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Fee-for-service | The American health care system primarily relies on an encounter-based, quality-insensitive fee-for-service system of compensation. In general, health care providers can lawfully bill for their efforts only when they physically interact with a patient or interpret a test that resulted from direct physical interaction with the patient. Each such interaction generates a bill, with the amount billed varying greatly depending on the nature of the service/interaction.


David A. Hyman is the Richard W. and Marie L. Corman Professor at the University of Illinois College of Law and the director of the school’s Epstein Program in Health Law and Policy. He is also a professor at the University of Illinois College of Medicine.

An earlier version of this article was published as “Follow the Money: Money Matters in Health Care, Just Like Every where Else,” American Journal of Law and Medicine, Vol. 36 (2010). In Medicine,

Money Matters

Real health care reform would change incentives.

By David A. Hyman | University of Illinois

Winter 2010–2011 | Regulation | 41


In Medicine, Money Matters

By David A. Hyman


El estado sabe bien que la gente desea beneficios, especialmente beneficios económicos. Y el Estado se esfuerza por proporcionárselos para, si no hubiera otra razón, mantenerlos tranquilos, y en el caso de una democracia, para ganar sus votos. Pero esto presenta un problema, pues el Estado no posee recursos propios con los cuales conferir estos beneficios. Sólo puede darle a una persona arrebatándole antes a otra; si una persona consigue algo por nada, otra debe conseguir nada por algo. Pero la atención del ciudadano-votante está tan centrada en el atractivo de las cosas prometidas que se olvida que el político que hace las promesas no posee ninguna de estas cosas para darlas- y que tampoco las tendrá cuando ocupe su cargo-; tendrá que apoderarse de las ganancias de un grupo de especial interés y distribuir esas ganancias entre otro grupos (quedándose el gobierno, por supuesto, el 40 por ciento por concepto de honorarios de administración)” 

John Hospers- The nature of the state.


Steve H. Hanke / 3/04/2002 @ 12:00AM


Argentina’s rulers cannot resurrect an economy by ignoring the rule of law and plundering private

STEVE HANKE-1The mess in Buenos Aires is nothing short of criminal. Citizens are rioting. The government is blocking depositors from tapping their bank accounts. Commercial banks have been forced to turn over dollars to the central bank. People are trying to sneak greenbacks out of the country.

When President Eduardo Duhalde ended the decade-old currency system, in which the peso and dollar both legally circulated at a 1-to-1 exchange rate, the peso was devalued. Okay, devaluations are one of life’s risks. But this one was far more than a typical devaluation. It was legalized theft.

French economist Frédéric Bastiat (1801-50) defined “legal plunder” as the passing of a law that takes someone’s belongings and gives them to another. Before Duhalde, the central bank’s foreign reserves guaranteed a peso holder’s legal right to freely convert a peso into
a dollar. This strong convertibility feature distinguished Argentina’s setup from the typical fiat money system. Its demise also is distinctive, perversely so.

As part of Duhalde’s Jan. 6 repeal of convertibility, he confiscated $17.8 billion of foreign reserves. Until his action, that was the property of peso holders.

Convertibility’s detractors have a way of blaming Argentina’s problems not on the breakdown of the rule of law but on the strong dollar, which supposedly led to an overvalued peso. This is said to have rendered Argentina uncompetitive, causing the economy to slump and forcing Argentina to default on its debt.

Argentina uncompetitive? Nonsense. If an overvalued currency causes uncompetitiveness, you see declining exports. But Argentina’s exports rose every year in the past decade except 1999, when Brazil, its largest trading partner and a nation without dollar convertibility, suffered its own currency crisis. (Note: The crisis was not that the Brazilian real was too strong.)

Argentinean exports during the first 11 months of 2001 were 3.2% ahead of the same period in 2000. Considering that the real growth in world trade was only an estimated 0.9% last year, Argentina’s export performance was rather strong. Indeed, the export sector has been one of the few bright spots in the Argentinean economy. If the rest of the economy had been growing as fast as the exports during the last two years, Argentina would not be in a recession and the government would not be bankrupt.

Hell-bent on proving that the peso has been overvalued, convertibility’s critics also point to purportedly high prices in Buenos Aires. More nonsense. A recent Union Bank of Switzerland survey of prices in 58 of the world’s largest cities found that, for a basket of 111 goods and services, Buenos Aires ranked 22nd. That’s about midway between the most expensive city, Tokyo, and the least, Bombay.

The biggest lie of all is that the peso devaluation will get the economy going again. Let’s go through the arithmetic. To stimulate Argentina’s exports by 1%, the real value of the peso (adjusted for inflation) would have to depreciate by 10%. Argentinean exports only accounted for one-tenth of gross domestic product last year. This implies that if the current devaluation of 50% doesn’t pass through to any domestic inflation–in short, if the nominal devaluation is a real devaluation–exports will increase by around 5%. Even under these unrealistic assumptions, a 50% devaluation would only add a paltry 0.5% to a collapsed post-devaluation GDP.

Any way you cut this, there was no moral or factual justification for Argentina’s devaluation and nullification of contracts. The Bush Administration should refuse to offer any direct aid and should veto any proposal for the International Monetary Fund, the World Bank or the Inter-American Development Bank to lend money to Argentina. There is a legal basis for refusing a bailout. Title 22, Section 2370 of the U.S. Code provides for suspending U.S. assistance to any country that seizes property owned by U.S. citizens or corporations or nullifies contracts with them. Americans with property in Argentina have been victimized just as much as Argentineans.

If that isn’t enough, listen to President George Bush’s first State of the Union address. “We have no intention of imposing our culture,” Bush said. “But America will always stand firm for the nonnegotiable demands of human dignity: the rule of law; limits on the power of the state; respect for women; private property; free speech; equal justice; and religious tolerance.”

The U.S. should not tolerate the plundering. It should pressure Argentina’s rulers to restore people’s property and the rule of law.

Steve H. Hanke is a professor of applied economics at The Johns Hopkins University in Baltimore and chairman of the Friedberg Mercantile Group, Inc. in New York. Visit his home page at



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