You cannot have profits without the potential for losses. In other words, capitalism fails to most efficiently create wealth unless investors and decision makers of all group sizes incur costs for their poor decisions. Because government has no profit motive, its moving into the health care insurance provision will distort the signals of what is desired and at what social cost.
In a survey released in April by National Public Radio, the Kaiser Family Foundation and Harvard, only 6 percent of Americans said that they were willing to spend more than $200 a month on health care, and the price must fall to $100 a month before a majority are willing to pay it. But according to Grace-Marie Turner of the Galen Institute, Americans already are paying an average of $400 a month.
Most Americans do not know this because the cost of their care is hidden. Only 9 percent buy health coverage individually, and $84 of every $100 spent on health care is spent by someone (an employer, insurance company or government) other than recipients of the care. Those who get insurance as untaxed compensation from employers have no occasion to compute or confront the size of that benefit. But it is part of the price their employers pay for their work.
The president says that the health-care market "has not worked perfectly." Indeed. Only God, supposedly, and Wrigley Field, actually, are perfect. Anyway, given the heavy presence of government dollars (46 percent of health-care dollars) and regulations, the market, such as it is, is hardly free to work.
As market enthusiasts, conservatives should stop warning that the president's reforms will result in health-care "rationing." Every product, from a jelly doughnut to a jumbo jet, is rationed -- by price or by politics. The conservative's task is to explain why price is preferable. The answer is that prices produce a rational allocation of scarce resources.
And from Greg Mankiw:
An important question about any public provider of health insurance is whether it would have access to taxpayer funds. If not, the public plan would have to stand on its own financially, as private plans do, covering all expenses with premiums from those who signed up for it.
But if such a plan were desirable and feasible, nothing would stop someone from setting it up right now. In essence, a public plan without taxpayer support would be yet another nonprofit company offering health insurance. The fundamental viability of the enterprise does not depend on whether the employees are called “nonprofit administrators” or “civil servants.”
In practice, however, if a public option is available, it will probably enjoy taxpayer subsidies. Indeed, even if the initial legislation rejected them, such subsidies would be hard to avoid in the long run. Fannie Mae and Freddie Mac, the mortgage giants created by federal law, were once private companies. Yet many investors believed — correctly, as it turned out — that the federal government would stand behind Fannie’s and Freddie’s debts, and this perception gave these companies access to cheap credit. Similarly, a public health insurance plan would enjoy the presumption of a government backstop.
Such explicit or implicit subsidies would prevent a public plan from providing honest competition for private suppliers of health insurance. Instead, the public plan would likely undercut private firms and get an undue share of the market.
Comments