Federal Bureaucracy Is Biggest Healthcare Rent-Seeker

Rent-seeking describes profit-seeking through the manipulation of the regulatory or legal apparatus rather than by  competing with others in the marketplace. Cronyism is a common form of rent-seeking, as demonstrated by the Solyndra fiasco.

When the California-based green energy start-up company Solyndra sought investors in the free market, every venture capital group refused. Solyndra leveraged its connections with the Obama administration to secure a taxpayer-funded loan of $535 million. The company went bankrupt and never paid back the loan.

Rent-seeking has several adverse effects on society. It reduces dollar efficiency, meaning dollars are expended without producing value for consumers. It reduces the creation of true wealth and increases income inequality. Rent-seeking encourages cronyism and corruption and tends to reduce public trust in governmental institutions.

U.S. healthcare is replete with rent-seeking examples and the adverse effects of this behavior. The recent COVID scam was used to justify several successful rent-seeking schemes.

“Big Pharma” as Rent-Seeker

The official narrative decreed that COVID-19 was an existential threat to our country. Americans needed a counter-agent, treatment, or preventative immediately. Big Pharma responded by releasing an mRNA genetic injection, assuring the public it was “safe, effective, and doctor-approved.” Their “vaccine” was never used before, incompletely tested, ineffective, and medically dangerous. Drug manufacturers convinced the Biden-Harris administration to require all Americans to accept no-charge mRNA injections, or else.

Of course, the no-charge-to-consumer mandate meant the government had to purchase billions of doses for a fixed, no-compete price. There is no consumer choice, no competition that drives down prices, no free market forces. The federal government gave Big Pharma more than $25 billion in rent-seeking payments.

Hospitals & Professional Organizations Too

Bribery is a common method for individuals to entice government officials to give them preferential treatment, i.e., to rent-seek. During COVID, the reverse occurred. The government bribed private entities such as hospitals and professional organizations with rent-seeking profits to promote their false public health crisis narrative.

Federal officials needed evidence of the alleged danger to defend the official story of the imminent viral threat. Washington paid hospitals and clinics a bonus for reporting every positive test for the COVID antigen as a “case,” even if the person was not ill. Deaths with a positive antigen positive test were listed as “COVID deaths” without autopsy evidence and despite the presence of end-stage heart or kidney failure. Even a motorcycle accident victim was listed as a COVID fatality because his blood tested positive for the antigen.

Insurance Rent-Seeking

The insurance industry has been successfully rent-seeking for decades because they have a captive audience of consumers called the American public.

Nearly half of the U.S. population, 155.8 million in 2023, is insured by the federal government directly or by subcontract: Medicaid/CHIP (79.6 million), Medicare (66.7 million), and Tricare (9.5 million). One-hundred and sixty five million Americans have employer-sponsored health insurance. In all cases, the premiums people pay are negotiated between insurers and the government, state and federal, and not by consumers spending their money in a free marketplace.

For the nearly 80 million enrolled in no-charge Medicaid, the people who pay are not these individuals but taxpayers as a whole. The number of enrollees, the revenue that insurers receive from rent-seeking, and the cost to all taxpayers are likely to grow considerably since states like California and Oregon have made illegal immigrants eligible for Medicaid, which should be limited to American citizens.

Federal Agencies Rent-Seek

By far, the greatest rent-seekers are federal agencies that regulate healthcare. This refers not merely to well-known entities such as CMS (Centers for Medicare and Medicaid Services), FDA (Food and Drug Administration), NIH (National Institutes of Health), and the CDC (Centers for Disease Control and Prevention) but to dozens of others not well known but well-staffed and very costly bureaucracies.

The rent-seeking behaviors of federal BARRCOME — bureaucracy, administration, rules, regulations, compliance, oversight, mandates, and enforcement — are the primary reason for dollar inefficiency in healthcare. Dollar efficiency refers to the amount expended on producing value for consumers. For healthcare, the “value” produced is (or should be) medical care. Dollars not devoted to patient care are inefficiently spent.

BARRCOME spending comes first and can be taken from patient care allocations. To pay for Affordable Care Act infrastructure, President Obama took $716 billion from the Medicare Trust Fund, taking dollars from senior care to fund BARRCOME.

Estimates of the cost of BARRCOME range from 31 percent to more than 50 percent. Since the U.S. expended $4.8 trillion on its healthcare system in 2023, $1.5 trillion to $$2.4 trillion was diverted from patient care to pay Washington’s rent-seeking.

Solution to Rent-Seeking

Solving the problem of rent-seeking cannot be done piecemeal, one at a time. It can only be fixed by addressing the system and dissolving the root cause.

Rent-seeking can only exist when a third party makes payments rather than when consumers spend their own money. If consumers had the choice to buy (or not) COVID shots, Big Pharma could not make a fixed price, special deal with the government. If Americans could decide where to spend employer-sponsored insurance monies, there would be no rent-seeking by Aetna, Cigna, and UnitedHealthcare.

And if Americans could expend all their own health care dollars, rent-seeking would simply stop. Two trillion “healthcare” dollars could then be used efficiently — on care and/or reducing the tax burden or the national debt. The cure for rent-seeking in healthcare is called “Empower Patients,” where Americans, not third parties, control their health (medical) care spending.

READ MORE from Waldman and Ginn:

Harris’ Healthcare Destroys Health CARE

Wait Times for Medical Care Matter

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Deane Waldman, M.D., MBA is Professor Emeritus of Pediatrics, Pathology, and Decision Science; former Director of Center for Healthcare Policy at Texas Public Policy Foundation; former Director of New Mexico Health Insurance Exchange; and author of 12 books, including multi-award winning, Curing the Cancer in U.S. Healthcare: StatesCare and Market-Based Medicine.  Follow him on X.com @DrDeaneWor contact viawww.deanewaldman.com.  

Vance Ginn, Ph.D., is president of Ginn Economic Consulting, host of the Let People Prosper Show, and previously chief economist of the Trump White House’s Office of Management and Budget. Follow him on X.com at @VanceGinn.

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