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

Wednesday, June 3, 2009

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.


The Law said...

I see where you're coming from man. I really do. But don't you think it should be a right, not a privilege for a nation as wealthy as ours to provide some kind of healthcare to our citizens? So while there is no question national healthcare would cost A LOT of money, I think we should be brainstorming *how* to make it work, not whether or not we should institute such a program. Fact of the matter is, more more people are losing their coverage, small business can't afford to offer healthcare, and people die of diseases that should have been curable had they had healthcare. So while I appreciate and respect your analysis, and in some ways agree with your analysis, I think the time has come when we figure out some kind of model to provide at least basic coverage.

This is where private enterprise can enter. What if there was a publc plan, but more healthcare facilities? Then we would need people to build these new facilities, more doctors, more professors, more worker bees... you get the picture.

Consider also, I was told a story of a person who had a twitching eye. She thought it could be serious since it had been going on for a good while. She goes to the doctor via triage, only to wait in a waiting room for a few hours only to hear that "it will go away." Presumably, emergency rooms have bigger fish to fry. Total cost, $600. Now if there was a clinic we could go to to make emergency rooms for big emergencies, and clinics for problmes like the person in the story,we'd be better off for it. So I think the conversation shoul dbe "how do we make it work" not whether or not we have healthcare for all.

June 4, 2009 at 2:45 AM
Miss T.C. Shore said...

"Don't you think it should be a right, not a privilege for a nation as wealthy as ours....?"

Wealthy? Hon, we're flat broke as a nation and we're trillions of dollars in debt.

As to it being a right ... Don't you think it should be a right that everyone should drive a Rolls Royce? Don't you think it should be a right that everyone live in a big mansion? Let's give everything to everyone, that way nobody has to work for it.

The fact is that most people without health insurance have made a choice to go without health insurance.

Screw around in school and don't learn any skills so you can't get a good job, and you've chosen to not have health care. Abuse drugs and alcohol and lose your job and you've chosen to not have health care.

What incentive to people have anymore to get a good education and get a high paying job? The government will take all of your income away in the form of taxes so that those who've made poor choices can have their cake and eat it too.

June 4, 2009 at 4:56 PM


First I think to have an honest discussion, we need to tell the truth. The truth is the government can't afford to provide the same quality of health care and access as people want provided. As Miss Shore points out, half of our wealth is gone. Obama's health care has a 2007 mentality. I understand that many people want good, cheap, healthcare, but wanting it and making it possible are two different things.

I have my own family to look out and provide for and simply cannot afford to provide health care for the 47 million that don't have it. My situation is not unique. There are probably millions of other tax payers that cannot afford one more dollar of income going to federal, state or local governments.

Miss Shore,

Thanks for stopping by. I couldn't agree more with your point regarding the loss of wealth that occured with the recession.

I agree that there are some that have made a choice and as a result do not have health care access and they should take responsibility for it, but I don't think we can lump everyone into that category. There is going to be a lot of college grads this year that will no longer be covered under their parents nor will they be able to find a job.

It'll mean tough times for them like the other 9% of the population that is unemployed, I don't believe these people would fall into that category. I myself have come upon tough times in the past and have been without insurance. I may come upon those times in the future. However, I never expected nor expect others to take responsibility and provide me with something that I did not earn.

June 4, 2009 at 9:15 PM
The Law said...

"The fact is that most people without health insurance have made a choice to go without health insurance.

Screw around in school and don't learn any skills so you can't get a good job, and you've chosen to not have health care. Abuse drugs and alcohol and lose your job and you've chosen to not have health care."

This is just awful logic. I'll debunk this right now... I have a bachelors and master's degree, don't do drugs, and in many cases, there is no way to get health insurance in my industry until you have enough credits to get in the guild, which can take years. Until then, scraping together enough money to have health insurance, even with a job, is close to impossible. I have friends, all who did the right thing, and work hard, who are in incredible amounts of debt because they had to have some emergency surgery that cost more than their grauduate school tuition. So in line with telling the truth in order to have a debate, let us also shed these often incorrect stereotypes.

As I said, I agree with you that the cost is extremely high. I maintain that the conversation should be how to make it work, not whether or not we do offer healthcare to all.

June 4, 2009 at 10:50 PM

If it is so impossible then how are so many other countries able to do it?

June 6, 2009 at 1:22 AM

Littlest Gator,

They do so and are subject to the rules I've written about. Either access and quality of health care decreases or costs increase or both.

June 6, 2009 at 7:49 AM

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