It’s unfortunate to see economic ignorance lead to the ruin of more lives, especially after it ruined so many in the 20th century. But it’s unlikely to stop any time soon. This was made evident in recent days when a young man, rationalizing his nihilistic violence through delusions of world-saving heroism (a common temptation for young men throughout history), decided to assassinate the CEO of a major health-insurance provider in broad daylight.
The killer, Luigi Mangione, in his manifesto, justified his act with gross oversimplifications, like, “the US has the #1 most expensive healthcare system in the world, yet we rank roughly #42 in life expectancy… [United Health] has grown and grown, but [h]as our life expectancy?”
He admitted his ignorance, though, by adding, “Obviously the problem is more complex, but I do not have space, and frankly I do not pretend to be the most qualified person to lay out the full argument.”
It would have been much better if his engagement on the matter started and ended there.
But, despite the poor reasoning and half-formed arguments, America’s left-wing intelligentsia gave the assassin an A for effort, and for parroting the lines that get one an A in their classes. Everyone from US Sen. Elizabeth Warren to former Washington Post journalist Taylor Lorenz gave “Murder is wrong, but…” justifications for Luigi.
When Piers Morgan asked Lorenz how she could say she felt “joy” over the killing, when the man was a father of two and a human being, she responded, “So are the tens of thousands of Americans that he murdered!”
But these arguments have all the profundity of other freshman favorites, like “What if everyone just stopped fighting wars, so there was world peace?” or “If we just built all the homeless people houses, there would be no people living on the streets.”
If we do go back to our freshman year though, and choose a class with a little more substance, Econ 101, we remember that the definition of economics tends to be something like, “the study of how to distribute scarce resources.” The starting premise is that there are not unlimited houses to go around, or unlimited cars, or (relevant to our present conversation) unlimited doctors.
There have only been a few systems dreamed up to address this scarcity as of yet. One way is called a “command economy,” where the government just orders resources to go one place or another. Examples are socialism, fascism, and meddlesome monarchies. The other main way is the free market, where we generally let everyone produce and consume as they see fit, using prices to signal in what quantity goods need to be supplied at any given moment.
Healthcare is a tricky one, because almost no society has been comfortable allowing this sector to be a completely free market — understandable, since it’s an ugly thing for those with fewer resources to be left to die in the street if they can’t afford treatment.
The United States, having mostly free-market instincts outside of healthcare, has avoided falling completely into the socialized medicine trap. Instead, we remedy this humanitarian concern with safety-net programs and the wide use of health insurance, creating a complicated hodge-podge of government and market elements. Luigi and his apologists claim this is an unjust system based on exploitation and profit. If only we had a completely nationalized system run by the government, they say, then people wouldn’t get denied the care they need.
First, to address the profit question: yes, insurance is a business. But it does not seem to be an extremely profitable one percentage wise. An NYU study found the average American business got a 7.7% net profit. A good profit margin is typically over 10%, with 20% being excellent. Under 5% is seen as a struggling business, or at least one that must pinch pennies to avoid going under.
Health insurance companies are very low margin businesses, with the latest CEIC quarterly report showing their margins further declining from 2.7% in June 2024 to a barely sustainable 1.9% in September. As the chart shows below, they’ve never really been rolling in money, as Luigi was led to believe.
Part of the confusion is that an enormous company making a 2% profit appears to be pulling in obscene amounts of money, even if that profit is being split between many more people. Another part of the confusion is that many prominent and even powerful people don’t do the work to learn the difference between things like gross revenue and net profit.
Take US Congressman Ro Khanna of California, who used a massively exaggerated number to justify getting rid of health insurance altogether and replacing it with “Medicare for All,” a single-payer system. Thankfully, Twitter’s “community note” function corrected his error.
But leaving aside the sloppy demonization of the health insurance industry as the problem with American healthcare costs, their solution of handing everything over to the government is equally lazy.
As was stated earlier, economics is about finding the best way of dealing with scarcity, and when it comes to healthcare, everything — whether doctors, MRI machines, hospitals, and ER rooms — is limited in quantity. And in government-run systems, that scarcity doesn’t go away. It’s just that bureaucrats and government boards, rather than insurance companies, decide what is covered and what is not.
To take Canada’s system — since they are our closest neighbor and have a similar culture and standard of living — care is greatly rationed to those the government determines need it most urgently. And this is happening at a grand scale, since Canada is dealing with a healthcare crisis due to staff shortages and increasing demand, especially at ERs, family physicians, and specialists. With no family doctors available, Canadians have been rushing to the ER for everything, leading to astronomical wait times and people dying of serious conditions in the waiting room.
Healthcare is a very complicated industry, and the United States has a very complicated way of administering it, but the fact that 70% of Americans are confident they would see emergency care in a timely manner, compared with 37% of Canadians, does speak to some strengths in our system. So does the fact that Americans are twice as likely as Canadians to be satisfied with their access to healthcare overall.
If one is denied care by a health insurance company who says that procedure is not covered or not in network, an American is at least allowed to seek care in other ways. This could mean the difference between life and death, even if it comes with a lot of medical debt. In Canada, however, health providers and insurance companies are generally banned from providing services that are covered by the national system. So if there is a long wait time or you’re denied coverage, you can’t use your own money to arrange care yourself. You’re simply out of luck.
Because of that, a 2024 Ipsos poll found 42% of Canadians, if faced with a serious condition, would prefer to cross into the US and pay out of pocket for treatment, rather than experience the uncertainty of long wait times or denied care — a choice Canadians have been making for years.
We do need reform and to create better systems of distributing these scarce resources. But that will not start with assassination of those running our current institutions. I doubt those justifying Luigi’s actions would wink at Canadians — 85% of whom believe drastic changes are needed to their system and 60% of whom believe private alternatives are needed — if they started offing government bureaucrats for denying care.