Monday, September 21, 2009

Mankiw Gets to the Heart of It

Greg Mankiw is a Professor of Economics at Harvard University. His article in Sunday's NY Times is profound. Professor Mankiw imagines that a medical process is found that costs $ 150,000 annually with the power of extending life for the user by one year.

Who can use this process?

In a free market, the answer is obvious. The users will be those who can afford it. The result: a limited number of relatively affluent folks will pay $ 150,000 annually and live another year (eternally in principle).

What happens in Obamacare? Using the principle that all citizens have an equal right to health care and that medical care should not go to the highest bidder, then the answer is obvious. No one will get to use this process that can extend life. It will be outlawed. It has to be under Obamacare. If anyone gets to use this process, then all must get to use it. All will want to use it. But society cannot afford it. Therefore, no one gets to use it.

Think about that for a moment. Expensive medical procedures, if they have the possibility of improving life chances for all of us will be outlawed, because, in the aggregate, under Obamacare it breaks the budget.

Put another way, if we decided that cars should not go to the highest bidder, but that all Americans should have the right to own the same car as everyone else, the result would be the lowest common denominator. We would all be driving cheap cars -- no more Lexuses, no more Mercedes (maybe GM would make a comeback!).

This is where Obamacare will take us. Since everyone must have access to identical health care, anything that is very costly and could, in principle, be widely used will simply be outlawed. If you want expensive, life enhancing health services, you will have to move to another country that permits free market health care in order to get such services.

In a free market, you could buy insurance that would provide the money to have the very expensive life enhancing procedures if you so choose. Under Obama's bills in Congress, such insurance policies will be illegal.

Not only do you lose the freedom to have the care you want and need, an insurance company that sells you a policy to provide for that care will be breaking the law.

The free market is the best allocator of scarce resources. Under a government allocation scheme, either the government must pick and choose who gets a limited resource and who doesn't or the government must outlaw that resource so that no one gets it. That's why the free market is the right answer for health care, not Obamacare.