Why not just “fix” Obamacare?

People are beginning to say, “Well, can’t we just fix the bad parts of Obamacare, and leave the good parts?”   When you ask about what they think are the good parts, they usually name the fact that people can’t be denied health insurance for pre-existing conditions and they can’t be charged more for their insurance because of pre-existing conditions.  Unfortunately, the bad part, the high prices that are going through the roof, are a direct result of the good part.  So we can’t lower the cost of medical insurance if we want to have these “good parts.”  Let me explain.

Let’s talk about fire insurance on your home.  We usually understand that we have to pay for fire insurance year after year, even though we don’t have fires, so we will pay enough to the insurance company so they have the money to pay to replace our house if it does catch fire.  Now imagine if we decided to put the “good parts” of Obamacare into our fire insurance policies.  So the rule would now be that you can buy fire insurance at any time, even after your house catches fire, and you can’t be asked to pay more because of the fact your house is on fire.  (Not to mention that everyone pays the same regardless of the size of their house–e.g., community rating.)  As you could predict, if people could wait to buy fire insurance until after their house caught fire, everyone would skip paying for years on fire insurance policies and call the minute the house caught on fire.  The insurance companies would have to pay thousands every policy, and the prices would go through the roof, and/or fire insurance companies would go out of business.  That is exactly what is happening in health insurance now as a direct result of the “good parts” of Obamacare, and for the same inescapable economic reasons.

Many people will say, “But health insurance is more important than fire insurance.  It is not fair to require people to pay more for health insurance if they get sick through no fault of their own.  People need to have access to health care or else they could die. We are a rich country.  We can’t let so many people go without medical care and the insurance to pay for it.”

Regardless of how important something is someone has to pay for it.  Medical care does not become free because we really want it.  It does not even become “affordable” if someone else pays for it or other taxpayers subsidize it.  Medical care is no exception.  Every medical procedure, prescription and practice has to be paid for in real money.  We want to have a system where “price is no object” and everyone can have anything they want.  The problem is that humans have unlimited wants, even when it comes to medical care.  This demand is driving up the cost of medical care.  This is the cause of the fact that the prices for medical care and medical insurance have been rising, even faster than inflation, as we have all noticed.  In fact, the prices will keep going up until we cannot afford to pay them.

The cost of Medicare and Medicaid and Obamacare and all medical insurance are all going to keep rising until we put on the brakes and say, “No we don’t want to pay for that.”  In other words the value of medical procedures has to balanced against the cost.  If the price is too high, the customer has to say, “It’s not worth it.”  Well, actually the government is already trying to do that somewhat with Medicare and Medicaid by limiting what they will pay for.  Everyone is incensed by this denial of the procedures and services they want, but it is the only way to stop the rising costs.  If we want the government to pay for our medical care, so we don’t have to, then the government must ration what healthcare we are going to receive.  Medical care is either going to be rationed by price (only buy what you can afford) or by government edict.

A better way is to let us decide what we will pay for and what we won’t.  That is how the marketplace works best.  Prices can come down when individuals decide what they are willing to pay for and what they are not willing to pay for.  But we have to be deciding this with our own money, not someone else’s money.  No one is very careful or frugal with someone else’s money!  That’s why if we want to help poor people we need to give them more money not free health insurance.

In some areas of our economy, notably where government subsidies are absent, and government regulation and micromanagement is minimal we see competition drive down the actual prices of things.  Computers, cell phones, TVs, and clothes at WalMart have all gone down in price.  They are today more affordable than they were 20 years ago.  Even “non-covered” medical costs like the cost of Lasik or cosmetic surgery have dropped.  These things have become more affordable.

How do things like computers become more affordable–actually come down in price?  The people with less money to burn don’t buy the newest computer at the high price.  When the computer manufacturers have sold all the computers they can at the high price, they then lower the price.  They’ve probably covered their startup costs or perhaps have learned ways to make their product more efficiently.  If they haven’t figured it out, their competitors probably will.   However it happens, the producer sees that with a lower price it is possible to keep selling more and keep making a profit.  So the price comes down as the volume goes up.    As the computer becomes really more affordable, more and more people can buy it.

Just the opposite happens when something is made “affordable” by subsidizing.  Nobody is saying “That’s too expensive,” and refusing to buy it.  [This is happening with college tuition as well.] In turn, the provider has no incentive to lower the price and, in fact, research into new and more cost effective methods of delivering product will slow down to a crawl.   So the goods or services never really become affordable.  They will have to be subsidized at higher and higher rates forever.  Economically speaking subsidies are an addictive drug.

Medical care costs continue to spiral out of control because we are insulated from the real costs, two layers deep.  Those two layers make thinking about free market reforms confusing.  The first layer is medical insurance insulating us from the costs of medical care.  The second layer insulates us from the costs of insurance—by having others buy it for us. Eliminating those two layers of insulation and creating a free market in medicine would give us more control and actually make healthcare more affordable.  See “What should replace Obamacare?” for how we get there from here.



Posted by donc1950@gmail.com

Researching the answers to today's problems I found the best answers among writers who identify as libertarian. Maximize freedom, rely on the free market to solve most of our issues, rely on personal responsibility, promote more voluntary charity.

Civil comments and discussion questions welcome