Here I am comforting my favorite sister Gena after she found out Michael Jackson and Latoya Jackson were one and the same.
Healthcare for All
I would love nothing more than for every person in the United States to receive everything their heart desires. What a fabulous country this would be if every human need, want, and desire (NWD) could be satisfied by politicians passing a law mandating it be filled. Think of it –if you want to live in a mansion, a law is passed and POOF – you live in a mansion. If you want an extravagant car, a law is passed and POOF – you are driving an extravagant car. If you like trendy clothing, a law is passed and POOF – you are wearing trendy clothing. If you like the finest food, a law is passed and POOF – you are eating the finest food. Although it would be fabulous if these NWD’s could be filled by the simple action of passing a law – most people understand it is naive to believe you can pass laws and POOF – all the NWD’s of individuals are filled. It is at the very least naïve to believe you can guarantee goods and services to people without unintended consequences. Think about it – if I guaranteed you a free house, then I must either force someone to build it for you for free or I must force someone to pay for it for you – houses do not magically appear, they must be paid for. It is the same for cars, clothing, food, and any other good or service you can think of – nothing is free! Most people find the concept “nothing is free” very easy to understand. So how can so many politicians claim they can provide high quality, universal healthcare coverage to 100% of the U.S. population without increasing taxes or adversely impacting anyone – doesn’t this sound similar to passing a law and POOF – everyone magically has high quality healthcare coverage?
The best known proponent of making healthcare magically appear for every American is Hillary Clinton, who claims she has devised a way to provide quality healthcare for all Americans while at the same time reducing taxes to pay for it. Here is a summary of her healthcare plan taken directly from http://www.hillaryclinton.com/ – Hillary Clinton’s official presidential website.
1. Offer New Coverage Choices for the Insured and Uninsured:
a. The Same Choice of Health Plan Options that Members of Congress Receive
b. A Guarantee of Quality Coverage
2. Lower Premiums and Increase Security
a. Reducing Costs
b. Strengthening Security – cannot lose coverage
c. End to Unfair Health Insurance Discrimination (an insurance company cannot deny coverage to anyone)
3. Promote Shared Responsibility (This plan ensures that all who benefit from the system share in the responsibility to fix its shortcomings).
a. Insurance and Drug Companies – (insurance companies will…ensure high value for every premium dollar; while drug companies will offer fair prices and accurate information.)
b. Individuals – (responsible for getting and keeping insurance)
c. Providers – (will work…to deliver high quality, affordable care).
d. Employers – (….will help finance the system…)
e. Government – (will ensure…is always affordable…and will implement reforms to improve quality and lower cost.)
4. Ensure Affordable Health Coverage for All
a. Provide Tax Relief to Ensure Affordability
b. Limit Premium Payments to a Percentage of Income
c. Create a New Small Business Tax Credit
d. Strengthen Medicaid and SCHIP
e. Launch a Retiree Health Legacy Initiative
5. A Fiscally Responsible Plan that Honors our Priorities
a. Most Savings Come Through Lowering Spending Due to Quality and Modernization – (Over half the savings come from the public savings generated from Hillary Clinton’s broader agenda to modernize the heath systems and reduce wasteful health spending)
b. A Net Tax Cut for American Taxpayers – (The plan offers tens of millions of Americans a new tax credit…and discontinue portions of the Bush tax cuts for those making over $250,000…)
c. Making the Employer Tax Exclusion for Healthcare Fairer
Hillary Clinton’s proposal for healthcare coverage is very interesting based on the fact she claims to be able to offer “new coverage choices” for people with and without current coverage while at the same time she will ensure “lower premiums” and she will “increase security”. The most amazing claim is she will do this while providing a “net tax cut for American Taxpayers.” While I applaud Mrs. Clinton for trying to identify ways to make healthcare more affordable I believe she has a serious misunderstanding of the causes of higher healthcare costs and her cure for our healthcare will actually make it worse. Remember, misdiagnosing an illness and proposing the wrong cure can transform a small, manageable illness into a life threatening disease. Likewise, misdiagnosing an economic problem and proposing the wrong cure can lead to a worse economic situation.
So what is the correct diagnosis? What is causing healthcare costs to increase more than 10% per year in recent history? As with most economic problems it is a problem with supply and demand.
I’m sure you are wondering what I mean by “supply and demand”. Here is what I mean. When the demand for a product or service increases and the supply does not increase – it tends to cause the price to increase. To understand this you need only to think about an auction where 10 people are bidding (demand) on one Rembrandt painting (supply). The price will tend to increase because there is more demand than there is supply. On the other hand, if supply increases more than the demand increases the price will tend to decrease. Again, think of an auction where there are 10 velvet Elvis Presley pictures (supply) but there are only 2 people bidding on the pictures (demand) – the price will tend to decrease because there is more supply than there is demand. Your next question should be, “what causes demand to increase/decrease and supply to increase/decrease?” Demand for a product or service tends to increase when prices are low and tends to decrease when prices are high. Think about it. Would you buy (demand) more laptop computers for your home if they cost $1 each or would you demand more if they cost $1,000 each? You would buy (demand) more if the prices were lower. On the other hand, supply of a product or service tends to increase when prices are high and tends to decrease when prices are low. Think about it. If you were a dairy farmer would you milk more cows (supply) if the price of milk was $1,000 a gallon or would you milk more cows if the price of a gallon of milk was $.10? You would milk more cows if the price was $1,000 a gallon because you could become rich by milking cows. You might even start milking goats and your pregnant wife if you could make $1,000 a gallon. On the other hand, you probably would not milk any cows if the price was $.10 per gallon - it would not be worth your time squeezing those bovine boobies.
When it comes to healthcare – the demand for healthcare products and services are exceeding the supply – thus resulting in increasing costs.
On the demand side the U.S. healthcare industry is experiencing more demand than it ever has. First of all, U.S. citizens are living longer than they ever have. It is no longer unusual for parents and grandparents to live into their 80’s, 90’s, and even over 100. Considering the fact that older people tend to utilize more healthcare services it is not surprising that healthcare demand has increased. Furthermore, medical research has continued to develop more treatments and cures for illnesses and diseases. These treatments and cures frequently require high tech medical equipment and the latest in pharmaceuticals – all of which place a higher demand on the healthcare industry. Furthermore, researchers and doctors have “discovered” more illnesses and diseases than I ever thought were possible. We have ACL, ADD, ADHD, AIDS, VD, ED, HPV, CHD, PMS, AMD, and FAS just to name a few. We have more reasons to go see a doctor now than we ever had when I was a child – this means more visits to doctors, hospitals, and emergency rooms (more demand). Next, most people utilize a 3rd party payor system (insurance companies, HMO’s, PPO’s, ABC’s, or government) which results in healthcare consumers using more products and services (without consideration of expense) than they would if they were required to pay out of their own pocket. How does this increase costs? Think about it? There are four ways to spend money; you can spend your own money on yourself, you can spend your money on someone else, you can spend someone else’s money on yourself, or you can spend someone else’s money on someone else. When you spend your money on yourself you are likely to require the highest quality good or service at the lowest cost, on the other hand, when you spend someone else’s money on someone else you are more likely to accept lower quality service at a higher cost. When 3rd party providers, private or government, administer healthcare they are spending someone else’s money on someone else – in other words they spend money in the least efficient way, resulting in increasing costs.
On the supply side, the supply of healthcare products and services are kept artificially low because of government regulatory induced barriers to entry into the healthcare industry. These include barriers which limit, among other things, the availability of drugs, the number of medical professionals and therefore medical care. First of all, it takes years for pharmaceutical drugs to be approved by the Federal Drug Administration (FDA). Reducing the speed at which these drugs are approved for the market might be safer but it is definitely more costly. Also, there are limits to who can prescribe pharmaceutical drugs resulting in limiting medical supply? Furthermore, the government determines what qualifications healthcare providers must have and in many situations it is illegal for an “unqualified” individual from “practicing” medicine. Some of these limitations might sound very sensible, and some might be, however, they clearly reduce the supply of healthcare products and services – which increases costs. Although, there are some very powerful arguments explaining why you and I am better off with limited choices - I am still skeptical. I wonder why the American Medical Association has so many lobbyists in Washington D.C. and why they seem to consistently fight to limit the number and types of doctors who can perform certain medical procedures? Do they do this for us or do they do it for their clients? They do it to limit the supply of medical treatment in order to artificially raise the price their clients are paid (see earlier comments about supply and demand)?
Now that you understand why healthcare costs are increasing let’s look at Hillary Clinton’s universal healthcare proposal and what impact her proposal will have on healthcare costs and taxes.
First of all, as you saw earlier, her first claim is that she will offer new coverage choices for both the insured and uninsured. Also, she will provide the same plan options that members of congress receive. (As a side note, since Hillary would like to give all people in this country the same healthcare as members of congress I suppose she will also require all people to be paid the same salary as members of congress if she becomes president.) Another claim is she will guarantee no one will lose coverage and that private companies cannot deny coverage. Based on what you now know it is clear that her proposals will result in higher demand. When there is higher demand without an increase in supply – what happens? That is correct - higher prices. Unfortunately, her proposal does not include any changes which would increase the supply of healthcare products or services; therefore, there will be higher healthcare prices.
She also claims her plan will decrease healthcare costs – she says her proposals will “lower premiums” and “reduce costs”. Considering the fact you know “nothing is free” I am sure you will be surprised by her claim that not only will healthcare costs be lower but the taxes which would be used to subsidize healthcare costs will also be lower – she says there will be a “net tax cut for American tax payers.” Since healthcare follows the same laws of supply and demand that any other product or service follows you have to willingly suspend your disbelief in order to believe prices would be lower under her plan.
So, based on the last two paragraphs what would happen to healthcare costs under the Hillary Clinton plan? Unless Hillary Clinton can convince healthcare providers to perform their services for free - healthcare costs will be higher – period! When healthcare costs continue to increase who will Hillary blame? Will she blame higher demand and lower supply - probably not? My educated guess is that she will blame the doctors, pharmaceutical companies, big business, and the republicans? Furthermore, she will misdiagnose the problem again and make the situation even worse.
After she blames the usual suspects, doctors, pharmaceutical companies, big business, republicans (oh yes, and the vast right wing conspiracy) for healthcare costs continuing to rise she will need to come up with the money to pay for her program. Where will she get the money? Will the people receiving the healthcare be required to pay for it? Probably, but only the rich, a.k.a., you and me. Will she propose a tax increase? Probably, but only for the rich, a.k.a. you and me. Is this what she means by “shared responsibility?” Yes, but only for the rich, a.k.a., you and me.
So what should be done to improve healthcare and make it more affordable? Stay tuned…
