29 June 2009

Why Government-Run Health Care Fails

Economics 101

Every single item and service on the planet responds to the Law of Supply and Demand. The food we eat, the home we live in, the labor we provide, the cost of each of these is governed by this law. Even the air we breathe. Don't believe me? Try SCUBA diving, being 100 feet below the surface, and running out of air. How much would you pay for a fresh tank? At that point, demand has far outstripped supply, leading to a rapid increase in price.

Separately, the curves for Supply and Demand of any given product look like this. Combined, the point at which they intersect is the price we pay for any given item or service.

Now, what P-BO and the Democrats want to do is lower that price to make health care "more affordable." Like this:
Looks good, right? Who could possibly be against such a benevolent use of the government's coercive powers? Well, the effect of that will mean the supply and demand curve will change to meet this new price point. Since supply will be unchanged (there won't be a rush to build hospitals, or an increase in funding medical research since now there's no money in such endeavors), that means the demand curve will adjust . . . like so:
Notice how the new demand shifts from "5" to "7." Demand increases when there's no way the price can go up. Consumers see this as "value." Why not get the supersize meal when it doesn't cost you anything more? A car dealership offering a used Ford or a new Cadillac for the same price will find itself sold out of Cadillacs.

But remember, there's no increase in supply, which means longer waiting lines, full hospitals, and doctors making less money because now they have to see patients but can't increase their prices to meet this new demand. And so, the inevitable happens.

Government, having modified the price to increase demand, now has to limit Supply to bring the curves back in line. This means rationing services. Cutting off chemotherapy treatments for patients deemed unlikely to recover. Refusing to cover medication that doesn't meet government standards for efficacy. Never mind that people respond well to it, if the demand outstrips supply, the supply MUST be limited.

This wild idea is borne out by the fact that every single country with nationalized health care has rationed that care! That means the government is telling people "No, you can't get that surgery" "Your chemo will have to wait" and "We don't cover 'lifestyle' illnesses anymore."

Congratulations, America. I hope you get what you deserve.


Beavis said...
This comment has been removed by the author.
Beavis said...

Man, I should really learn to spell. I wouldn't have to shamefully retract my original comment. This one looks much bettertastic.

You and your economics. You need to apply the economic model that OPEC uses to determine the real supply/demand ratio. In other words, it won't make sense and it will fail miserably too.