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Smoking and Government Controlled Health Care

by

David Jelinek


GUEST COLUMN IN THE DAILY PENNSYLVANIAN (June 18, 1998)


Over the last few months, the president and Congress have been debating exactly what to do with tobacco companies. President Clinton wants to raise taxes on a pack of cigarettes by $1.50, while some Republicans think that $1.10 is more reasonable. They all seem to like the idea of beating up on one of America's most-hated industries, and a lot of politicians are aware that they can also use this opportunity to look like soft-hearted heroes interested in helping children. The idea of raising cigarette prices in order to discourage teenage smoking is riddled with practical problems. For starters, as the governments of Germany and Canada have already learned the hard way, making cigarettes artificially expensive encourages a black market for cigarettes and leads to more violent crime.

A second problem is that as much as liberals like to claim that they're looking out for the poor, most of the new tax would be paid by the neediest Americans. According to Senator Ashcroft, even the Republicans' proposed tax hike would cost $17.5 billion a year, and 60% would be paid by those earning $30,000 or less a year.

But as a Libertarian, I have a much deeper problem with all of the attacks on the tobacco companies. What all of these politicians make painfully clear is that they think that they have a right to regulate what you do with your own life and body. Whether you're dealing with smoking, renting an apartment (and not buying a house), drinking beer, taking a second job, or not having children, the politicians want to hit you with a tax penalty. Never mind your personal liberty or the fact that you're not hurting anybody; the politicians think that they have a right to regulate your behavior to the smallest degree.

But wait - you might be saying - when you smoke, you are hurting somebody. In 1992, 51% of all health care dollars came from the government. Since a majority of our health care system has been socialized, your bad habits hurt other taxpayers through higher Medicare premiums, higher payroll taxes, and less money available for Medicaid and veterans' benefits.

And government-controlled medicine is exactly the problem. The moment you let the government control your health care, the government immediately thinks it has the right to run your life in order to control health care costs. Under socialized health care, smoking could be disallowed, various "risky" sexual acts could be prohibited (as they already are in many states), potato chips and Taco Bell could be heavily regulated, and skiing could be outlawed.

Many people, including President Clinton and many ordinary citizens, love the idea of government-controlled health care. It's easy to see why; the health care situation is a mess right now. Private insurance is expensive, and insurance obtained through your employer is often one-size-fits-all.

Furthermore, some people with chronic conditions can't change jobs for fear of losing their insurance. Poor people have little access to doctors, and often have to go to emergency rooms in order to get simple conditions treated.

How did this all happen? Before World War II, privately held medical insurance was the norm. But during the war, the government tried to cap wages, and so employers had trouble attracting workers. The solution? Employers started offering medical insurance to their workers as extra compensation for work. Meanwhile, income tax rates more than quintupled between 1939 and 1944. Therefore, since employer-provided health insurance was purchased with pretax dollars and didn't count towards the government-imposed wage cap, the employer was tempted to offer very generous health insurance packages.

The situation nowadays is even worse: since income taxes have increased even further, an employer's offer of $1000 worth of insurance could be equivalent to almost $2000 in extra pay!

The upshot of the tax laws is that it is much more economical for an employer to offer an insurance plan than extra salary. This has led to people owning insurance policies that they would never buy with their own money. Insurance plans that pay for small expenses and routine care have become commonplace. If people were able to buy insurance with their own money, many of them (especially wealthier people) would opt only for catastrophic insurance.

The result would be lower administrative costs (because not as many small claims would be filed), and since patients would be discouraged from requesting unnecessary services, overall medical costs would be lower.

How would privately purchased insurance discourage people from engaging in risky activities? First, since most medical plans would have deductibles instead of offering first-dollar coverage, consumers would have an added incentive to take care of themselves. But more importantly, like life insurance companies, medical insurance companies are free to give you a significant discount if you're a non-smoker.

So while you and your congressman are deciding to what degree the government should be regulating your life, try and remember what got us into this mess in the first place. High taxes and economic intervention caused the health care mess and drove up medical costs.

As a result, people got fed up and wanted more government control of medicine. Then they realized that government control of medicine justifies government control of personal habits. And with each new tax that's passed and each new restriction on personal liberty, this country moves further away from the libertarian ideals on which it was founded.


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