By Nolan Weber
Obamacare will not solve this debacle. The problem America is encountering is entirely structural. Structural as in no politician, interest group or insurance provider will work toward a well-structured solution. The problem will be brought to equilibrium by forces outside of the socio-political order—namely, bankruptcy. Especially frustrating is the fact no group can really be blamed for how they behave. Each have an incentive structure based on costs and benefits and ultimately fall prey to The Logic of Collective Action (Olson 1-5). It is imperative that one not think of this article as a contribution to vociferous partisan dialogue. Instead, this is a sincere and reasoned look at the future of our nation’s health. Whether one supports free-market or single-payer health care, in 800-odd words it will become clear that the United States will continue to perfect the worst of both worlds.
Essential to understanding this issue is a brief history of health care. At the start of John F. Kennedy’s term as president, it was becoming readily apparent that the economic boom following WWII was starting to wane. The 1960-1 Recession was in full swing. To help ensure a second term, JFK cut the top tax rate by 20 percentage points. Following his assassination, the feeling of prosperity lagged. Consequently, President Johnson started running on his Great Society platform to get elected. Within this plan was Medicare for the elderly and Medicaid for the poor. That is not to say these were the best possible policies. If LBJ was to propose the more effective option of single-payer, he would be called a Communist. Equally effective would have been Goldwater’s pay for performance, otherwise known as the free-market system. But personal responsibility is an impossible sell when there are public coffers to be looted. In essence, explaining the benefits of a market-oriented or a socialized health care system requires more time than an election-deciding voter’s attention span has to offer. As a result, America witnessed the creation of a business sector protected by the IRS and bankrolled by the middle-class.
The crux of the health care issue has manifested itself as a systemic problem of third party payment. Whether that party be an employer, elected officials or the taxpayer, the cost of health care has no incentive to decline. Through political contributions, Big-Pharma ensures one is limited to buying insurance within his/her state—to cater to a region’s respective budgetary mismanagement and further scalp consumers. Employers get a tax write-off on paying for employee health care and taxpayers are an ambiguous blob of seemingly limitless revenue withdrawal. Consequently, as technologies and methodologies advance, costs increase much more than they otherwise would. Why? Because manufacturers and providers are exempt from having to create an efficient system to reduce cost.
Instead, they can charge an arbitrary amount for treatment and receive compensation at inflated rates because an unseen, conscripted donor is paying. Consequently, things like unnecessary surgery on the elderly are rampant. Ultimately, this creates $1400 taxi rides in ambulances and phony ER visits by the homeless to obtain a $5000 sandwich. This issue financially and emotionally bludgeons anyone who falls between young and old or rich and poor. It should be no surprise that elective treatments, subject to more market incentives, see better quality and cheaper prices, much in the vein of computers. For example, LASIK eye surgery’s average cost has been cut by more than half in ten years with fewer accidents to boot (Tabarrok, Feder). However, the health care market will never open up to these productive market forces because the elderly are the most powerful voting block in the country. After all, what interest group has a 75% turnout rate and is more susceptible to fear mongering than the elderly?
Equally disconcerting is the resistance toward a single-payer system. While research and development will stagnate under this policy, it does offer a reasonable solution. It disallows pharmaceutical corporations from being protected by the government by rendering their room for bargaining moot. Other countries make it work to a degree, but piggyback on the fact America accounts for roughly 80% of the world’s medicinal R&D. This means that the United States has to continue its worst-of-both-worlds approach to maintain an incentive for research. A single-payer system would be more inclusive but global society would have to accept that medical breakthroughs will be few and far between henceforth. It’s a trade-off worth considering, given the current state of affairs and political realities.
Of course, this R&D figure is not all of what it claims to be. It includes advertising brand name drugs on television. Once again, this drives up the cost of health care by forgoing the use of generics and production optimization. Then again, a Big-Pharma CEO has no incentive not to do this. The CEO produces a drug at a given cost then adds cost to the consumer because it’s a brand name and requires advertising. Moreover, the elderly and poor have no reason to seek out generics because someone else is paying for their purchases. This leaves the rest of the populace to choose from an array of drugs that are vastly overvalued. Yet again, no leader wants to stop this practice because his/her party is funded by these select interests. Indeed, money is votes.
At least under a single-payer system there is no incentive to attach additional costs at every point of production. Moreover, coverage will be more thorough. However, do not be so naïve as to think this moral achievement does not come with a practical cost. It’s a fact that under the UK’s National Health Service one can be denied health service if he/she is too old or deemed too ill. Today’s technology allows people to be kept biochemically alive yet brain dead for unnerving periods of time. Under a single-payer system, there is no chance that a family could milk the state for millions per year for a person who barely qualifies as existing. A line has to be drawn. If it were a market-driven scenario, it would simply be the family that decides with its willingness to accept cost. It’s a classic case of freedom v. security. Both have drawbacks; both have upsides. The fact of the matter is one has to commit to one side or the other. By meeting these systems in the middle, America has compromised with evil.
Obamacare is part and parcel to a truly endemic extortion of the American people. Assuming our health care system is broken and mismanaged, how will increasing demand while stagnating supply aid the situation? By this, I am referring to the mandate which requires all citizens buy insurance but the lack of a quota for new entrants into medical school. Now Americans will be subject to the same sub-par health care system; but will receive less attention and less resources, but more IRS agents. It cannot be stressed enough. This frustration is not taking the form of a right-wing diatribe, but rather a call for either a commitment to a single-payer system or a truly market-driven economy. As it stands, this bill serves only one community: the insurance industry.
The system is not sustainable. The largest generation in both population and tax base, the baby-boomers, are now entering the Medicare program. It is a well-known fact that 80% of health care costs are incurred during the last two years of life. Consequently, as this financial liability becomes larger and the tax base becomes smaller, revenue must increase. How convenient that a bill passes which forces everyone to buy insurance. One should not kid themselves. Obamacare is not only a tax but an act of political cronyism of the highest order. The bill is merely serving the politicians’ campaign benefactors whilst avoiding political culpability to failure. I do maintain that politicians should not be blamed. The electoral model of the US makes this the most reasonable option for them. Nevertheless, Obamacare is simply another Band-Aid covering the festering wound of bankruptcy and socio-political irresponsibility.
Olson, Mancur (1971) . The Logic of Collective Action: Public Goods and the Theory of Groups (Revised edition ed.). Harvard University Press
Tabarrok, Alex. “Seeing Is Believing (in the Free Market).” Seeing Is Believing (in the Free Market). N.p., 23 Nov. 2004. Web. 01 Oct. 2012. .
Feder, Barnaby J. “As Economy Slows, So Do Laser Eye Surgeries.” Nytimes.com. N.p., 24 Apr. 2008. Web. 4 Oct. 2012. .
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