Killing health care

A while back, I wrote about how to kill health care.  In reality, the government has been killing health care for a long time.  According to a report from the AARP the government already accounts for 46 percent of all health care spending in the country.

That number will only increase.

In 2018, healthcare spending will make up more than one-fifth of the American economy and the government will pay more than 50 percent of those costs, according to projections issued at midnight Tuesday by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS).

This is exactly the problem with health care “costs”.  The more government spends on health care, the more and it will, and need to spend, on health care.

Here’s a perfect example.

Since its inception, Medicare spending has grown more than 14 times the rate of inflation to about $300 billion. It spends more than $800 million a day. In a decade, analysts estimate, spending will top half a trillion dollars and account for nearly a fourth of the federal budget.

Government is the single largest “consumer” of health care already.  It matters not who receives the care, it mattes only who is paying.  The government has no incentive to price ration, and neither does the patient.  In addition, there is no incentive or need for the provider to compete on price.

Government expenditures on health care displace private dollars spent on health care.  Worse than that, price is never a consideration.  We have ipso fact socialized medicine, as the government has such large market share.  As Mises so accurately described, without price calculation, the socialist system fails.  Is it any wonder why our health care system is in such need of “reform”?

So, according to the AARP report, which cited the CBO’s 2008 report on Growth in Health Care Costs, what is driving much of the increases in health care costs?

Much of what is driving the cost of health care is the widespread use of new medical technologies. Advances have introduced treatments for conditions previously untreatable and new categories of spending.

You don’t say?  So, if they are correct, and it is technological advances, you know, the life saving kind, the types that were unavailable just a few years ago, that is driving the increases in spending, then there is an easy solution.  All we need to do is curtail medical advancements.  Of course, that might cause a few lives to be cut short, but hey, it’s all about the greater good.

And you needn’t even pass a law that prohibits new medical technologies, all you have to do is impose price/cost controls.  Problem solved.

I’ve often said to people (and my classes by the way) that the rising prices of health care are a good thing.  Now, I do get many funny stares and sometimes worse, but once again, Austrian economics to the rescue.

Prices are the signal that producers and consumers use to communicate with each other.  Rising prices indicate that more resources ought to be directed into that sector, and alas, they were.  The resources delivered newer and better medical technologies and countless lives were saved that otherwise would have been lost.

The rules of scarcity still apply (even when you’re a Nobel laureate from Princeton) and shortages do occur.  They are alleviated with higher prices.  Over time markets adjust.  In fact, there is no reason at all why good health care shouldn’t be more expensive.  If consumers value good health care more, than they ought to, and I imagine they are willing to, pay more.

Government intervention into the market only causes distortions.  As there is no reason to make pricing calculations, consumers and producers have no way to determine the proper allocation of resources to and within the health care sector.  Already, as previously covered here, doctors are leaving the profession and even those with insurance are sometimes unable to receive care.

The more the government spends, and the more they impose controls, the worse it will be.  The solution to our health care problem is actually quite simple: get government completely out of the health care market.  When government expenditures on health care are zero, when the market is truly competitive, then the most people will get the best care at the lowest price.

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