07.01.2008 0

The Power of Choice

  • On: 07/20/2008 17:40:27
  • In: Health Care
  • When it comes to healthcare services, government intervention invariably drives costs up and quality down. Left to its own devices, by contrast, the free market system can only result in quality care at an affordable price. Simply put, as with any other service, the vendor can only charge what the customer can – and will – pay.

    John McCain’s proposal for more consumer choice in making healthcare decisions is a step in the right direction, and addresses some of the problems of government regulations on the cost of private insurance. For example, he wants to lift restrictions on insurers to sell plans out-of-state, which would allow Americans a broader range of options from which to choose, including, for example, those that better fit their age demographic.

    This is a move in the right direction: lifting a government-imposed restriction that meddles with the free market and by empowering State governments to impose higher premiums on residents by law. Lifting restrictions, however, is really only the tip of the iceberg.

    What McCain’s plan does not address is the escalating costs of publicly-provided health insurance, which significantly contributes to rising costs.

    When the government agrees to pay for benefits for a significant portion of the population, prices cannot seek their own level. The government skews healthcare costs upward because in a free market system, health providers would be forced to set prices according to what the market could afford instead of to the government’s seemingly limitless supply of money. Unfortunately, in today’s “mixed” economy, whatever individuals cannot “afford”, the government basically agrees to split the difference (or cover the costs) – hence driving up the prices.

    This is a self-perpetuating diminishment of cost-effectiveness in what could be a more free market system. Assuming Senator McCain is sincere in wanting to give consumers more of a choice, he ought to consider even more free market solutions. Assuring that private insurance be as competitive as possible and loosened from government regulations is good start, however, and he does deserve credit for this approach.

    The other end of the equation is to consider public systems’ delivery of health services, with their inordinate penchant for artificially raising the cost of healthcare by the very nature of their own excess and inefficiency. The less onerous the public system is, the more costs can come down.

    ALG Perspective:
    No business can continue to be profitable that inordinately drives up the costs of the very products it purchases. Government healthcare has created a catastrophic tautology: it artificially drives up the cost of services, thereby raising the prices, which increases demand for government-provided healthcare, which in turn artificially drives up the cost of services, thereby raising the prices, which increases… ad infinitum, ad nauseum, ad mortem. The solution is to interdict this tautology – post haste. McCain’s first step is an important one which deserves the American people’s attention.

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