There is an argument you’ve probably heard over and over again if you’ve ever discussed politics in the state of Utah: “The government should not get involved with ________. Markets will naturally fix things better than the inefficient government will be able to.” Conservatives frequently employ the same argument as a major reason why the Feds should stay as far away from health care as possible. And they’re wrong. Economically speaking, the health care market is the victim of circumstances that prevent it from acting like other markets.
If you’ve ever seen the bill after a routine check-up, it won’t surprise you that Americans pay more for health care than any other nation on the planet, including a whopping 53% more per capita than Switzerland, the next closest country on the list. Costs are so high precisely because the aforementioned ideal, competition-friendly circumstances simply do not exist in the health care market. Let me explain: In a standard market for a regular good, price is kept in check by the idea that, if the price escalates too high, consumers will either stop buying the product or they will seek it from a different source. In the case of health care provided by private insurers, both key checks on price escalation are absent. Consider for a moment this exaggerated, but telling example:
Let’s pretend that you have health insurance, and you develop an ingrown toenail. As such, you head on over to the family doctor to take care of it. After the quick visit, you go to pay the bill and are taken aback when you see the balance: $4 million. Although startled by the price, you eventually settle down once you remember that your insurance is taking care of it. You pay the $25 co-pay and are on your way. Your insurance gets the bill, and they’re excited because they’re not really paying for it either. They’re a corporation and they cover the cost (and bring in profit) by ramping up your monthly premiums, as well as those of your fellow insurees. At this point, neither you nor your insurance company have directly borne the burden of the $4 million bill, and the hospital is raking in the dough. In this type of situation, no consumer will stop purchasing insurance (especially with the high cost of medical care) and there’s nowhere else to turn besides insurance companies who are trying to make a buck (the bigger the bill, the bigger the premium, the greater the revenue). Is it any wonder that U.S. health care premiums have risen at five times the pace of wages in recent years?
Here’s the even bigger problem: Uninsured people develop ingrown toenails, too — except the results are much worse. A recent Harvard study found that 62 percent of declared bankruptcies occurred as a result of unforeseen medical expenses. But don’t think purchasing private health insurance exempts you from such financial hardships: the same study also reported that “78 percent of bankruptcy filers burdened by health care expenses were insured.” (Emphasis added.)
This is really happening every day in our country: average Americans with average incomes become ill and are bled dry by the enormous costs of health care. Don’t these people deserve to receive care without ruining the livelihood of their entire family? Aren’t the health problems bad fortune enough?
The latest proposal from the White House seeks to balance these injustices, in the form of a public option — an affordable, government-run health insurance plan for those who want it. Economically, it provides the competition necessary to reign in the price of health care and is not being imposed on anyone. Those who enjoy the runaround and hassle of a private insurance company are more than free to keep paying overpriced premiums for insufficient coverage. With a public option, those who cannot afford the “joys” of private insurance will at least have some means to get the treatment they need. Let us be clear: from the perspective of the American citizen who already struggles with outrageous premiums, outlandish insurance company shenanigans and insufficient coverage and care, this needs to happen — quickly.
In addition, and perhaps most importantly, whether you agree with the economic thought or not, a staggering 72 percent of the American public would favor the implementation of such a plan, according to a recent New York Times/CBS News poll. 72 percent. Hardly a slim majority. This makes the outrage currently bellowing from the right side of the aisle seem more than a little misguided. In my estimation, it would be a terrible shame to see our representatives, elected to serve the will and interest of their constituents, ultimately reject a policy that clearly holds the favor of the American people. If helping the millions of Americans constantly affected by the exorbitant costs of health insurance does not provide enough incentive for members of Congress to act quickly and boldly, hopefully the notion of upholding our most basic constitutional principles and ideals will.
Daniel Anderson currently serves as Rhombus’ resident armchair economist. We’re not quite sure what that means, but he seems to have a vague idea of what he’s talking about — and that’s good enough for us.
Trackback from your site.