This is by far one of my favorite authors and one of the smartest people I've ever read. He is an amazing man with an inspiring life story. (See http://www.tsowell.com/ for more information.) This article is a great perspective on the current healthcare debate.
The "Costs" of Medical Care
Now, with Dr. Sowell at my back, I'll venture to add the following:
It is worthwhile to discuss the difference between "cost" and "price". People often use the words interchangeably, but they are different things. Consumers are typically much more interested in the price than the cost. But businesses have to be interested in both the price they charge and their costs for producing. For example, when a grocery store sends out a weekly ad, they cover the front page with what they call "loss leaders". Loss leaders are the items that are put on sale at a loss in order to get customers in their stores. Grocery stores bank on the fact that customers will make other purchases in order to cover their costs of operating their business, but they actually lose money if you only buy those sale items. The price is what a consumer pays for any given product or service. The cost includes the manufacturing, shipping, training, equipment, wages, facilities, etc. for any given business. Any business that does not recoup their costs in the sale price is losing money. I'll give a simple example: Kinko's charges $.10 per self-serve, black and white copy. So, the price I would pay is $.10, but the actual cost of that copy is probably much lower, if I were only paying for the paper and the toner. Factored into the price I pay are the costs of the equipment, the facility charge, maintenance and repair, employees, etc.
So what?
When we talk about lowering the "cost" of health care, we have to be careful to understand the difference between cost and price. Government lackeys love to blather on about lowering the "costs" of healthcare. What they will succeed in doing for the short term is lowering the "price" that you and I pay. But the costs that hospitals, doctors, clinics, pharmaceutical companies and insurance companies bear to run their businesses will not change. The end result will be that we will then receive the level of quality for which we pay. If they succeed in lowering "costs", we will in the end, get what we are paying for. It is a brutal but simple fact and all the politicking in the world won't change that. Cause and effect, consequences, gravity are all dispassionate, unfeeling laws of nature. Supply and demand are not much different. Costs and prices are determined by the marketplace and all the well-meaning political tinkering can do nothing to eliminate that. They can only make it worse.
A perfect example of well-meaning tinkering is the Pennsylvania Milk Marketing Board. This board sets the prices statewide for milk, cream, cottage cheese, etc. I was paying over $4/gallon for milk when we lived in PA (less than a year ago) and it could never go on sale. Now I never pay more than $2/gallon. Oddly enough, I read about the same struggles for the dairy farmers in WA and PA. The government has "fixed" the price, but it is not helping the farmers and it is hurting the consumers. Where does the extra $2/gallon go? My guess would be to operate the Milk Marketing Board. I guess the good news is they're creating jobs......
Try as I may, I can see no good outcomes for the government getting involved in the costs of health care. Any price I pay will be too high.
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