The Savior Complex: Economics Amateurs and Health Care Policy

As a Swede, i.e. a native from the country of the greatest (biggest) welfare state in the world in terms of services and expenditure per capita, I am amazed by all the people so consumed by the thought of “free” health care (or free whatever). It is true that these people have some kind of Savior Complex, as I call it – they want to save the world from whatever horrors they identify. The problem with this approach is the attitude that they can save people through forcing a system upon them, and that they actually believe that this coercive system is a solution to the problem.

The latter is interesting, since it seems to apply to almost anybody – and it absolutely applies to most politicians. Having spent ten years as an activist, political leader, and elected to local parliament, I know for sure that politicians are no doubt some of the dumbest people on the planet. They are the true victims of the Savior Complex: they do not only believe they have the ability to save people from themselves and the world, but also that they have the right to use whatever means necessary to accomplish these ends – and they expect gratitude, money, and more power in return.

Ignorance should therefore be a large part of what these people are about.

But politicians aren’t the only people who suffer from the Savior Complex, even though they are the ones most heavily addicted to the feel-good of being do-gooders (at other people’s expense). Most people, I would say, are to some degree victims of or ready to become victims of this complex. The reason I say this is that anyone who is “awarded” a little power, especially in the power rule system we call democracy, pretty much immediately leap into being totally consumed by it.

Let’s have a look at health care policy as an example of this complex, and how it makes people totally ignorant of economics (assuming they knew anything about it to start with). Who is against “free” health care? Most people are not, even though some conservatives talk about it probably being a bit better if private corporations supplied the services rather than an outright government monopoly (they still support “free” health care policies if asked, though).  Why is that?

The reason for nationalizing health care is often a function of both health care services being a “very important” service and the costs being too high for “common people” to afford. Since it is important to everybody – nobody wants to be sick, and we all want as close to eternal life as possible – many conclude it is a “right” to have it: if it isn’t a right, they rightly conclude, everybody wouldn’t get it. So in order to save people from how the world works (meaning, if you can’t somehow pay for it yourself or provide your own health care – somebody else must be forced to pay for it) the obvious conclusion is to make it mandatory for all suppliers to make it available to anyone who “needs” it. (Notice how easily the Marxist term sneaked in to the mainstream vocabulary?)

So there is an obvious political demand for “free” health care services just like there is for promising any other kind of “free stuff” – only health care is by most people considered a lot more important than chocolate bars, cars, or even houses, which means politicians gain a whole lot more offering “free” health care than “free” chocolate bars.

One might wonder what made politicians get all the health care they so eagerly promise people. After all, most people in Congress and the White House don’t own hospitals or are even MDs – so where does the health care come from? As everybody knows, you cannot give people what you don’t have. If you do, then you would commit an act of either fraud (if you deceive the recipient) or theft (if you steal it from someone else to give it to a third person). Politicians have no problem with either of these “qualities” of course and often do both, but they tend to do a lot more of the latter than the former.

So we can safely conclude that politicians, when promising “free” health care, steal it directly from the suppliers or steal money from people to pay for it. In any case they do steal to provide people with what they don’t have. As anyone with just a fraction of economic understanding knows, there ain’t no such thing as a free lunch so someone has to cover the costs somewhere, somehow. In the case of “free” health care, which, by the way, seems to be called “universal” health care nowadays after people got a bit troubled by it suddenly being “free” through some act of political magic, the cost of it ends up with you and me and every other taxpayer. In other words: taxes increase.

This doesn’t seem to be a big deal for some people, since they might argue that they would gladly pay a couple of extra dollars to provide for the poor. That may be the case, but somehow these “friendly” people never got to giving the poor even one cent’s worth of health care prior to it being mandatory. One might wonder if these people are so good if they simply refuse to do it unless forced to.

That obvious contradiction of the do-gooders’ mentality set aside, how many dollars would they, now as tax payers, have to pay to provide health care for the poor? Probably not very much if they would support only vital health care, which is sometimes the case when buying health insurance – the insurance company dedicates part of the premium to supplying health care for those in need. But the problem is that a government program does not easily target certain illnesses – and it certainly doesn’t have a restricted budget (after all, if the money available isn’t enough they just go get more). Also, government is not an actor with a clear and controlled purpose (which is usually the case for a company) – so government is victim of both fuzzy, incomprehensible goals and a huge principal-agent problem (people acting on behalf of government aren’t controlled or controllable, and they have no incentives at all to act morally as agents of government – they act in their interest instead).

How often haven’t I heard physicians in Sweden claim “we might as well do this too, since you are here” while adding “there’s no cost to you, of course, since we have free health care”? All too often, and hardly anyone would say no to further tests or treatments even though they aren’t necessary or even recommended. Had it been at your own expense you would probably first have asked about the cost, and then considered if it is “worth it.” If it is free, then go for it!

This is the rational way to think about it, so I blame no one for accepting “extra” treatment. The people paying for it are unknown to you and you will never meet them or be held responsible – and since you dutifully pay your taxes you have the “right” to get “your share.” So people tend to consume more. Sounds familiar? If you pass someone handing out free stuff, would you then get more than if you would have to pay for it?

I’ve conducted a couple of experiments of this myself, while I was in politics. In a local high school we tried to “sell” our ideas through handing out stuff with our party’s logo etc. When we offered free stuff, even if they were only bumper stickers, everything would be gone within seconds – people eagerly grabbed tens if not hundreds of stickers even if they didn’t at all sympathize with the party.

Stickers are expensive, so we tried to limit it to “one free sticker per person.” This worked in the sense that all the stickers weren’t gone in seconds – it took minutes. At one time we tried limiting this very costly campaigning strategy through offering all stuff – stickers, socks, coffee mugs, and even t-shirts – at a very limited cost. We set the price at around $0.10 per item. After a whole day’s campaigning we would go home still having almost all the stuff we brought! Nobody wanted these things (and I don’t blame them) since they had to pay – even though it was only $0.10!

I admit that this political merchandise is totally worthless to people – who wants a pair of socks with a political logo? A t-shirt with an enormous party logo? Unless you are an active member it has literally no value (maybe negative).

Now apply the logic of the worthless political stuff to the “very important” health care. Of course, the demand for health care would sky-rocket to levels never anticipated by even the most pessimistic politician. And the costs would follow. The normal government reaction to this is to make sure to limit the cost for the program (they never ever consider abolishing a program that voters may “like”), often through setting a ceiling to how much certain treatments may cost. So they hire an army of bureaucrats to calculate the “true” market price (this isn’t doable, but government does it all the time) and how much it “may” cost – and then they limit the amount government pays for the certain treatment.

This is what the Medicaid is all about. Government says a kidney transplant is worth $X and therefore pays that much. In theory (if we for the moment pretend to be very ignorant) this should limit the costs. The problem is that bureaucrats have no idea – and some of them probably cannot even spell to “transplant.” So they have to ask the suppliers how much it would be. The first estimate may be fairly accurate, but as time goes by people learn that the government bureaucrats – in order to avoid being scammed by suppliers of health care services – set the ceilings at only part of what they claim the real costs is. So they have an incentive to push prices upward in order to cover costs and – possibly – make a profit. If bureaucrats calculate ceiling prices to 90 % of reported costs, the reported costs will be at least 110 % of the real costs. Also, they will charge private customers less than they charge the government, since private customers (and insurance companies) cannot afford to pay much whereas government has no clue – and will only reach deeper into people’s pocket books if they run out of money (or print more of it).

When the bureaucrats understand this (which could, admittedly, take some time) they retaliate: they say they will only pay the real price, not the charged price. So they will require health care providers to either report all their transactions to the newly established authority for health care services market price estimations or offer only fixed prices. The latter might not sound like a bad idea, but the fact is that health care providers often would charge poor customers less than rich customers for the same purposes that insurance companies give free health care to poor – charity because it increases the firm’s market value and creates a competitive advantage.

Also, health insurance companies would have discounts for promising certain volumes to the health care providers. The “fixed price” demanded by government bureaucrats now pushes average prices up, since any offered discounts mean less money from the authorities for delivered services. This hurts, of course, people who are poor or have health insurances.

The effect of this is that poor people who somehow aren’t covered by the rigid government program no longer stand a chance – they cannot get health care at all unless they find someone who can pay the overprice on their behalf. Also, insurance premiums go up, since there are no longer any discounts available and prices tend to move quickly upward to cover possible cost increases. A fixed price needs to cover the risk of increased costs in a way variable prices do not – in the latter case, if costs go up prices will too (and the same if costs go down) while in the former case government will only allow for price increases under certain circumstances and at certain times. So prices are continually adjusted upwards.

So the effect of this “excellent” government program is sky-rocketing demand and prices rapidly increasing.

Politicians are of course totally surprised by this result – they thought they would do good and provide “free” health care for everybody at the costs when the program was established and with the demand at that same time. Now they learn that demand and prices are increasing so rapidly that the program always runs out of money – and this makes people real angry when government isn’t able to give them what they promised. So they add more money to the program budget and perhaps more restrictions, again causing higher prices.

Another common measure is to include more people in the program, since a lot of people suddenly cannot afford the health care they once were able to get for their hard-earned money. So the program is enlarged to cover everybody in “need,” which of course creates the same kind of problems again – only to a much greater degree. (But it is too optimistic to conclude politicians understand this; they won’t.)

It is at this time the people suffering from the Savior Complex once again step forward and sees opportunity. They offer new and far more extensive programs to make sure people get health care even though they can’t afford it – they high prices are publicly condemned as results of “corporate greed” or perhaps described as a “market failure.” The new program, perhaps a “nobody left behind” or “universal” program to finally solve the problem, is a great way to get elected. After all, most people don’t have the economic understanding nor the insight in the horrendous government systems to figure out what is going on.

This is one of those excellent games that would go on even if politicians were wise enough to understand what is going on (and they’re not). After all, everybody loses while the politicians win – they get more power, bigger government, and more friends get to be hired in another fancy government authority. This would give them enough incentive to act against the public interest, which is of course what they always do.

But what if they would for some reason understand the effects of their program? They would still go through with it, even if they would find the effects somewhat unfair. The reason? Simply to satisfy their egos. They are, after all, victims of the Savior Complex. They are addicts to being seen as do-gooders; they want appreciation – they want to look like they do something. That makes them dream sweet dreams every night. While you and I pay the terrible and enormous costs of these self-absorved petty good-for-nothings.

For more on the Swedish welfare state, please see How the Welfare State Corrupted Sweden. For articles where I briefly discuss the Savior Complex (or Messiah Complex, which I used to call it), please see Saving the World Through Saving Yourself and A Strategy for Forcing the State Back.