June 28, 2012

Facts cost less than Ideology

By Don Kirk in Economics, Politics

The Supreme Court ruled 5-4 today that the individual mandate in Mr. Obama’s health care reform is constitutional. This decision will require approximately 20 million more American citizens enroll in the United States’ health care system, which from the chart above–kudos to The Economist magazine–is already the world’s largest and most expensive.

A fundamental law of economics is that an increase in demand results in an increase in price. Adding 20 million new participants to the health care system will not drive down costs–which is the ideological propaganda used to sell the program–instead, the dramatic increase in demand will drive up costs.

In may well be that capitalism is at a stage where it can afford universal health care. The real difficulty is that the addition of so many more beneficiaries is done with the old thinking of the 1930′s: have the taxpayer pay for it. A much less expensive system could be created whereby the truly poor are subsidized while incentives–instead of mandates–would have citizens responsible for their health care financing. As one possible example of incentivizing health care, if the tax codes rewarded greater supply of health care, then the costs would fall.