The 12 cent problem

Incentives matter.

Imagine how much you’d eat if you only paid $0.12 for every $1.00 of food… how much more would you consume or waste, how much more would restaurants prepare and serve, how hard would it be to plan or control supply & demand?

That is our health care system:  88% is paid by third parties – government and insurance companies – so consumers have no idea what the true costs are and providers practice defensive medicine by ordering up tests and more tests.  Elsewhere it’s been called “expense account healthcare” because someone else picks up the tab.

And O-care’s answer is… more third party payments, overseen by a 15-member panel that will ‘control costs’Every attempt at price controls in history – dating back to the Roman Emperor Diocletian – has failed.  But we’re now asked to believe this time will be different.  On one side of the argument we have the unanimous verdict of history and experience; on the other side we have… promises by the latest cohort of smart people who believe they’re better than that.  (And who make sure to take care of their own.)

It really is simple: whatever the product or service, when prices are set too low, suppliers quit, lines form, and we end up with rationing – either in the form of unavailable services (unless you’re connected!) or loooong waits.

And in the meantime we will destroy innovation, the real source of improved health over the generations.  Kevin D. Williamson, writing in What Is Seen and Unseen: Obamacare Edition

Good insurance does not equate to good health or to good medical care. Likewise, spending lots of money on health care, even other people’s money, does not correlate very strongly with health outcomes. Why might that be? We are an aging and overfed society in conditions of great material abundance, and you cannot bribe cancer, Alzheimer’s, or diabetes, [which represent 75% of health care costs, per HHS – ed] even with all the money in the Treasury at your disposal.

Here is what is unseen: There is an important relationship between medical innovation and health outcomes. Innovation costs money. Real money. Innovation requires investment, which requires capital. As Obamacare shunts great streams of capital out of the productive health-care economy into the growing health-care bureaucracies, for instance by taxing medical devices, that money will not be available to fund research, development, or innovation. Yes, little Jimmy, the 26-year-old “child” still clinging to his mommy’s insurance coverage, may lose out if Obamacare is repealed. But how many thousands, or more than thousands, will lose out because of the diverted investment and lost innovation? There is no way to know, of course, and no way to quantify that.

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