This year my company faces another huge jump in the cost of our group health insurance. Every year brings a shocking hike in the premiums we pay. Health care costs are going into orbit. What’s causing this runaway price explosion?
About thirty years ago I met with a physician at the old Mount Sinai hospital in Minneapolis. He told me to wait in the emergency room admittance area and he would see me there. Much to my surprise, the waiting area was crowded with people. Most were welfare mothers and their kids. At the time, I quaintly assumed the emergency room was for emergencies. However, none of these people appeared to be particularly ill. Afterwards, the doc told me that the government was paying the bill for them.
Healthcare is both a limited and valuable resource. When it’s provided free, the demand for it naturally rises. If my company gave away gold coins, the demand would rise astronomically to the point that gold would rise in price. Medicare, Medicaid and other federal healthcare subsidies will come to almost $500 billion this year. That’s a powerful amount of demand. In effect, the government is giving away healthcare, and driving up the price.
The demand for healthcare is totally unrationed when it’s free. A wino can get better care than a working person who may skip a doctor’s visit because of a co-pay requirement on their insurance. If nobody has to pay anything, the sky’s the limit. An article a few years ago in the Wall Street Journal recited the story of a West Virginia retiree who had heart valve surgery. The cost was $260,000, which the government paid for. The patient had lost significant weight because of his ailment and his dentures no longer fit. Since the government only paid for a portion of the cost of new dentures, he would have to pay $60 for his share. He refused and kept the dentures he had.
In a 1991 book, "Quicksilver Capital" the authors made the case that technology and the rapid movement of capital would restrict the growth of government. Wall Street loved that argument. To them, technology is the cure for every economic problem from deficits to deflation. In the case of medical technology (one of Wall Street’s darlings), more progress promises national bankruptcy.
The number of medical technology companies have multiplied like rabbits. That’s because every new invention, every new device, and every new procedure rapidly becomes standardized treatment in a heavily subsidized system. A portion of the hundreds of billions of dollars flowing out of government coffers to subsidize healthcare makes it to the bottom line of medical technology companies. These profits excite investors who are willing to provide capital for even more medical companies. It’s progress, but it’s also a catch-22. The more new inventions (or new prescription drugs), the more the cost of care rises. That generates more profits and more new medical devices that drive costs up even further.
We constantly hear the left wing bemoaning the number of people who are uninsured (they count illegal immigrants and the self employed). No matter how high the costs and how dangerous the deficit, the left clamors for more spending. To be a socialist, it helps to be an economic ignoramus. Over a quarter of our population gets federally subsidized healthcare through Medicare. In my state, a low-income single mother of four can get full coverage from state government for about $15 a month. We’re driving demand through the roof with subsidies, and the left wing utterly misses their exorbitant impact on today’s outrageous medical costs. They only want more giveaways.
Because we are a rich country, and because our dollar is the world’s reserve currency, it allows us to run huge government deficits. Thus we can advance medical care without an adequate brake on costs. Other countries can’t do that. In Canada, with its socialized medicine, care suffers. They don’t have the money. Patients in need of heart surgery have a higher chance of dying on the waiting list than in surgery.
Despite our national wealth, healthcare costs are soaring to the extent they threaten the government’s solvency. Let’s face it, there’s no way any of this will be rolled back. It’s going to get worse until some sort of financial reality sets in. In my mind, that will be a national bankruptcy. If you don’t think that’s inevitable, take a look at your health insurance bill.