Posted by
Scott Bowden on Tuesday, June 05, 2007 9:48:14 AM
The intensity of the national debate over health care is heating up with the early start of the 2008 Presidential Campaign season. Rather than writing pages and pages of commentary and analysis documenting how many Americans do not have health care, I'd like to reduce the debate to its simplest terms. Great health care is an extremely scarce resource....everyone desires and, in many cases, people faced with illness truly need it. In a market system we allocate scarce resources through the use of price mechanisms. The more people want something, the higher the price for that entity which communicates to suppliers to enter the market (more doctors, nurses, and hospitals), which increases the supply and thus reduces the price to equilibrium. The other feature of an increased price (driven by demand) is that it reduces demand by making people seeking that good more likely to consider alternatives (over the counter remedies instead of seeking expensive prescription drugs, deciding that one does not need to see a doctor every time one coughs [keeping hypochondriacs out of the system]).
If the government enters this arena and completely removes the market mechanisms, then we put reverse pressures on the supply (people will not want to work in the industry or build new hospitals because they will not be able to recover their investments [expensive education, expensive land and construction for buildings]) and reverse pressures on the demand (since health care is now "free," people will not self-limit their use of this good). The day that government health care comes online, the lines will be out the door of any facility now offering these free services (think of the DMV except that no one "wants" to go to the DMV). Doctors will leave the profession or the country because they can earn money in other ways using their talents and expertise. These long lines will trigger politicians to react which will lead to the dreaded rationing approach, in which people will be told what services they can and can't use.