I believe, as I have said in previous diaries, that health care is a fundamental human right which should never be based on financial ability of individuals to pay. But I also believe that liberal policymakers and academics have bought into the "non-economic" thesis about health care and therefore end up not only agreeing with conservatives that the system has to be analyzed from a cost basis, but that something has to be done about those high costs.
The whole point of this exercise is to show that if we analyze health care as a standard industry, which obeys the same economic rules as every other industry, that we not only will understand what the data really tells us, but will also be able to come up with some valid remedies to fix the problem.
Unfortunatly, since liberals don't see health care as an industry, they recoil in horror when presented with the continued growth of for-profit organizations delivering health care. And as a result, they leave the whole argument about for-profit health care in the hands of conservatives, who will advocate for-profit health care or for-profit anything whether the data supports this position or not. Because the truth is that the Republican Party continues to assault the entire notion of government welfare and demands its replacement by the private sector, in particuloar, as a remedy for the so-called health care crisis.
So the purpose of this diary is to examine the issue of private versus public efficiency, and then see which sector operates better in the health care market.
The Republican argument for replacing health care as a non-profit system model with a for-profit business model is based on the assumption that private enterprise will always deliver services more efficiently than government. This is because free enterprise is more efficient (hence less costly) because it operates in a competitive environment. Government, on the other hand, is inefficient because it operates in a non-competitive environment.
The data that is always produced to buttress the private-sector efficiency argument has to do with the increase in living standards as the market expands. And this may be true, except it has nothing to do with comparing private to public sector efficiency. This is because the private sector can make choices about how it operates that simply csnnot be made by the public sector.
The bottom line is that every seller who enters the marketplace first nakes a calculated decision on pricing his product. And this calculation is based on two things: how much the item cost to produce, and how much of a margin does the seller want between the cost and the price at which it will be sold. After arriving at this number, the seller must then figure out the most important issue of all, namely, are there enough buyers in the market who will be willing to pay the price that the seller has set for his product?
So the seller, by definition, views his customers in exclusive terms; he doesn't need to sell the item to everyone, he just needs to sell it to enough consumers to make a profit. And since there's usually more than one seller offering the same product, this forces every seller to be extremely price-sensitive to the desire of the buyer to pay the least amount possible for the particular product.
The public sector doesn't enjoy the luxury of being to offer its products and services on an exclusive basis. Once government decides that a particular government service should be made available, the price of this item must be set in non-economic terms. Let me give you an example of this difference by comparing the operations of FedEX to the operations of USPS a particularly apropos comparison given the current financial problems of the USPS.
If I want to send a letter from New York to Californis and get it to the recipient in less than 24 hours, FedEx can usually accomplish this for around $18. There's no guarantee, by the way. In the small print there's a disclaimer which protects FedEx in case they don't deliver on time, and if this occurs, you can go through a somewhat complicated process and get a frefund for the botched delivery.
If I mail a first-class letter in New York it will probbly get to California in three days, and in some instances get delivered in two. This costs fifty cents. So on an hourly basis my first class letter cost seven-tenths of one cent to get to California, the FedEx letter cost .75 cents per hour. On a per-hour cost the Post Office is 100 times more efficient than FedEx. And by the wsy, the only time that USPS didn't deliver a letter for me to California is when the letter contained a demand for a check.
The truth is that it probably costs USPS between four and five dollars to deliver that letter to California. But for reasons having nothing to do with market considerations, the government has decided that anyone should be able to send a letter anywhere in the United States for half a buck. So comparing the alleged efficiency of FedEx to the alleged ineffriciency of USPS says nothing about the real efficiency of either one. It simply reflects non-economic decisions that the government must make because the government can't offer its srvices based on the ability of the citizens to pay.
Of course, if you're a Republican, you probably figure that people who can't afford to pay for such non-necessities as food, clothing, transportation, and even helth care, shouldn't get it anyway. But aside from that nonsense, if it turns out that the free market really can benefit the greatest number of people at a price that most of them can afford, shouldn't we at least consider the possibility that delivering good health care to most people is preferable to delivering lousy and expensive health care to everyone?