The Healthcare Cost Conundrum

Protecting people from healthcare costs means prices will never go down.

As expected, Republicans in the White House means that Obamacare is being revisited as it should be.  As expected, the discussion is becoming heated.

What we have to keep our eyes on amidst all the smoke is one simple fact: despite its name, Obamacare had nothing to do with making health care affordable.  We see this reflected in the rhetoric: even its advocates now admit that its objective was increasing the availability of health insurance which has nothing directly to do with obtaining actual care.

In reality, Obamacare was designed to give the government more control of our health system.  As any number of examples over the years amply prove, any increase in government control gives politicians another opportunity to solicit campaign contributions in return for favors.

Back in 2007, we pointed out that the biggest problem in health care is that nobody pays for their own treatment.  Poor people get it free with the cost passed on to society at large.  Insured people get it mostly or somewhat free with the costs paid by insurance; even the portion they do pay is largely unknown until after they've already received medical services and supposedly owe the co-pay part of the bill.  Insurance companies care about denying claims for current customers, but in the long term they don't care deeply about cost increases because they can always raise premiums.

Since insurance is, by definition, spreading one person's risk across a large pool of other people, self-inflicted medical conditions are becoming a serious problem.  We know a lot about the benefits of proper diet and exercise, but statistically speaking, nobody likes exercise.  Americans just keep getting fatter, keeping us alive gets more expensive every year, and Obamacare prevented insurance companies from raising prices based on a person's risky behavior.

These problems are bad enough, but we're finding that government policy also blocks the normal push for market efficiencies.  When cars first got power steering, automatic transmissions, and a host of other inventions, only the rich could afford cars with these wonderful new features.  The rest of us had to make do without these luxuries.

Auto companies wanted to expand their markets, however.  Over time, they managed to reduce the cost of new marvels to the point that everybody could afford them.  We see the same effect in PCs and smart phones - they get cheaper all the time.

This doesn't work in health care because our government has decreed that the moment any medical treatment is shown to be effective, it must be available to anyone regardless of ability to pay or legal status.  There is incentive to create entirely new treatments, but there's no incentive to make existing treatments cheaper, and every incentive not to.

Kidney dialysis has been very expensive since it was developed decades ago.  Why should anyone try to make it cheaper?  Nobody gets kidney dialysis unless they need it; the market is limited by the number of kidneys that fail.  If your kidneys fail, you will die without dialysis.  At that point nothing else matters and you'll pay whatever is demanded up to the maximum you can beg, borrow, or steal.

Given that somebody will pay for dialysis no matter how much it costs and there's no way to increase the number of customers who want it, it makes sense for dialysis equipment makers to increase the price, at least up to the point at which the middle class would be completely unable to pay regardless of their insurance coverage.  As long as the price remains just barely within reach of the average member of the middle class, they won't sell any fewer at the higher price because anyone who needs dialysis and can't get it will inspire sob stories coast-to-coast.

We've explained how much dialysis costs the taxpayers when illegals with late-stage kidney disease appear in our emergency rooms.  International bleeding-hearts like to argue that rich countries have a moral duty to provide everything the world's poor need that they don't have, but Gumball Immigration presents unarguable facts about the number of people involved which show that this approach is ridiculous.

A Harsh, But Effective, Solution

We would do the world - including the impoverished third world and poor people here - far more good by denying treatment to people who can't pay for it themselves.

This sounds horrible, and in a way it is: to begin with it would mean an awful lot of unlucky Americans dying, unable to afford the medical treatments that would keep them alive.

In the long term, though, this market fundamentalism would save vast numbers of lives all over the world.  How?  Simple: seeing a great many middle class Americans with some money dying because they can't afford treatment would give the medical industry the usual market incentives to cut costs to the point where people could actually pay for it.  Our article about a 50-cent birthing mat and the story of a 20-cent medical centrifuge show that cheap treatment is possible when businesses are given the choice of selling cheaply or not selling at all: they almost always find a way to sell it cheaply, and everyone benefits everywhere.

Instead, our socialistic "give everybody anything" philosophy means that the entire medical profession has every incentive to keep costs as high as possible instead of reducing costs to increase sales.  Our big-government leftists advertise this as humanitarian and merciful, but it seems so only so long as we as a society are rich enough to afford it - which, at the rate they are over-regulating businesses and importing illiterate and sickly third-worlders, won't last forever.

If we don't address costs, we, like all other single-payer healthcare systems, will get to the point that enough people will have to die while waiting in line to keep costs affordable, just as Sarah Palin predicted.

Will Offensicht is a staff writer for and an internationally published author by a different name.  Read other articles by Will Offensicht or other articles on Economics.
Reader Comments

Here is the problem in a nutshell: the people most needing healthcare are the ones legitimately least able to pay for it, namely the likes of cancer or dialysis patients, CP patients, etc.

The problem compounding the problem: everyone seems to think that their healthcare costs, be they a routine teeth cleaning, eye exams, or even setting a simple broken limb should be born by others. Everything is catastrophic, everything needs insurance, and it is your employer's job to provide it.

Unless you solve the second problem, we have literally no chance of ever addressing the first.

March 20, 2017 7:26 AM

I think the problem lies solely in insurance driving up costs because of 3rd party payments. I also think the problem is that hospitals and clinics don't show prices beforehand. Maybe force them I show prices and that will make health care cheaper as they must compete. Even with insurance. I'd be stupid to go to the more expensive hospital vs the cheaper one since I pay premiums.

Another good idea is give everybody a HSA account with 6500 in it. It builds up every year you don't use it. Do everybody can use that money and put more into it if they want to. But once you run out of money that's it. Your screwed. That would force people to care much more about their health and obviously limits the amount of money anybody can spend.

A rich guy can obviously spend all his fortune on health. Where as a poor person only has 6500 to spend every year. Or if he gets a good job he can put more money into it tax free. But obviously can only be used for health care. Really wish politicians would talk more about HSA accounts and play with that to make the system better.

September 3, 2021 9:11 PM
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