Saturday, July 25, 2009

Health Care -- The Right Answer Once More

The free market's great strength is its ability to allocate scarce resources in an efficient way. Medical services would best be delivered by market forces. Having the government involved in any significant way distorts the beneficial effects of market forces and leads to problems. The biggest problems now facing health care are: 1)medicare; 2)medicaid; 3)prescription drug coverage for seniors. These three programs have the effect of increasing medical care costs without limit because they create users of medical care services who don't pay for the services (at the margin). They may pay, after the fact. Or, they may pay very small co-pays. But, basically those entitled to medicare, medicaid and prescription drug coverage are able to pass along their medical expenses to John Q. and Susie Taxpayer.

If you had an equivalent system for food, then food prices would be out of control. The problem is that creating a buyer who is getting much of the product for free creates unlimited demands on whatever the product is. You cannot produce an infinite amount of health care at minimal cost. That is not one of the available options.

The options are twofold: 1) either the market can allocate medical services according to what people are willing to spend on them or 2) the government can decide who can have medical services, when they can have them, and what they will pay for them. The latter is mostly how we now handle medical services and is the reason medical care costs are out of control. The free market has not been permitted to work.

The president and the Congress want to expand medicare to the entire population. (That is basically the ultimate destination of both the House and Senate proposals). These proposals, if enacted, will destroy the medical service industry in America and create a bifurcated health care system much like the public and private school systems now prevalent in the US. The poor and middle class will be left to wallow in the public system. High income folks will seek out private hospitals, private insurance and private health care. Obama, Kennedy, Kerry, Gore and Pelosi will use the private system just as they do today when they send their own children and grandchildren to private schools, they will send themselves to private doctors and private hospitals.

If you are worried that the relatively low income part of the population cannot afford high cost coverage, then, by all means, subsidize the costs of "catastrophic" insurance packages. Such packages are high-deductible insurance packages much like auto insurance packages that most states require their citizens to have. Any American who can afford, tobacco, beer and alcohol, cable TV, cell phones, and/or drugs, can afford "catastrophic" health care insurance and can afford to pay the out of pocket expenses that would go along with such packages.

Health care is affordable if the market is left to allocate medical services. Government run health care will simply have the government decide who can have what medical services and when they can have them. Abortion and aids will be covered (as they are in the current House and Senate bills), but surgery for heart trouble and cancer will not be (as they are not currently covered in England for those over 65 years of age). The main killers of older Americans are heart trouble and cancer. Aids kills relatively few and is mostly confined to a narrow demographic. Why all Americans should be insured for things they cannot contract (old folks are not likely to get pregnant) is beyond absurdity.

What the President and the Congress want to do is to decide which health problems are "good" health problems -- aids, abortion, etc. and which health problems for which care is not necessary -- cancer, heart trouble, hearing and sight problems. Most Americans need coverage for cancer, heart trouble, hearing and sight problems. Very few need coverage for aids and abortion. Yet the President and the Congress favor the latter group over the former.

This is all about politics and who your political friends are and has nothing to do with providing health care for the citizenry.

Frankly your health does not generally much depend upon the health care system that is available to you as almost any physician will attest. Life style choices determine most folks health care, with or without the provision of medical services. Clearly there are cases that are not correctable by life style changes. But these cases are a small minority of those treated in the health care system. Go visit any emergency room and you will see what I mean.

The good news is that there is now a good chance that Obama and Congressional Democrats may lose their current fight to destroy the US health care system. That may be why the stock market has begun to show some real strength lately.