John

It continues to amaze me.

I know I should be used to it by now, but the fact that the people who are in charge of formulating national policy (namely congress-critters of the representative and senatorial characters) are so completely ignorant of basic economic and financial principles continues to astound me. It also make me upset to my stomach and makes my Omeprazole medication work double-time to prevent my chronic upset-stomach / heartburn / GERD that I’ve had to deal with for years now.

Simply put, this is how the “single payer system” will completely screw up our health-care.

The reason we have horribly expensive care is not because of some failure on the part of the free-market system. We have expensive health care because the government DID intervene.

Regulation generally works to the benefit of large industry. The cost of compliance is generally fixed so the larger the company, the larger the base of customers that the cost can be spread across. So as government regulation increases, the input costs of the supply curve increase shifting the supply curve to the left. This causes the intersection of the supply and demand curves to shift up and to the left indicating a higher price with a lower quantity demanded.

Once this happens there is a “horrible crisis of un-insured persons”. In order to supply healthcare to all of these people who have been denied healthcare due to the increased costs of govt intervention, the government decides to intervene again by subsidizing the health care of “special minorities”. This shifts the demand curve of health care to the right increasing the quantity demanded of health-care but at the expense of increasing the cost of health-care even further.

Basically, we’re now still serving the same amount of people, but we’re charging a whole lot more for it due to nothing else BUT government intervention.

It gets worse….

the government will not pay the full amount of the new equilibrium price so the difference between that price and the amount of money the government decides is “fair” is added to the equilibrium price and charged to private insurers and thus to the premiums of the people.

Now all the govt has to do is point to these higher than ever premiums and same or lower standards of health-care and blame it on “free-market”. How do they get away with that? well, starting in the 50′s (thank you Eisenhower) we have had a federally controlled education system that has taught everyone that our current system of economics is actually free-market rather than the socially controlled experiment that it really is.

The government’s next step is to set the price of all health care whilst simultaneously guaranteeing health-care to all citizens. This shifts the demand curve significantly to the right while reining in the price level. The result? a shortage.

This is not some fairly tale, some grim spectre of horrror cast by the republicans. It has absolutely nothing to do with politics of right vs left wing and only is affected by the simple mathematics of the situation. There is no way to provide universal care to an increasing population with a finite amount of resources without rationing that care.

The democrats keep shying away from the word “rationing” because they are afriad that once people realize what their plan entails, they will vote republican. The republicans keep emphasizing “rationing” as if the current system doesn’t ration by price level.

Pricing, without govt intervention (ie: not FDA, no regulations, no Medicare, no Medicaid) would be lower and increase accessibility. If we are going to require that everyone in the country be covered to all possible health concerns including concerns that the people have sole control over, then we will see a destruction of economic capacity unlike anything since the Great Depression….

if, that is, we are lucky….