Scontras: The Laws of Economics Apply to Healthcare Too

Recently on Twitter, a very non-political friend of mine posted something about the failures of Obamacare.  It was only seconds before a lefty follower of his descended upon him about the evils of insurance companies and the subsequent need to eradicate them from existence and replace them with virtuous central health care planners.   I couldn’t resist.  In response, I wrote a sarcastic remark.  “Because, of course, the government bureaucrat is virtuous in nature”. The central planner scurried away into the twitter night, never to be heard from again.

In his book, Basic Economics, Thomas Sowell defines economics as “the allocation of scarce resources that have a variety of uses.”   The operative words are ‘scarce’ and ‘allocation.’   Both words seem to have been removed from the liberal economic lexicon on healthcare.  Instead, doctors, nurses, hospital beds, and organs (for transplants) are like unicorns and rainbows; they are ‘universal’ and everlasting in nature.

However, as Sowell rightly explains, healthcare is no different than real estate or any other market that is limited to the finite nature of the universe and the laws of economics that govern it.   Thus the need for a market of exchange and efficient method of ‘distribution.’   No matter the market, prices have always been more efficient and virtuous than their public planning peers.   The two biggest myths at the core of the Obamacare argument are, and have always been, that healthcare is universal, and that current system of allocation is inherently ‘evil.’

In free and open markets, prices most efficiently allocate.  In centrally controlled economies, planners allocate resources.  Central planners in the Soviet Union were notoriously bad at getting people what they needed.   The human planner simply wasn’t capable of efficiently figuring what the market was able to efficiently calculate based on the thousands of transactions occurring in an economy.  Despite being a country of great natural resources, often shelves in the former Soviet Union were bare or stocked with things people didn’t want.  More so, the human government planner with seemingly unlimited, unchecked power was more inclined toward greater corruption, collusion, fraud, and abuse – not less.

Hence, according to any view of economics – whether you are an unabashed free marketer or central planner – the very notion of “universal health care” is a pre-existing myth.  Nothing is universal in supply.   Yet, this is precisely the lie upon which it was sold.

In Maine, this has been the case for several years as stories of Medicaid patient’s crowd out doctor’s offices.  It’s not the Medicaid patients fault.  To them, there is no scarcity in supply.   The moral hazard in their decision making has been entirely removed.   To the contrary, there is seemingly unlimited supply of healthcare dollars and healthcare supply. The act of ‘parting with dollars’ is absent from the ‘consumer’.  The provider gets paid cents on the dollar for providing care.  Ultimately, that model will collapse as future doctors and nurses elect to pursue more lucrative careers.

But, part and parcel to that lie, is the greater lie that the bureaucrat is of greater virtue than their private market counterparts.  The idea that government restores virtue and order to the disordered universe is the central myth upon which every other progressive axiom of economics rests.