The political discourse on how to pay for health care is locked into an impossible vise. We think that there is either the Market Way or the Government Way. At most, we can conceive of the Mixed Economy Way.

Generally, this third way carries with it most of the disadvantages of the first two approaches: Freedom is restricted and costs remain stubbornly high.

Let us explore the Amish Way.

The Amish pay cash, their own cash to purchase all the health care they need, wherever they want it, and receive it at up to 40% discount.

 Not a bad solution at all.

Once upon a time, this happened to be the way for all Americans. This is the rich man’s way. How can we return to it—how can the poor gradually make themselves adequately rich?

The solution lies in looking into the operations of the Federal Reserve System (the Fed), our central bank. And adapting them to serve the needs of all the people.

There has to be a two-pronged tack: Reduce costs of producers and increase income of consumers.

The Fed is the pivot in both approaches.

 Let us start at the top.

 Since money created by the Fed goes to financial corporation—the so-called primary dealers—first, all industrial and commercial corporations pay interest rates on capital expansion loans.

Why can’t loans be issued directly to industrial and commercial corporations?

There is no reason, except custom.

Customs can be changed.

Indeed, the Fed has examined a proposal along these lines, and, provided it is adopted by Congress, the Fed seems to be ready to consider such a change of custom.

Indeed, the Fed is ready to go one step further. The Fed is ready to ask the same questions about interest.

There is no reason why the Fed is charging interest rates on capital expansion loans. Hence, the Fed is ready to consider the possibility of issuing such loans at cost. The cost of creating and servicing the loans.

The Fed is ready to consider such changes provided they become part and parcel of a uniform national policy. Three rules need to govern such a policy: 1. Loans have to be issued only for the creation of real wealth; 2. Loans have to be issued at coast; 3. Loans have to benefit as far as possible all citizens.

This third condition is aimed at increasing the income of consumers.  

Capital expansion loans, loans aimed at creating new real—as distinguished from financial—wealth, can be issued at cost by the Fed to all qualified entrepreneurs. And that is most useful to unleash the creative and entrepreneurial juices of the people. The key qualification is a monstrance of the ability to repay the loans.

But not everyone has an entrepreneurial, a business spirit. How to help them?

The solution is ready-made; it is well known; and it is much used.

The solution is that public capital ought to be given to corporations as well as individual entrepreneurs and cooperatives. But corporations must have an Employee Stock Ownership Plan (ESOP) in their operations. Through this ingenious legal instrument, created by an American lawyer and investment banker, Louis O. Kelso, workers are legally, and peacefully, and justly transformed into co-owners of the corporations in which they work. The ownership base of the country is thus expanded. More money enters the pockets of consumers; more money is available to allow producers to keep up their creation of new useful wealth.

The Fed is ready to make this a condition of making loans at cost to American corporations. Indeed, with little prodding the Fed might be ready to add Consumer Ownership Plans (CSOPs) as a condition of federal loans.

Through CSOPs and ESOPs we can look forward to an equitable distribution of the income produced. The age of robots will be welcomed, rather than dreaded—provided their ownership is spread as widely as possible, rather than concentrated into a few hands.

Given these conditions created by Fed policy, pharmaceutical corporations as well as insurance corporation and hospitals can be expected to operate at lower costs.

By the same token, workers/consumers can be expected to have more income to spend on health services.

The Market and the Government will be there to create and to enforce the rules of the road. But entrepreneurs as well as citizens will be ready to use the roads and will be free to use them when and how they please.

Carmine Gorga is president of The Somist Institute.