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Impossible Promises
8.4.09: Government cannot perform medical miracles.
August 4, 2009 — -- I keep reading about health-care "reform," but I have yet to see anyone explain how the government can make it easier for more people to obtain medical services, control the already exploding cost of those services and not interfere with people's most intimate decisions.
You don't need to be a Ph.D. in economics to understand that government cannot do all three things. (Judging by what Paul Krugman writes, a Ph.D. may be an obstacle.)
The New York Times describes a key part of the House bill: "Lawmakers of both parties agree on the need to rein in private insurance companies by banning underwriting practices that have prevented millions of Americans from obtaining affordable insurance. Insurers would, for example, have to accept all applicants and could not charge higher premiums because of a person's medical history or current illness".
No more evil "cherry-picking." No more "discrimination against the sick. But that's not insurance. Insurance is the pooling of resources to cover the cost of a possible but by no means certain misfortune befalling a given individual. Government-subsidized coverage for people already sick is welfare. We can debate whether this is good, but let's discuss it honestly. Calling welfare "insurance" muddies thinking.
Such "reform" must increase the demand for medical services. That will lead to higher prices. Obama tells us that reform will lower costs. But how do you control costs while boosting demand?
The reformers make vague promises about covering the increased demand by cutting other costs. We should know by now that such promises aren't worth a wooden nickel. The savings never materialize.
Some of the savings are supposed to come from Medicare. The Times reports "Lawmakers also agree on proposals to squeeze hundreds of billions of dollars out of Medicare by reducing the growth of payments to hospitals and many other health care providers."
With the collapse of the socialist countries, we ought to understand that bureaucrats cannot competently set prices. When they pay too little, costs are covertly shifted to others, or services dry up. When they pay too much, scarce resources are diverted from other important uses and people must go without needed goods. Only markets can assure that people have reasonable access to resources according to each individual's priorities.
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