 Our guest this weekend is Charles Hugh Smith who operates the alternative financial website of two minds calm And Charles recently wrote a brilliant article called the new shackle of serfdom clinging to health care insurance And so our topic this weekend is health care in the terrible state of health care services in America today How did we ever reach a point where health care is so thoroughly anti-market so thoroughly captured by the regulatory state in DC and by their crony friends in the insurance industry? And how can we ever get back to a system of paying market prices for basic services and having insurance only for Catastrophic injuries or illnesses. We'll explore these problems And we'll also talk about some potential solutions that the marketplace offers like minute clinics at places like Walmart and CVS cut the Irish care which more and more doctors are interested in now offering and Medical tourism which involves allowing people to purchase services outside the US So if you're concerned about what's going on in the health care industry stay tuned for a great interview with Charles Hugh Smith Charles Hugh Smith welcome so much for the first time to Mises weekends. Thank you for joining us today It's my pleasure Jeff an article you ran on your site up two minds about a week or so ago Also ran on new rockall.com was entitled the new shackle of serfdom clinging to health care insurance And I really enjoyed it because it talks about something I've always talked about this ludicrous coupling of health insurance with one's employment Right when you change jobs, you don't lose your auto insurance. You just pay the premium So let's unravel this event and talk about how we ever got into this mess Where first of all we have health insurance to begin with as opposed to paying cash for basic services But also how it came to be part and parcel of one's job. So I'll open it up to you How did we ever get to such an anti-market health care system? Well, it's certainly a long and twisted road as I understand it Jeff And I don't claim to be an expert in the history, but as I understand it It's a historical accident that Health care insurance was linked to employment and this this came about back when employment was very stable, you know the 40s and 50s when people would tend to work for a company for for decades or perhaps their entire career and and health care insurance was actually more like hospitalization insurance in other words back in the 50s when You know, I was a child My parents and everybody else paid for normal health care in cash, you know, the dentist paid in cash Doctors visit paid in cash so on and so it was only hospitalization that that it had insurance and It was very low-cost and I know this because I found my father's paychecks from Sears Roebuck and company and and the hospitalization that he paid was a few dollars a week and so It started out Looking rather benign, but as conditions changed then we're stuck with this legacy system that makes no sense Well, I've also read about during especially during the World War two period when there were actual wage controls In effect in the US that employers got around that and attracted talent by giving them sort of a backdoor raise By offering a perk known as health insurance And of course, we also have this mess where in most cases anyway Health the provision of health insurance is deductible to an employer as a business expense Whereas it's not deductible in most cases to an individual as a personal expense So it's definitely something that didn't happen by accident In other words, it feels like the government has forced us into this insurance model. We're in well, it certainly is forcing a cartel structure that Basically denies the market any chance to discover Price and and that's why it that's really the core one of the core issues of why it's so devastating is There's no real price discovery. So The pharmaceutical cartel, you know puts a price that the insurance cartel Pays and then the hospital cartel takes care of you know, they're in and so We don't know what the price really is We have no pricing mechanism and imagine if if we still had a system as you alluded to from your own childhood where our mom or dad When we're little go in and pay cash for things. I mean there you would instantaneously Have a huge amount of downward Pressure on prices for basic services But what ever happened in this idea before Obamacare came along and mandated that all sorts of things be covered in even the most basic Bare-bones policy, you know in my own youth time As a young guy in the 80s for instance All I had in terms of health insurance was a very high deductible catastrophic type policy I think the deductible was five thousand dollars a year or something which would have been a ton of money back then to me And all it covered was if I get hit by a bus or got cancer You know real hospitalization type things and beyond that I was young and healthy and I didn't care about health care insurance Is this the kind of thing that we could ever get back to today? Well, Jeff, I think that's a great question and I think that's we need to map out some route back to that even to the 80s and I can relate because I was an employer in the 80s and I remember distinctly that all my Employees I paid I think fifty four dollars a month You know for for for basic health care coverage, which was a copay, you know 80 20 or something And so it's like where did we how did we get from a situation that health care was once? quasi affordable and and provided a lot of a spectrum of choices to now It's horrendously expensive no matter what you choose and as a self-employed person I I know that the cost is just horrendous if you don't Qualify for a subsidy that is if you have a middle class or above income then you're paying 10,000 15,000 20,000 dollars a year for Obama care or if you're lucky It's a grandfathered in equivalent and and that's insane But since it's so expensive and since it's not deductible generally to the individual Which means if they have a 15 or $18,000 annual premium for let's say their family policy That means they got to make 25 or $30,000 before tax pre-tax to have that money You know it's just you talk about the need in the capitalist society to have mobility of labor and capital And I just wonder how many Americans who have entrepreneurial aspirations are scared to quit their job, right? Because they're afraid of being self-employed and having to go out and get health insurance on the market they're afraid to leave that sort of cozy confine of Employer provided health insurance. I mean it must be a huge drag In the sense that people don't leave their jobs as readily. I think you're absolutely right Jeff I think it's completely suppresses self-employment and the start of new businesses And it also suppresses hiring employees because if you do start a business and Get it functioning to where it can cover you and your family the huge cost of of Healthcare insurance puts a huge burden on on hiring anybody else And so it keeps very small businesses very small because it's a huge leap of faith to hire people and have to pay these Ridiculous healthcare premiums. So it suppresses self-employment Entrepreneurship and hiring that's a bad combination Well, as you point out if one happens to be poor Presumably there is Medicaid there as a backstop or you simply go to the emergency room or whatever and default on the bills when they come And of course, there's also a workaround in the current system for wealthy folks You know someone like Barbara Streisand is not going to call her doctor and wait two weeks for an appointment She can take advantage of something which is now termed concierge care Maybe she pays a hundred thousand dollars a year to a favored doctor and that doctor serves a very small group of people Who also pay him or her that hundred thousand and they can get same-day appointments? They have the doctor's cell phone number. They can call them 24-7. They can get prescription refills Referrals all these things very easily. It's like having a concierge as your doctor There's been some movement to move that down into more affordable middle-class levels like a $5,000 a year annual payment, but I wonder I'd like to get your thoughts on is this viable I suspect if that became prevalent the Fed gov would come along and try to say well You can't do that or you have to accept Medicare patients For example that they would find a way to keep that away from average folks, you know Jeff It's you raise a critical point in this discussion Which is what the federal government and and also by the state governments How they enforce a system that is broken and so when you try to do a workaround You're always you know at least in the lower rungs of our economy You're breaking the law like people write me and they say that they know a lot of people who are just in the underground economy You know they fixed cars, but they only do so for cash So they get their Medicaid coverage, you know paid by the the government, but they're making money cash and and so That's another kind of bad thing that these ridiculous costs do is push people who with marginal businesses into the underground economy where they pay no tax and and then there's they're basically Subsidized by those of us who are paying the tax, you know, I like the idea of of More options, you know and the concierge service is is an option and so, you know That's part of what makes markets work is having a spectrum of choice, right? so that what works for one person might not work for somebody else, but there's another choice for them and So there's another issue that I want to bring up which is when the government mandates all these things like no You can't do that unless you provide Medicare Medicaid a lot of providers and I mean doctors and Nurses and small clinics. They just decide to quit They just you know, they can't make money because of course the government instead of instead of breaking up all the cartels Which would be the way to lower costs the government keeps the cartel structure So all the prices are insane, you know, the every medication is five or ten thousand dollars every hospital stays a hundred thousand dollars and so on and so what happens is If the government imposes the cartel structure, then the only way it can reduce the cost is to Reduce the payments to the providers at the front line So that that means and I get complaints from I'm hearing from doctors via email that you know, they can't survive They get like thirty one dollars for some Medicaid Medicare Procedure or visitor something So they're gonna quit and so then we're not gonna have enough providers to provide healthcare It's such a tough road to become a doctor, you know, you give up your 20s you go into debt You give up a lot of your health and all the stress involved. I mean, I fear for my own Senior years who's gonna be around to be doctors? It's not it's not just a rhetorical question But you know, we talked about the workaround that the poor and the rich have to go get healthcare But let's talk about some of the workarounds doctors have one is one you just mentioned dropping out Two is perhaps trying to opt out provide concierge care going to research Leave the country etc. But there's a third one which is you know There's some of these areas where it's still cash and and look at how these things have become better and cheaper of years Laser eye surgery is one example It used to be done with a scalpel and it costs like ten thousand dollars now It's done with a laser you see it you see it advertised for like one thousand dollars because of course insurance doesn't cover it There's also an analogy with plastic surgery You know people go to the dermatologist or the plastic surgeon for cosmetic type treatments And these have gotten cheaper and cheaper and cheaper Because of because supply and demand at least to an extent is allowed to operate. So I'd like your comments. Yes, Jeff That that's exactly correct that when the markets allowed to function where innovation is allowed to flourish and people are presented with The cash price so there's competition then the cost of care plummets and So obviously that's the the the solution that needs to be expanded and I think that There is a movement Toward that and a lot of people look at I think Walmart has a thirty dollar You know flat fee Service and some of their pharmacies and and there there is movement both in corporate America and by individuals to offer just cash services and I know a lot of doctors would Would love that model or they're they're trying to get to that model because they also can eliminate all the paperwork What one fellow wrote me that he says he has like six people on his staff that do nothing But process paperwork to deal with all this government stuff And so if you're paying cash guess what you know you you need one person and so that that's the whole cost of Healthcare will go down the more we move to cash Because we won't need 40% of the money now goes to processing paperwork and some other unknown percentage as high as 25% from what I've gathered is lost to Fraud and corruption, you know in other words people billing the government for services that weren't rendered and so If we could eliminate the waste in our system We could drop pray the cost of the system by over 50% right off the bat never mind allowing innovation in competition Well, wouldn't it be beautiful of despite all the heavy handiness of the state here that someone like a Walmart with its minute Clinics or whatever they call them was able to cut through and at least apply some measure of Market to this in other words what people really want is to be able to go see the doctor same day without an appointment They want to pay a low amount 30 bucks or something for you know You're typical cold flu Erake whatever it might be so so we definitely need to keep an eye on that but I wanted to get back to Something you mentioned in your article, which is you've written in the past about this basically There's two options that we might consider when we do look at health care in Western countries and in the US One is that we go back to what we had which is basically a cash system with honest pricing get the state out of it Perhaps insurance exists but only you know high deductible catastrophic type insurance or the second option is we go You know to the full UK or Canadian model where you literally have what I guess is now termed single payer The government doctors provide you health care of a sort in these dreary clinics with long waits And there's there's scarcity and there's limits on on certain kinds of surgeries and there's end of life Considerations when when things get really expensive all that sort of DMV VA model of health care provision But so those are the two basic models out there in the world today of course the left hates the cash and capitalism model But here in the US we're mired in this middle this sort of corporatist model where we ostensibly have private medicine Through this network of insurance payments and the state and Medicare determined how much is paid So it seems to me and I hate to say this as a as obviously a hardcore anti-status that ours is the worst Our model is actually worse than the other two it in in a in a twisted way We might argue that that that the Canadian or the UK system is better than what we've got I mean I know it isn't in terms of results because you can still opt out I like I said if you're Barbara Streisand, but it seems like we have Saddled ourselves with the worst of both worlds. I totally agree Jeff and I think that we can quantify that It's not just an opinion, you know health care in the US costs far more than it does anywhere else in the world and the results are at least in terms of public health like the our problems with Obesity and and chronic disease and stuff. I don't think we're We're doing as well as other countries that's been a whole lot less money on whatever model So yeah, and you know, let's talk about that. What about if we had a a government-run, you know service like a you know, gigantic VA or something that was available and that Anybody could sign up for but there was also an unfettered open market So that if if you wanted the government service, you could sign up and that would be paid for by taxes But it would be as you said, it would be slow and efficient to be limits on what you could get But it would be like a way of covering offering coverage to everybody, but in an unfettered market Alternative then there'd be this whole other spectrum and I think that competition between these two systems would drive price and innovation because that's what That's what that's what the market excels at is introducing innovations that make things faster better cheaper and Allow people the choice based on the price and and the quality and the service and everything that should be Transparent and that's what's so wrong about our system is nothing's transparent The cost is is not transparent and the quality of services and transparent. You don't even know what you're buying Well, Charles, we only have time for one last question Let's talk about what libertarians might do here and now today to to make things better for themselves and for their families In terms of trying to go out and get health care One thing that pops to mind is this new burgeoning industry called medical tourism I witnessed this Quite a bit in the 80s and 90s when I lived in San Diego for many many years people would go to Tijuana For for especially for dental treatments root canals etc. And pay a much more affordable cash payment How can we go about working within or without the system as libertarians any thoughts or suggestions? well two things occur to me Jeff one is as as you say medical tourism and It's certainly thriving in places like Thailand where my wife has gone for dental dental work and Skincare at like a fraction of the cost in in the US and so and these are often US trained or European trained doctors and so the quality of care is is quite high and it's also transparent in the states I think we need to try to support those doctors nurses and clinics which are offering cash services So and it's hard to find find them sometimes, you know, and so the ideal to me would be to establish like sort of a national network of providers of cash services and so that if if there was a Site that everybody could go to to find cash providers in their area then we'd start supporting those people who were Providing that alternative system. Well, you know, that's a great idea and I must say at the Mises Institute We know lots of doctors who are doing this even surgeons who are involved in groups that are cash friendly So it's definitely something we need to pursue, but Charles Huesmith Thank you so much for your time today ladies and gentlemen If you want to check him out He has a great website called up to minds calm if you like alternative financial websites Mises org zero heads Etc. I guarantee you will like a site. He's a brilliant guy And he really has a different way of looking at some of the things that are going on today So I really encourage you to check out up to minds calm Charles Huesmith. Thanks again and ladies and gentlemen have a great weekend