A Prescription for Marxism

Karl Marx may have suffered a second death at the end of the last century, but look for a spirited comeback in this one. The next great battle between socialism and capitalism will be waged over human health and life expectancy. As rich countries grow richer, and as healthcare technology continues to improve, people will spend ever growing shares of their income on living longer and healthier lives.

U.S. healthcare costs have already reached 15 percent of annual national income and could exceed 30 percent by the middle of this century -- and other industrialized nations are not far behind. Certainly, an aging population is part of the story. But if economic productivity keeps growing at its current extraordinary pace, Europeans, Japanese, and Americans could triple their current income per person by 2050. Inevitably, we will spend a lot of that income on improving and maintaining our health.

Which brings us to Marx. When the price of medical care takes up just a small percentage of national income, it is hard to argue with the notion that everyone should enjoy similar medical treatment. Sure, critics may gripe that the higher taxes needed to pay for universal health coverage may cut into economic growth a bit, but so what? A little redistribution won't suddenly transform the United States into a failed, Soviet-style "workers' paradise." But as health costs creep up to, say, 25 percent of national income, things get more complicated. Americans would see their tax bills more than double, while total taxes could reach 75 percent of many Europeans' income. With oppressive tax burdens and heavy state intervention in health -- already the largest sector of the economy -- socialism would have crept in through the back door.

Of course, smug Europeans, Canadians, or Japanese may think that exploding healthcare costs are a purely U.S. problem. Certainly, the British and Canadian governments successfully wield their monopolies over healthcare to hold down both doctors' incomes and prescription drug prices. And part of the rise in U.S. healthcare costs stems from the breakdown of the checks and balances that more centralized systems provide. (For example, Americans are several times more likely to receive heart bypass surgery than Canadians, where the procedure is reserved for extreme cases. Yet several studies suggest that patients are no worse off in Canada than in the United States). And even the most fanatical free marketers recognize that healthcare is different from other markets, and that the standard supply-and-demand principles don't necessarily apply. Consumers have poor information, and there is an obvious case for greater government involvement than in other markets.

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