidation to its inevitable conclusion: combine everyone into one nationwide risk pool, a single-payer system for all Americans."

    Pardon me as I'm not a debater, but I do see a dichotomy here. You say the only way to check the power of big actors is thru a single payer system run by the govt. Seems to me that then you have one single "big actor" controlled by and answerable only to itself! Somehow I fear this type of scenario in regard to anything, and we all should.

    Do I trust our gov't? NO. I trusted our founding fathers, who were looking out for the nation. The present govt, both parties, is all about looking out for themselves, their power, and their political futures.

    Linda M

  12. You are too a debater, Linda—you're doing it right now! :-)

    It's only a dichotomy if you maintain the dichotomy of government versus the people instead of Lincoln's government of, by, and for the people. That single payer is answerable only to itself... i.e., to us, the way we hold our elected officials accountable at town hall meetings and the ballot box (funny: I still haven't heard anyone raise an uproar over the fact that our insurance agents and CEOs don't have to come to town halls to be called fascists).

    But at least you agree, Linda, that it is possible for government to be good, as it was, you say, when our Founding Fathers ran the show. The Founding Fathers weren't gods; they were folks like us, putting together institutions and rules answerable to the people. Those institutions still exist. We can still run them for ourselves. We just need to shout above the noise created by the big corporations that violate Adam Smith's principles (and prove Marx's point).

  13. I think the idea of gov't of and for the people is being thrown under the bus by the power of the fed gov't, its lack of transparency, and its lack of accountability.

    So my reasoning remains. One big actor, ie the fed gov't, offering one public plan for insurance and also in charge of auditing it, controlling it, with no chance for us little people having a say in it, which inevitably it would be, is completely counter to your argument. And I am not ready to give the fed gov't that power to control my life, and I would hope that no one else would want that either.

  14. Actually, the last anon comment above was me, Linda M. I forgot to sign it!

  15. "Jack," Linda M. is my neighbor Linda McIntyre from Winfred. And she is quite clearly disagreeing with me. Introduce yourself, Jack, and you can stay, too.

  16. Steve Sibson8/26/2009 11:43 AM


    Removing protected territories increseas competition. Need to think it through.

    I think Linda correctly points out the illogical solution to big insurance companies being a even bigger one.

    I think the biggest reason why Marxism doesn't work is that it removes the cost/benefit decision that those in free markets make. And that applies to health care. Remember the question that none of the Obamacare proponents will answer:

    Who should determing the maximum benefit;
    1) Those receiving the benefits
    2) Those paying it
    3) the government

    The right answer is made when the person receiving the benefit is also paying for it. When Davison county pays for it, the taxpayers are stuck dealing with a half a million dollar cancer treatment bill. And future technology will only make this question much more important to answer. Best we answer it now.

  17. And the insurance companies lobby to keep that competition from increasing. Point made.

    Linda's point -- nope. I'm not advocating creating a bigger insurance company. I'm advocating replacing big insurance companies with one non-profit government solution. Very different creature.

    Your supposedly unanswered question: I'm still not clear about the premise of the question. Are you saying that a human life is worth a finite amount? If a child's medical treatments reach a certain million-dollar level, we should stop paying? Is there only so much you are willing to pay to protect the life of one of your Davison County neighbors? Just what are you saying about a maximum benefit?

    But I will answer your question: Who should determine the maximum benefit... the actual dollar value of a human life? All three: recipients, payers, and the government. And under a single-payer system, those three entities are all the same. If you want to establish a dollar value for a human life, that's a discussion everyone should be able to take part in, not just some secret private insurance death panel of unaccountable CEOs.

    Does that answer your question?


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