Health Care Costs
without the Demagoguery
Manweller—
Last month I wrote about the inefficiencies of government run health care. And, like moths to a flame, everyone who doesn’t understand health care policy felt compelled to display their ignorance in the form of letters to the editor. I actually believe that drawing these people into the open is a form of public service, but I rarely respond because dueling op-ed pieces seldom get us anywhere. However, the letter by Mr. Stokes arguing that America’s health care costs are due to private sector overhead costs was so staggeringly off the mark it served two purposes. One, it gave me something to bring into my political economy class illustrating how little some Americans know about health care policy, and second, it drove me to write this essay.
Americans pay extremely high health care costs for three reasons: the way we buy health care, the way the government makes us sell health care, and who pays for health care. Let’s start with the first.
Take a moment to think about the way you buy groceries. Everything you put in the basket you pay for. The more you put in, the more you pay. This is what keeps you from putting everything in the basket (and leaving some for others). But imagine if we changed that. Instead, at the first of each month you wrote one check for $250 to Fred Meyer and then you were allowed to shop as much as you want, as often as you want, and take whatever you wanted. Would your shopping habits change? Facing no incremental costs due to increased consumption, you would take more and more. Take the good beer. Take more beer than you need. Let’s raid the electronics section. Who cares? Once you pre-paid your $250 you can take whatever you want without feeling any extra costs. Well, Fred Meyer would care and they would increase to $1000 your flat monthly fee, and then we would start complaining about the high cost of food. Democrats would start calling for national food insurance! This may sound crazy in the grocery industry, but it’s exactly how we buy health care. It’s why we don’t ask doctors “how much is that x-ray?” In the short run, it doesn’t matter. Nor does it matter if I go to the doctor once or ten times. The system encourages over-consumption until insurance companies have to raise premiums because of our shopping behavior.
Second, imagine a country that makes everyone buy a Mercedes
Benz for a car. It would be illegal to buy a Prius.
Would people in this country have better cars? Yes. Would fewer people own
cars? Absolutely. If we require that everyone buy a
$60,000 car, fewer people will own them. This is how the government makes us
sell health care. Our state legislature and our federal government create
“mandates” in health care. They say “You must cover this, and you must cover
that.” Eventually, health care plans cover just about everything, but they also
become extremely expensive. A 22 year old male doesn’t need the same coverage
as a 60 year old female, but the government doesn’t give him the choice to buy
a smaller plan. Facing the expense, he usually chooses not to buy health care
at all. Many economically ignorant politicians (think Hillary) want to use
government to make health care more affordable when government is the reason it
costs so much! If government would allow private insurers to sell many levels
of health care, just as
And finally, who pays. The problem here is that everyone gets health care but not everyone pays. Go to the hospital. If you have no money, you still get admitted. So, we have a system where 100% of the people consume health care but maybe 75% pay for health care. That means your bill is about 25% higher than what you actually used. Your bill must compensate for the bills that aren’t paid by others.
So there you have it. These are not the only three reasons, but they, along with high tort costs, are the main reasons that health care is so expensive. Now its time for everyone who didn’t understand this essay to start writing letters to the editor.