Thursday, January 8, 2009

Health Care Rationing

Economists often argue against greater government involvement in health care, claiming that whenever government interferes with the market allocation of goods and services, rationing will result.  Indeed, such an argument was recently posted in a Wall Street Journal editorial.

The editorial (it was this week, though I don't know the date) received several responses arguing that the market also rations health care by price, so rationing is inevitable.

What an excellent topic to discuss in an intro class!  What is the difference between rationing by price or rationing by government?  One answer is that rationing by government will usually result in less health care.  

When markets determining health care, the price determines how much health care is provided and who receives the care.  Health care is determined by mutual, voluntary transactions between buyer and seller.  Once government becomes involved and alters this price, one of two things can happen.  If government serves to raise the price (unlikely) then consumers are less enthusiastic about receiving health care, and the level of health care drops.  If government serves to lower the price (unlikely), sellers are less enthusiastic about providing health care, and health care drops.  

It is true that price rations health care.  But anytime government seeks to take over this rationing duty by raising or lower the health care price, the amount of health care provided will be lowered.

I personally believe this is not the correct way of viewing U.S. health care.  We already have a socialist health care system, and there is no chance it will ever become capitalistic.  Since we already are socialists in our health care, we might as well be good socialists!  Maybe Obama will make us better socialists than Bush was?

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