More on health care

Christopher Mayer at the Mises Institute has written a great article on the cries for universal health care that will surely appear with the upcoming election season (year?). Like most bad political ideas, the call for universal health care is based on poor reasoning and emotional tugs. Just as Arnold Kling wrote about The Delusion of Collective Affordability, Mayer refers to the The Impossibility of Making Something out of Nothing:

Such an immutable law, for example, would be the law of supply and demand. With the idea of universal health care coverage, the government seeks to break the law of supply and demand. It seeks to make something available that the market currently provides only at a price deemed too high by some.

He does offer an alternative:

The only durable way to build wealth and improve the standard of living is by saving, by putting off present consumption in favor of a hopefully better future, which allows for the accumulation of capital. Garrett understood this and noted that "social gains that cost more than society can afford, especially those that are founded on the doctrine of dividing what there is instead of producing more, are bound in a little time to annul themselves."
This is the way to view universal health care coverage. It is an unaffordable luxury. It divides what exists and does not produce anything more. It does not change the fact that such an imposition will create unintended consequences. It does not render the laws of economics obsolete.

The alternative is to let the standard of health care rise through savings, capital investment, and productivity increases. It won't happen overnight; difficult individual choices will have to be made. But over time, the cost of health care will come down relative to wages. This solution is usually either too scary or lacking in emotional appeal to resonate.

If ever a time is to exist when a checkup costs five bucks, when the diversity of choices for health care services is as varied as the choice of restaurants, when the type of technological advances that have occurred in information technology over the last 20 years occur in clinical medicine over the next 20 years, when the poorest of the poor are able to afford basic health care like they can afford food and clothing?

?then let people decide for themselves how much they value units of health care relative to units of other goods. Let entrepreneurs find the best ways to bring health care production in line with consumer demand. Allow competition between producers bring prices down.

But don't take a step backwards with universal health coverage.

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I'm a free-market liberal,

I'm a free-market liberal, who bemoans cries for socialized medicine. I have been finding it most ironic, that my dear friends from the inner-city in which I grew up who now suffer from most severe mental-illnesses are managing to receive exemplary treatment and care through existing government programs and charities. Meanwhile, a British friend of mine, suffering considerably, is unable to get treatment of nearly any substance or regularity.

That being said, there are a few free-market problems regarding health care that I would like to see addressed.

The first being that Health Care is one of the only industries I'm aware of that bargain-hunting is viewed as a horrible idea. Cheaper care tends to be viewed as worse care, and in matters of health, people would rather spend more for reassurance about what can be a life-or-death issue. Therefore, less pressure exists for lower costs.

The second factor working against lower cost is that, quite simply, people will pay anything to stay alive.

The solution to me, as someone who would like to see broader care that was less expensive, would be on the corporate side of things. I would like to see an HMO or Health Insurance plan which was oriented towards a significant reduction in bureaucracy, along with a business model of reducing costs by keeping their patients healthy, as opposed to convoluted schemes of bribes from drug companies and reductions in service.

I think you've identified a

I think you've identified a big part of the problem, which is that cheap care is considered bad care, and thus people want the most expensive care they can get their hands on.

The only way this is made possible, though, is that the individuals demanding the care don't have to pay for the high price. It's sort of a "stated preference" vs. "revealed preference", in that everyone wants the best, most expensive care, but if people had to *pay* for it, you would probably see something different.

I think Arnold Kling's idea about making health insurance analagous to car insurance (covering catastrophic care but not maintenance, and requiring a variable deductible) and decoupling insurance from employment. Tying health care to employment has had numerous perverse effects on both the labor market and health care, IMO.

It should also be noted that

It should also be noted that a large proportion of the high cost of healthcare is caused by government action associated with Medicaid, Medicare, and insurance regulations. Medicare is a big culprit in this area, as doctors are rarely compensated at a level that even covers costs, much less allows them to make a profit, therefore rates are raised for private insurance and cash (do they exist?) patients. Why does a band-aid cost $3 at the hospital?