Wednesday, October 14, 2009

The Real Solution to Health Care Reform

Economics reminds us of one simple rule regarding any good or service: If you offer people something they want at a cost of less than it is actually perceived to be worth, they will acquire more of it than they need. Under the rules of supply and demand, the cost is out of alignment, forcing the demand to exceed the supply, which will lead to insufficient supply to meet the demand. In a normal free market situation, the price would increase to pay for the needed increase in supply to meet the demand.

Unfortunately, when the price is set by the government, there is no mechanism to increase the supply without subsidization by the government.

On the issue of health care, there is a way to avoid the whole supply and demand problem which universal health care causes: Only provide those medical procedures and drugs which nobody wants. In other words, provide catastrophic health care only.

No one is going to use too much chemotherapy for their cancer treatments. No diabetic is going to use more insulin than they need (at least not intentionally). No one with a slipped disk in their back will be actively trying to acquire too many spinal surgeries to correct the condition. And people with heart conditions won't be begging for that extra triple bypass surgery.

On the other hand, do we need to pay for abortions? How about every case of the sniffles?

We need to draw a hard line, and let the health insurers take care of the little things, like preventive medicine.

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