The Laws of Supply and Demand Won't Be Conned

You would think that the destruction of capitalism would be enough to keep our new president busy for at least a year or two. Nationalizing the banking, finance, insurance, and automobile industries is a pretty big bite to chew. But as they say in the ads, there’s more. Controlling your money is not enough. There’s your health to consider.

We can take some comfort in the fact that, since the prez is planning to socialize the medical industry too, many of us will very likely not live long enough to get the full effect of living in a socialist hell hole. By the time the country collapses in government run ruins, having our health care in the hands of the same folks who are doing such a bang-up job with Amtrack, Social Security, and the IRS, will spare millions of us the trouble of living long enough to see it happen.

If you’ve ever had to renew a driver’s license, apply for a building permit, or get on an airplane it should be obvious to you why government supplied health care is a lousy idea.

Never the less, with the confidence of the righteous Obama and the fawning media are convinced that a  government-run universal health insurance scheme will bring down the cost of healthcare while improving its quality. Such a notion is logical only to people who believe that capitalism is a scourge that must be wiped out, and that the laws of supply and demand can be conned as easily as voters. If it does turn out to be true, it will be the only accurate government economic prediction ever made.

Unexamined, except to bash greedy capitalists, is the role of government health insurance in driving up the prices of health care. Up until 1964 the cost of health care had never risen faster than inflation. Doctors made house calls. People could afford health care. Few people bought health insurance. 

That was the year the feds got into the health insurance business. They passed Medicare and Medicaid, essentially free health care for the poor and the elderly. They seemed like good ideas at the time. The compassionate looting of the young to pay for the old was wildly popular with the old. The program has been a reliable vote getter ever since.

Politicians gave a large block of voters free health care at the expense of their children and grand children while making it seem like an act of compassion rather than intergenerational looting. It is not a coincidence that starting that year the cost of health care began increasing faster than the rate of inflation.

Government insurance increased medical costs by creating a class of citizens for whom money was no object in considering what treatment they wanted. They weren’t paying for it, so they wanted the best, and right now.

The escalating costs were noticed by those who still had to pay for treatment. Unfortunately, those folks made the mistake of complaining to lawmakers. Politicians stepped in to help by making the problem worse. They made the cost of health insurance tax deductable for employers.

Employers liked it because it was cheaper than paying an equal amount of wages, on which they had to pay Social Security and unemployment taxes. This in turn dramatically expanded the class of the fully insured.

Millions could now say, “Ok, Doc, make my deductable!” When government employees themselves got on the health insurance bandwagon the class of the fully insured expanded once again.

As it did, naturally, health care costs exploded. There were now millions of people who, after paying just a few hundred bucks of their own money, could command vast corporate or public fortunes to treat any ailment they might have. When price is no object, demand goes up. As demand increases, prices increase.

Today the U.S. government is the largest single buyer of health care in the United States by a wide margin. The government has been as thrifty and prudent spending that money as it is buying every last limousine, junket, and toilet seat.

 And now the “debate” boils down to how much more the government should meddle in the insurance and health care market. There are no proposals to get the feds out of health care. The only choice we hear about is between doing nothing and creating one compulsory government run class of fully insured consumers. The choice is do nothing or  create essentially unlimited demand for medical services. Unlimited demand does not make for falling prices.

Unlimited demand can only drive up prices. In similar systems, the Canadian, British, Australian, and many others, demand is controlled the only way it can be, by rationing care. Bureaucrats decide who is the most deserving of limited available treatment, the rest die on waiting lists. Universal national health insurance is why Canadian politicians come to the U.S. when they get really sick.

Once we have it in the U.S., where will you go if you get really sick?