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InsiderOnline Blog: December 2008

Classic Wisdom: What Would Hayek Say About a Federal Health Board?

In his book, Critical: What We Can Do About the Health-Care Crisis, Secretary of Health and Human Services designate Tom Daschle proposes creating a Federal Health Board to manage the 45 percent of the health care sector that is financed by government. The board would be given the power to make a number of decisions—such as which treatments are covered by federal insurance programs—that currently are made through the lawmaking powers of Congress. According to Daschle, getting good health care policy requires that decision makers be insulated from politics. “Congress is just not capable of being the manager of a health care system,” Daschle told the Kaiser Foundation earlier this year. “It hasn’t worked for the last 50 years. It’ll work even less in the next 50.”

It seems likely that Friedrich Hayek would not have been at all surprised by the push to remove political pressures from the task of planning nearly half of the health care sector. In chapter five of The Road to Serfdom, Hayek argued that comprehensive economic plans presume more agreement than can usually be found through the operation of democratic institutions. “The conviction grows,” he wrote, “that if efficient planning is to be done, the direction must be ‘taken out of politics’ and placed in the hands of experts—permanent officials or independent autonomous bodies.” But, he noted, the lack of agreement is not a result of any defect of democratic institutions, but is simply a reality of pluralistic societies. Discussing the problem of finding one plan for an entire economy, Hayek wrote:  

It is not difficult to see what must be the consequences when democracy embarks on a course of planning which in its execution requires more agreement than in fact exists. The people may have agreed on adopting a system of directed economy because they have been convinced that it will produce great prosperity. In its discussions leading to the decision, the goal of planning will have been described by some such term as “common welfare,” which only conceals the absence of real agreement on the ends of planning. Agreement will in fact exist only on the mechanism to be used. But it is a mechanism which can be used only for a common end; and the question of the precise goal toward which all activity is to be directed will arise as soon as the executive power has to translate the demand for a single plan into a particular plan. Then it will appear that the agreement on the desirability of planning is not supported by agreement on the ends the plan is to serve.

This analysis suggests that there is a huge difference between support for the idea of reforming government health programs through an unelected Federal Health Board, and support for the particular decisions that such a board will end up making. An agreement on the means of reform should not be confused with agreement on what the reforms should be. Indeed, a Federal Health Board with the power to decide what benefits will be covered by public insurance programs, how health care providers should be reimbursed, how best practices should be determined, whether malpractice courts should be set up, and whether tax exclusions should be linked to a standardized benefits package is a body with great potential to disappoint a lot of people. The greater the number of discrete decisions that must be made by such a body, the more likely it is that the resulting system will be satisfactory to no one. As Hayek put it:

The effect of the people’s agreeing that there must be central planning, without agreeing on the ends, will be rather as if a group of people were to commit themselves to take a journey together without agreeing where they want to go: with the result that they may all have to make a journey which most of them do not want at all.

Posted on 12/04/08 05:38 PM by Alex Adrianson

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