Cover Me

I heard the news - the US has passed some sort of Health Insurance Reform. We can all probably agree that it would be great if everyone had health care for their entire lives (not so sure about insurance, but care is good). And we all know that the only reason everyone in this country doesn't have full health care coverage is because of evil corporations, evil insurance companies, and evil doctors/hospitals. Given that all of that is true, we have nothing to disagree about, so we can move on to a thought experiment!

Imagine a strange world, a world in which health cover is expensive not because of evil people, but for some other reason. In this other world, let's see if we can figure out why health coverage is high and what they could do to meet the goals of: 1) cheap coverage and 2) coverage for everyone. As I said, this is some other world, not ours, so nothing to get upset over, just a thought experiment.

Let's imagine that the rules that we have here of economics works there as well. Let's say that as demand of something rises, if the supply doesn't also rise, the cost will go up. So, if they added 30 million new people into the demand for something, but didn't change the supply, say the number of doctors/hospitals, then the price would have to rise.

If these things are true, then we can see why health care costs so much - a lot of demand, but a limited supply. Unless, in this other world, there are hospitals just sitting empty and doctors with no patients, because if that were the case, then there would be an oversupply, which would have caused the prices to fall, and since we stated that the prices were high, we can assume that all of the hospitals are full and all of the doctors are busy, just like here.

Now, as mentioned, we add 30 million new people with demands, which is good, if these people are sick, we want them taken care of. But, if there are no idle doctors and the hospitals are already full, where will those people go? Who will treat them? So, prices would rise in this strange land.

Now let's say that their government decide to step in and fix this rising price problem by fixing prices, what do we think will happen next? Price can not rise, supply will not change, demand will be high, so the only thing that happen is rationing. There was rationing before, it was just set by price, those who could pay got the rations. Under this new system, rations will have to be set some other way, by some government agency. That person will decide who gets health care and when, and to make sure it is fair, it will be decided by who can fill out the government mandated paperwork the best or who will wait in the longest lines. There is no other way with the rules as stated.

But, you say, why did I propose all of these things, create a thought experiment that has no solution? Well, you are wrong, I see a solution - do you?

The only thing that actually isn't fixed is supply. If prices are high, and demand is high, one just has to increase supply to bring down demand. So, if this other world government instead increased the number of doctors, increased the availability of medical supplies (instead of putting a 10% tax on them, which will cause fewer of them to be sold), increased the number of hospitals, etc, made the supply so overwhelming, the price would naturally fall. Doctors and hospitals would be begging for business, trying to increase their demand.

So, I'm suggesting, that is this other world, that if the government feels that they need to do something to decrease price, increase quality of care, and achieve their goals, there is only one solution: pay for loans for doctors so that there are more, create science programs to research better medical technology, increase production of medical devices, and make more land available for hospitals, just to name a few.

But we do not live in that land. We live in a world where evil people are stopping us from getting health care, a land were people would let their fellow humans suffer and die rather than lose a profit margin. Too bad, the other world has a way out of their problem.

The Edward