There is a significant obstacle facing government in any attempt at “fixing” the costs of medical care: reality. Yes, reality, that often loathed principle of life for which we cannot escape yet seem to try tirelessly to ignore. Obamacare seeks to repair healthcare through government subsidy, an increase in the pool of insured (which may lower the cost of health insurance, but not the cost of medical care), and coercion of providers to lessen their own fees. However, it apparently fundamentally ignores the two primary factors that actually dictate prices in a market.
I am writing of supply and demand, which represents Adam Smith’s principle of the “invisible hand” that guides the market and allocates goods in a world of unlimited wants and limited resources; in other words, that is how scarcity is dealt with. Rationing is an undeniable fact of life and is the basis for all prices. Government’s attempt to control the health market without addressing scarcity of supply and an overabundance of demand is doomed to failure from the word go. Additionally, transferring the costs of health care through subsidy does not make it any cheaper, it only transfers those costs from direct medical payments to increased tax liability or to increased deficit spending; and amounts to more of a Chris Angel illusion than a solution.
What about the fines for those who do not purchase healthcare you might ask? Well, to state it simply, they are largely irrelevant. The most recent Congressional Budget Office (CBO) projections show that approximately six million people (and counting) will incur fines of approximately $1500 each (FYI: that could be you), amounting to somewhere between $8 and $9 billion in revenues to the government. There are two main problems with using the fines as a way to offset increasing prices. First, government subsidies for insurance will undoubtedly exceed the fines. Second, people who did not purchase insurance previously so they could save money will likely pay the fine as opposed to obtaining insurance (which would be significantly more expensive) and still will not pay their bills when they go to the hospital; thus maintaining the “free rider” status quo (in Pelosi parlance).
Another important aspect to consider is that, as fines to employers are cheaper overall than actually carrying insurance, there is likely to be an increase in the number of uninsured, which previously were covered at work and thus more people receiving subsidies for insurance, or incurring fines for that matter (once again, this could be you). This does not even factor in the likelihood that those employers who are on or near the threshold requiring them to provide insurance or pay the fine, which would result in a loss in income for the business owner (and thus a decrease in “revenues” to the federal government), will cut back employees (unemployment), trim some back to part-time (under-employment), or be hesitant of growing their business (an even more stagnant job market).
All of these negatives…and pricing has not even been addressed. Ironically, the only potential part of Obamacare that might affect pricing, the Independent Payment Advisory Board (IPAB) (or, death panels in Palin parlance), is denied to be a rationing board. If it is a rationing panel, we have a bureaucratically operated health lottery for old people (and, at some point, probably poor people through Medicaid); if it is not, the disparity between supply and demand will remain, or worsen, and costs will not change (downward anyway)…or will they? It is actually irrelevant if Democrats are right and it is not a rationing panel; if it is a rationing panel prices will be curbed by decreased access (i.e.-less people getting care, which I thought they were trying to remedy…?). However, pricing will be affected if they are absolutely correct and it is not a rationing panel, but a direct price controlling board: overall costs will likely stay the same at best. Now, if a price ceiling is imposed, that will restrict the number of providers wishing to enter the market (hospitals, doctors, nurses, etc.) and reduce the number of manufacturers wishing to develop and produce goods for health care (medical equipment, drugs, etc.). We can remedy this, though, so all is not lost; let us reduce the obstacles to entry into those markets making it cheaper and easier to get “qualified” providers and manufacturers. Do not begin rejoicing yet, that means the guy who was previously going to go into golf course management (with a 17 on his ACT) can now, for just a few dollars and years more, become a doctor. Scared yet? By this action we have reduced pricing by reducing quality (and probably increasing mortality) This must not be the case though as we have been assured quality will not suffer, so that must not be the plan either, right?
There are three ways you can actually reduce the cost (and thus pricing) in healthcare: 1) increase supply through a reduction in obstacles to entry into the market (accomplished through reduced admission requirements into med school, increasing maximum entry quotas into med school, and establishing more med schools, etc. etc.); 2) we can reduce demand by letting more people die without care (Kevorkian care, anyone? I do not think any of us like the sound of that…); 3) freeze the development of new technology in medical care (technology gets cheaper over time, particularly when you remove the need to mark-up to cover future research and development). In fact, if we would have frozen medical technology one hundred years ago, costs would be next to nothing now; of course, bleeding would still be the primary cure for most ills. On the “bright side” this would have maintained the “promised” costs of Social Security by freezing mortality for people to a point in which almost nobody would have lived long enough to collect it.
Another fallacy proposed by both parties is that reducing fraud in Medicare will reduce the overall cost; however, this will only reduce the cost to government as pricing will have to increase to individuals to cover lost fraudulent revenues to providers. This amounts to another cost sleight of hand, the alternate equivalent to that of subsidizing insurance. Ultimately, if we are all dedicated to reducing the cost of healthcare, which would you choose? Rationing does exist in the market, and that will not be eliminated through the government control of it unless quality or technology is influenced to address pricing. Collectively, we must decide whether we will pay more for more — or wish to pay less for less; that is an undeniable fact of life in any market. Whether you are a Republican or Democrat is irrelevant because neither is being honest about the problem because the voting public values fantasy over facts; ultimately, there is no solution that maintains technology and quality of service, increases access, and reduces costs.
But, before we tinker with the most technologically advanced healthcare system in the world, perhaps we should try out these theories on the bubble gum market which will at least not result in the death of people so that politicians may try to “muddle through” to a solution which is patently unrealistic. If the new “Obamagum” plan worked as they say Obamacare will, gum prices will go down (as will the overall cost of gum nationally), more people will be chewing gum, and there will be vastly better increases in gum technology. If they are wrong, gum will not increase in quantity (relative to the increase in demand), variety of flavors and manufacturers will decrease, and the overall cost of gum and the gum market will increase. Sounds like a safer experiment to me. Please, let us refrain from killing people to just to prove that central planning and socialism still does not work! Fair enough?