Posted by
cavalier973 on Wednesday, August 12, 2009 12:30:59 PM
Take a hypothetical guy who has a health insurance plan through his employer; it's a family plan, $300 a month, with 80% coverage, a $1000 deductible, and $40 co-pay.
The Government offers a "Public Option" plan that's $150 a month, 100% coverage, no co-pay, no deductible.
Who wouldn't take it?
On the other side of the equation, the employer is paying who-knows-what for providing his employees with health insurance (as mandated by the goverment), now he can have a health-insurance plan that meets government requirements, and reduces his business' health insurance costs to zero.
What employer wouldn't take it?
The problem that arises is that everyone is thinking of health care costs in monetary terms rather than in resources required (including time). Providing health care requires land, buildings, labor, capital equipment, disposable equipment, and time for research, evaluation, and treatment of health problems. All these things must be paid for, and simply increasing the money supply won't pay for it. Doctors need food, rest, shelter, clothing, education (both basic and continuing education), proper utensils and equipment. These are what patients pay their doctors in exchange for health care. Money just facilitates the transaction.
Hospitals need land, architects for designing the building, construction firms to build it, roads for worker and patient access, managerial staff, sanitation staff, staff for the cafeteria, equipment for the various staff to do their jobs, access to power and water, among other things. All these things are provided by the patients in exchange for health care. Money just facilitates the transaction.
When monetary costs are controlled rather than used as information for resource allocation, patients will find that they must pay for the resources in other ways, such as sacrificing timely diagnosis and treatment, lower quality care or rationing of care by people who do not have the patient's best interests in mind.
Politicians seem to be claiming that the Public Option will entail less cost because it will not be burdened by the profit motive; they claim that health care costs are so high right now because of the profits tacked on to the top of basic costs by greedy insurance companies, doctors, etc.
Politicians are sophists, and either do not understand, or do not care that profits serve the vital function of providing information for resource allocation. When a certain industry is showing higher than normal profits, it is an indication that consumers desire for more of the good or service that the industry makes--they are willing to pay a higher price for the good or service (or there are new methods and/or technologies that drive down the costs of production); it is a signal to entrepreneurs to enter that industry, thus increasing the supply of whatever it is the consumers demand.
Prices also serve this function on the consumer side; consumers who value a good or service highly will be more likely to pay more for it, thus insuring that they obtain what they want most. For example, two people contract some sickness that is not serious or long-term; both would benefit from a certain medication that will mitigate the symptoms of the sickness and shorten its term, but is in short supply. A travelling salesman who has a tight schedule and needs to be cured as quickly as possible will value the medication more than a college student who just started his summer break. Logically, the salesman would bid the price up to the point where the college student's desire for the medication is outweighed by his desire for the other things for which he could use the money.
The government could impose a price control on the medication, but that would not change the amount that the medication costs; the cost would simply be paid in other ways. In one scenario, the patient who is willing and able to get up earlier and stand by the doors of his doctor's office until the doctor arrives will get the medication. Or, if both patients arrive at the same time, the patient who spends the greater effort in persuading the doctor of his own need for the medication. Other scenarios could be imagined.
The core problem, in my opinion, is the "third party pays" system we rely on to pay for health care. Each person's health care must be rationed in some way--just like every other thing in a person's life. If health care were paid for normally--that is, if the patient went to the doctor, the doctor performed the necessary care, and the patient paid the doctor at the point of service, then the patient has a good idea of how to ration his own care, and an incentive to do so. Under third-party pays, though, neither patients nor doctors have an incentive to ration care themselves; what eventually happens is that the third party payer starts to ration care, and when people complain loudly enough about that ("The insurance company is getting between me and my doctor!"), the government plans to step in, and ration care according to its own ideas.
Which might be okay, if you have the fairy-tale, pollyannish view that politicans and bureaucrats are benevolent entities who always have your best interest at heart, plus the ability to accurately discern what your best interests are. For myself, I have my doubts.