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Healthcare: Government is the Problem, Not Cost August 17, 2009

Posted by federalist in Healthcare.
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Craig Karpel makes an excellent point in his essay today, “We Don’t Spend Enough on Health Care.”  He cites studies suggesting that it would not be unreasonable for the American healthcare industry to grow from 17% of GDP today to more than 30% of GDP in a few decades.

Why not?  Industrialization has steadily decreased the resources Americans must devote to satisfying the basic human needs of food, clothing, and shelter.  With increasing resources to spend on non-necessities it should not surprise us to find individuals more disposed to indulge in advanced medicine.  Entertainment and luxury goods have a limited power to increase quality of life, especially once health and vitality begin to decline.  Until we have achieved perfect immortality health technology is the ultimate luxury good.

Yet government and the liberal establishment are evangelizing an odd perspective on the healthcare industry.  Obama’s attempts to increase the federal government’s role as a purchaser and provider of healthcare are premised on the argument that, “The cost of health care has weighed down our economy.”

The President’s complaint seems to be about the efficiency of healthcare — i.e., the amount of dollars it takes to purchase a given level of service.  It is true that any market inefficiency “weighs down our economy,” insofar as we enjoy greater production at a lower costs when markets run more efficiently.  We could say the same about any sector of economic activity — “The cost of transportation has weighed down our economy.  If only we could move people and goods more efficiently our economy would certainly grow!”

In this case, the President is actually saying, “We’re spending 17% of GDP on healthcare, and that’s too much because I happen to know we could get the exact same goods and services for just 15% of GDP!”  Of course, anyone who still believes that a government can acquire or provide goods and services more efficiently than for-profit enterprises in a free market hasn’t been paying attention for the last century.  Indeed, insofar as there are obvious inefficiencies in the healthcare industry government interference is invariably the dominant cause.

A slightly different formulation of the President’s complaint might be, “We’re spending 17% of GDP on healthcare, and that’s too much because we need to increase spending on [insert the cause du jour — the war, or the space program, or entitlements to special interests….]”  In which case this is just an opportunistic appeal for increasing government control of the economy.

In the first case the President is almost certainly correct — America’s healthcare spending is less efficient than it could be — but for the exact opposite reason he would stipulate:  The federal government’s staggering regulation and spending in healthcare impairs the efficient operation of that industry.

In the second case, we should celebrate a society that can afford to devote such unprecedented resources to any sort of discretionary spending.  We might debate priorities: Perhaps there is some level or character of individual healthcare spending we should find as tasteless as megayachts.  But so long as we are a free republic that is a debate that should be conducted outside of the halls of a coercive government.

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Comments»

1. Sammy - August 19, 2009

All obama will do is outsource anyways. Just think about the all the lobbyists flocking to Washington DC because of obama’s reckless over-spending of $2 TRILLION in just 6 months, which alone is increasing the National Debt by 20%.

Politicians take people’s money and reward the large corporations, in this case companies in the health care industry, since they have the money to more effectively lobby politicians. In the end smaller businesses will be hurt.

Politicians will only reward companies that will be in their best political interest. Honestly, when can you really trust politicians since they are basically professional liars, and being president just means you are the best liar of the time. Why not just give the money directly from the people to the companies and take politicians in government out of the equation?

obama is going to recklessly spend TRILLIONS of tax payers’ money just to give insurance to about 25% of those who do not have it. Over 50% of people’s income go towards taxes, just imagine how many more people will afford health care insurance if their income is almost doubled because of dramatic tax cuts.

Competition is what is needed. It lowers prices of products and services, along with developing new innovations. All of which will benefit consumers. You need to remember that monopolistic tendencies can also apply to government.

The reason why the cost of insurance is high is because politicians in government mandate insurance companies to increase their premiums to pay for ridiculous things. In addition, politicians put up regulations so that Americans are not allowed to get insurance from another state and use the coverage in their own state. This reduces competition making it more expensive for people to get insurance. On top of that medical professionals are not allowed to freely practice their profession in any US state without taking a long and tedious licensing process. This again increases the cost of medical insurance.

In the end, the problem with most economic issues is too much government intervention of the economy by politicians, who will only tend to do things for political self interest. Just like how obama nationalized GM to pander to its unions. Politicians can barely run government, yet people think they can run a multi-national auto manufacturing company?

The solution is SMALLER government, LESS spending, and LOWER taxes.

2. federalist - September 13, 2009

See also: Cliff Asness’s excellent essay on “Health Care Mythology.”

You cannot judge the “cost” of something by simply what you spend. You must also judge what you get. I’m reasonably certain the cost of 1950’s level health care has dropped in real terms over the last 60 years (and you can probably have a barber from the year 1500 bleed you for almost nothing nowadays). Of course, with 1950’s health care, lots of things will kill you that 2009 health care would prevent. Also, your quality of life, in many instances, would be far worse, but you will have a little bit more change in your pocket as the price will be lower. Want to take the deal? In fact, nobody in the US really wants 1950’s health care (or even 1990’s health care). They just want to pay 1950 prices for 2009 health care. …

In the case of health care, the fact that we spend so much more on it now is largely a positive. The negative part is if some, or a lot, of that spending is wasteful. Of course, that is mostly the government’s fault and is not what advocates of government control want you to focus upon. We spend so much more on health care, even relative to other advances, mostly because it is worth so much more to us. Similarly, we spend so much more on computers, compact discs, HDTV, and those wonderful one shot espresso makers that make it like having a barista in your own home. Interestingly, we also spend a ton more on these other items now than we did in 1950 because none of these existed in 1950 (well, you could have hired a skilled Italian man to live with you and make you coffee twice a day, so I guess that existed and the price has in fact come down; my bad, analogy shot).


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