Top Notch, Affordable Health Care for All and at a Low Cost? Economics says, “No!”

It is important to preface this post by pointing out that I am not debating the particulars of Obama’s health care. Instead, I’m pointing out the economic fallacy behind Obama’s statement that government can provide top notch, affordable health care for everyone at a low cost. In actuality, economics shows us that such a statement is impossible. MA’s state run health care is a perfect example of how health care for everyone causes costs to increase and health access to decrease.

The above graph above is a picture of your standard Demand/Supply Curve. The theory behind this graph has largely been attributed to Alfred Marshall. I ask that you pay close attention to the supply curve. The shape of the supply curve was thought up as Marshall studied how farmers went about cultivating land. He noted that farmers always cultivated the easiest, most fertile land at first. He noted that it cost the farmer little effort to till and sow on flat land. However, as the need for more production increased, farmers would begin to till land that was less fertile and more difficult to cultivate such as hills and swamps. As a result, Marshall observed that farmers put forth much more effort to till this land, often yielding less and/or a poorer quality crop. Thus the supply curve was discovered.

Now the problems with health care are plenty and I do not presume to be an expert on how to alleviate health care woes. However, Obama’s health care promise is an economic impossibility. The key here is that we are providing this health care to all. He depicts our government as providing the current level of quality health care, at low cost, and to everyone. The quintessential problem with Obama’s lie is the same one facing the farmer when cultivating land. The more you try to produce for each additional person, the greater the marginal cost will be.

The problem with Obama’s statement is that hospitals, doctors offices, the number of doctors and nurses, the availability of facilities to a geographic location and the availability of life saving medical technology has been established for the current cost and number of consumers. To provide the same access to health care for all we would need to create more producers and facilities to provide an increase in the amount of health care. Since the system is already set up to accommodate those willing to pay at current rates, we need to make a much larger effort to include those not willing to pay at current rates. That means higher wages for doctors and nurses to attract more people to the field (there is already a shortage of doctors). It means higher costs to facilities to supply more locations and care for more patients. The result is a choice between access and quality or high costs.

This also points out the hole in Obama’s health care cost calculator. He is simply taking 47 million uninsured and multiplying that times the average health premium. In truth, the cost to add the extra 47 million is exponential and cannot simply be equated with market prices.

These truths have already been played out in MA. Robert Verdi at The 46 did an excellent post on how MA health care has created soaring costs and less access to health care called "A Second Look at Massachusetts Health Care". I will not rewrite all his points, please check out his post if you are interested.

Once again, I’m not presenting an answer only a truth. If you want to provide health care to all and you want Obama’s plan to pass, you have a choice; either costs that will choke the American tax payer or a drastic decrease in the level and quality of health care. Take your pick, but don’t kid yourself, Obama’s touted top notch, affordable health care for all at a low cost speech is a myth.