Health Care

Gotta love the topic of health care! This, to me, is the biggest, most blaring example of politicians not understanding cause and effect. Allow me to strip down the topic of health care with cause and effect thinking.

First of all, what is the number one reason health care is even an issue? Why do people not have health insurance? Here is an even better question, why do people even need health insurance? What happens if I don’t have health insurance and I get in a car accident and I have to be life-flighted to the hospital? I spend two weeks in the hospital undergoing surgeries and recuperating. What does my bill look like? It looks like I have to file bankruptcy. Why? Because I just don’t have the kind of money my medical bills call for.

Guess what? I just hit the nail on the head. The problem with health care is how much it costs. What if the cost of my medical bill was the same or maybe just a little more than a two week stay at a 5 star hotel? Why does two weeks in the hospital cost roughly 1000 times more than two weeks at the nicest hotel in the world? Does anyone know what determines how much things costs in a free market system? Anyone? Anyone?

How much things costs is determined by how much people want or need something and how much of that something is available. Now class, here is economics 101, otherwise known as beginning economics, or economics for dummies. (The politicians really need this!) Let’s use an example to illustrate how the price of a good is determined.

Let’s say that I go to a 4th of July Parade and I decide that I am going to sell hotdogs. I have found that if I price the hotdog at $6.00 I can’t get anybody to buy a hot dog. If I price it at $5.00, I’ll sell about five hotdogs the entire day. If I price it at $4.00, I’ll sell about ten hotdogs. If I price it at $3.00 I can sell fifteen hotdogs. If I price it at $2.00 I can sell twenty hotdogs, and if I price it at $1.00 I can sell twenty-five hotdogs. If I feel like just giving away hotdogs, I’ll give away thirty or more.

How do I decide what to price my hotdogs at? Well, like an self-serving, self-interested greedy person in a free market economy, I am going to price the hotdog at the price where I make the most money, but do the least amount of work. In this case, I would price it at $4.00 because at $4.00 I only have to make ten hotdogs and I make $40.00. I could make $45.00 if I made fifteen hotdogs but that would mean making fifteen hotdogs instead of ten. That’s a lot more work to only make $5.00 more.

Now what happens if some jerk competitor comes along and steals my customers by selling his hotdogs for $3.00? If his hotdogs taste just as good as mine, in fact, we’ll say it’s the same hotdog, I’m not going to be able to sell ten hotdogs at $4.00 anymore. He will sell fifteen hotdogs at his $3.00 price if I just quit and go home, but if I stay, the two of us have to share the market. Essentially, my market got cut in half. Twenty-five hotdogs being sold at $1.00 just turned into 12 ½ hotdogs being sold at $1.00.

So, if I decide to stay in the fight, what price do I charge for my hotdog? I would sell it at $3.00 because I’ll sell 7 ½ hotdogs at that price, making $22.50. If I priced it at $2.00 I would have to make ten hotdogs, for a total of $20.00. It would be more work for less money. If I priced it at $4.00 I would sell five hotdogs, for a total of $20.00 again, but I want to make more than $20.00. I didn’t set up my stand for nothing.

Now let’s say that I don’t have some jerk who comes along and steals my customers. In fact, contrary to last year, this year twice as many people are at the parade. Now I’m sittin’ pretty because I’m the only one selling hotdogs, and there is double the demand. If I sell my hotdogs at $4.00, I’m going to sell twenty hotdogs and make $80.00.

But lets just say that I’m feeling like a lazy chump and I don’t want to work that hard. Now I can sell my hotdogs at $5.00 and make $50.00, only selling ten of them. In the first example all I wanted to make was ten hotdogs and make $40.00. Now I can make ten hotdogs and make $50.00. I make more money and I get to charge more. People are paying me $5.00 a hotdog and I’m getting away with it! Why? Because there is twice as much demand for my hotdogs.

Unfortunately, this is exactly what has happened in the medical industry. Demand is bulging more and more every year, especially as the number of people in the elderly population increases, and supply is not keeping up with it. So what does that do to costs? They skyrocket.

It is staggering to think of how much demand will be increasing in the future. And what does the Democratic party want to do? They want to give health care to everyone, to make sure everyone in the country has health care. What would that do to the demand factor of the medical industry? They inadvertently want to increase demand so much that everything will explode under the pressure. If you think a $25,000 surgery is bad, wait until the exact same surgery costs $250,000, because of demand increasing four or fivefold.

The answer to providing health care to everyone is to get costs down to where everyone can afford to pay for them. How are we supposed to do that? Well, first of all, why are costs so high? Because supply is so low and demand is unrelenting. Costs will come down as hospitals and doctors have to compete with each other to get business, just like in my hotdog example.

There isn’t a lot of competition in the medical industry, in case you haven’t noticed. There is one hand-tendon-surgeon-specialist every 1000 miles, so to speak. The credentials alone make it extremely difficult to even become a doctor or a surgeon. First you have to get a four year bachelors degree in biology or chemistry, or something related to the medical field. Then you have to get accepted into medical school, which denies applicants like crazy. If your lucky enough to get into medical school, then you have four more years to become a doctor and another two to four years to become a surgeon. Twelve years of school.

How are you supposed to pay for twelve years of school? Student loans? Yep. The average medical school graduate acquires at least $200,000.00 in student loan debt, more like $400,000 for those that become surgeons. How many people are willing to go into that much debt, put in that much time and take that much of a risk, on the hopes that they will succeed in the industry after they graduate? There are more people willing than actually get through.

So, not just anybody can become a doctor or surgeon, and that is why they can charge so much. If you want to give everyone health care, start with making it easier to become a doctor, not by lowering the academic standards, of course, but by paying for the education of capable students. How many more students would go through medical school if the government was paying for all of it? The medical industry would have a huge increase in doctors and nurses.

What if the government had a zero tax policy for any an all companies in the medical industry? How many wall street investors and venture capitalists would dump money into building profitable hospitals, pharmaceutical companies, and hospital machinery manufacturing companies? The machines themselves are part of the reason doctors charge so much. They want to recover the costs they invest on their machines. What if their machines were less expensive?

So you create more hospitals, more clinics, spit out more nurses, doctors, surgeons, pharmaceutical companies, and hospital machinery manufacturing companies. You push supply so hard that the industry beats itself up and costs start plummeting downward so that the average American family doesn’t have to file bankruptcy when something unexpected happens.

You use market principles to lower costs, not communist stupidity. Appreciate your comments.

~Austin Elliott