Benjamin Zyncher makes a compelling case against single payer universal health insurance based on economic theory. Remember my statement earlier about the difference between “complimentary” and “free”. If you get a service comped by a hotel, the profit comes off the back of another guest. This idea is called “cross-subsidization” by Zyncher. In a definitive statement:

Government is an institution that exists explicitly for the purpose of engendering cross-subsidies among groups, whether through the tax/expenditure system or the regulatory mechanism. Single-payer health insurance, by its very nature (because it accepts all those eligible, and does not base taxes and fees on health status), must create such subsidies, and the tax system prevents competition on the basis of price.

So what, right? All this theory is too abstract? Insurance companies are the bad guys, according to the media and the democratic party. The only way out of this Gordian knot is to let the government take over the industry. The debate that then remains is how quickly or slowly do you want government to encroach on an already highly regulated industry. Hillary and her myrmidons have decided to do this incrementally, by increasing the funding of S-CHIP, which defines children upward to 25 years of age, and defines poverty upwards to an annual income of $75K/year per household. It may sound good to mandate everyone to pick up the tab on health insurance for the poor, but the problem is that rationing services, especially artificially, always has a price. If not in actual dollars, then in time.

In practice, mandating coverage is a slippery slope to price rationing, which quickly becomes wildly unpopular. Sally Pipes explains.

We have a large number of uninsured because insurance is expensive. Insurance is expensive because the product for which it pays — the world’s most advanced medical interventions — doesn’t come cheap. It’s also expensive because regulations severely limit the free-market’s ability to develop inexpensive, less comprehensive plans.

Few politicians are willing to deregulate.

The only levers left to pull are the ones bureaucrats love: price controls and rationing. This is why Hillary speaks of “fair prices.”

Once you get beyond the rhetoric of “40 million uninsured”, the argument for universal health insurance is fairly weak.

The insolvency of single payer
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2 thoughts on “The insolvency of single payer

  • Great post. I would disagree a little bit about the costs, though.

    The truth is, most people poo-pooing the current private market-driven system just don’t realize that it is NOT a truly market-driven system. Healthcare is a highly technological arena which under an ACTUAL market-driven system, costs for certain treatments, equipment, etc. would go down over time, just like HDTVs or microwaves.

    The problem is that Corporations and Insurance companies manage to keep the policy-holder–the would-be market driver–completely out of the decision process which means costs remain artificially high.

    Shifting control from insurance and corporations to the Government would only magnify that problem, and artificially FORCING reduced PRICES would not succeed in reducing COSTS. The result is decreased access and reduced quality.

    However, shifting the control back to the policy-holders would incent wellness efforts by the consumer, and said consumers would begin to demand INCREASED quality, and REDUCED costs…simultaneously. It happens every time something is released from Government control, even WITH lots of regulation. Telecom is the best example of this.

    It’s real easy to make a SOCIAL argument for “Universal” healthcare, but those that do should avoid trying to make an economic one…because there is little reality supporting such an argument.

  • A clarification/correction:

    “This happens every time something is released from Government control, even WITH lots of regulation. Telecom is the best example of this.”

    This is not to imply that Healthcare is currently under Federal control, just that putting the consumer in the driver’s seat would have the same effect.

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