Thursday, July 16, 2009

Healthcare Rationing or Pay for Service

There is an interesting article by the infamous "ethicist" Peter Singer about the need for rationing.

From what I've read from Mr. Singer, he tends to state a problem narrowly with a kind of conundrum and proceeds to argue that we really have no option but to follow the logic he puts forth. It's just that obvious!

It does bring up a point that bothers me about healthcare economics though. The fundamental problems with the current healthcare scheme is that the people who use it don't generally pay the fair value for it. Healthcare is an economic good. If you care about receiving a quality product you should be willing to pay for it. It's like that in any market. The irony of the current socialize medicine approach is that it is going to create a side market for cash paying customers. This is going to divert doctors towards serving those who can pay and away from those who can't. The level of quality care that the poor are probably going to receive is going to remain low and soon the middle class will be joining them in this. The rich, if they pay cash, will certainly be served in an environment where the government increasingly squeezes doctors to get "savings".

Since the advent of copays and HMOs, you could argue that healthcare already is run in a socialist model. The only difference is that now the government will be the arbiter of services rather than the insurance companies. You will soon be trading one master for another. And as bad as insurance may be, they do have some form of a bottom line, and some incentives for doctors who, via insurance networks, have in some form become employees of insurance companies. I can't imagine that government will do a better job. So, the horror stories about how insurance did a victim wrong on the commercials advocating for Obama's plan are only going to increase and get worse.

In the end, this debate must entirely be recast. We can offer some form of assistance in providing this service. But it is and has always been unsustainable to expect the usage of the product to be essentially separate from the payment of the service. This is the general case in the health insurance market. Until it is fixed, there is no way healthcare costs can reasonably be expected to come under control. Government will only expand it an accelarating rate. The current insurance market already demonstrates that its costs are unsustainable though less than what we will see with socialized medicine. We have to price the good accordingly and have people pay for it. This will economize on its use and abuse.

We also have to do away with trial lawyers. But that's for another day and another President to deal with later along the road who will have to clean this up and probably start over with it.

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