Give Universal Healthcare a Chance?

As we all know, with legislation it is currently considering our federal government is seeking to extend healthcare benefits to all Americans while lowering direct healthcare costs for most us and the overall costs of the healthcare system. And why, many ask, shouldn't the government of the wealthiest, most advanced nation on the planet guarantee healthcare to its people? As Americans, we should all be entitled to adequate healthcare, regardless of our ability to pay, shouldn't we?

Ideally, the answer to the above questions is "well...yeah". The practicality of the idea is limited by the reality of basic economics, however.

In his book entitled (oddly enough) Basic Economics, Thomas Sowell tells us that an economy is simply a mechanism for distributing scarce resources. It's that little adjective right before "resources" that makes the idea of universal healthcare so difficult to realize. There's only so much healthcare to go around and dividing it up among several-hundred million people strewn across millions of square miles, making sure each person gets what he needs, is an incredibly difficult task.

The first clue that the idea of universal healthcare is fatally flawed is the fact that the stated goals of the legislation are contradictory, at least within a free-market system. Normally in a free-market, when demand outstrips supply, prices increase signalling the market that more resources are needed. When supply outstrips demand, prices drop, encouraging more folks to purchase the resource, consuming the excess and signalling the market to reduce production. In the case of the medical industry, an increase in number of patients results in higher costs for treatment which encourages more people to go to medical school, which increases the number of doctors to meet the needs of the patients. Prices stabilize as supply nears demand. If a city or region has too many doctors, prices drop causing fewer doctors to practice there and office visits cost less. This mechanism results in an amazingly efficient distribution of medical resources and drives competition and efficiency.

The legislation being proposed seeks to increase the number of potential patients and lower the direct cost of healthcare to most existing patients. If we believe our model above-and we have little reason not to-, this should result in increased demand, increased prices and, eventually more doctors. However, the other stated goal of the plan is to reduce the overall cost of healthcare. This must mean that the government, has found a way to sufficiently increase the efficiency of the system to handle the increased demand while reducing healthcare costs.

O.K. you can get up off the floor, stop laughing and clean the coffee off your keyboard. There is another option, of course. The government can accomplish its goals, at least in the short-term, by short-circuiting the supply/demand mechanism. It can do this by rationing services and imposing price caps on medical care and drugs. This only works in the short-term, of course, because capping prices means ultimately limiting supply, leading to more rationing leading to...well you get the picture. Ultimately, capping the amount of money companies can earn by developing and marketing drugs and equipment and that doctors can earn by practicing medicine results in fewer drugs, less equipment and fewer doctors. Pretty soon you have the kinds of waiting lists for medical treatment seen in other countries that have tried...universal...health...care. Hmmm. Interesting.

The truth of the matter is that universal healthcare is a nice ideal, but in practice, it just doesn't work. The best way to ensure the greatest number of Americans have access to the best healthcare is to allow the market to work.

Feed the Body, Starve the Soul.

During the run-up to the 1980 election, Ronald Reagan gave nearly 1000 radio addresses on a myriad of issues. Below is one which highlights the real danger in buying into the entitlement/nanny state ideas currently being offered up by our government:

"I guess all of us have had the experience of getting into a discussion in coming up with the right answer two hours later when we are all alone. My award for someone who thought of the right answer while the discussion was still going on there is a young man named Brad. A member of young Americans for freedom at Pennsylvania State University he has written in an encounter on a campus with a pretty young lady who believe socialism is the answer to are problems. His own philosophy was self-evident because he was wearing a button that proclaimed cut down big government.

With a cool breeze stirring her hair, she asked what Grant described as her ace up the sleeve question even you right wingers don’t want to starve. Wouldn’t you like a guarantee that you will never go hungry Brad knew that if he admitted that she would follow with, why not such a guarantee for shelter and medicine and all the rest he paused and then gave it a victory she was seeking. Or so she thought he said sure I’d like to lay my hands on everything I can get.

Oh she said that the state is the closest you can come to guarantee, Brad described her embrace for a counter attack involving the magic of the market mechanism. But he threw another curve surly he said I grant that there’s something more, I’d like a guarantee of shelter and medical treatment and even some recreation. She must’ve thought she had a convert a little shock she spoke at that’s what we support, why are you wearing that button she of course meant, that cut down big government button.

Brad wasn’t finished he said to her I would also like a yacht, somewhat defeated she answered with your not going to be serious about it. I am Brad said earnestly as he could I would really and truly like a yacht also a seaside villa. Look she said sternly you know what I’m talking about sharing I’m not interested in your greedy daydreams. I’m asking what everyone should have alright, Brad answered I understand let everyone have a yacht.

But how she asked lucidly with the first sign or rational thought, don’t bother me with that he said there be a way I’m sure. Just so everyone has a yaut, however there is one more thing I would like what she asked two yachts. Brad wrote that she looked rather unpleasant at that point and he feared for his safety and then she declared its people like you who keep socialism from working. Brad agreed yes quite right perhaps people like me were put away somewhere.

Socialism would have a chance by now she was really glaring she tried to think of an answer Brad continued, but they’re still one problem how many are there like me. But not as many as you’d think she said and walked away. an then Brad came up with a really appropriate last line, he wrote there she’s wrong and that’s why she’s a socialist, How right he is. Socialists ignore the side of man of the Spirit ; they can provide shelter, fill your belly with bacon and beans treat you when your ill. All the things that are guaranteed to a prisoner or a slave, they don’t understand that we also dream -yes even of sometime owning a yacht."

This is Ronald Reagan (1977)