Donald Trump heads to Capitol Hill today to push the passage of a health care bill he doesn’t understand: TrumpCare, which rejects the free market, tinkers around the edges of the problem, and assumes that government central planning is the answer. This bill continues to treat insurance as the primary way to get health care, substitutes lawmakers’ judgments for that of the market as to how to price policies, and sustains an unsustainable path of central planning.
Basically, the First Five Year Health Care Plan has been determined a failure, so Trump will give us a Second Five Year Health Care Plan. Let’s hope it doesn’t take thirteen Five Year Health Care Plans to figure out that central planning of the economy never works.
Economist Bob Murphy suggests an analogy to food, to illustrate how ObamaCare (the First Five Year Health Care Plan) rejects the free market to the detriment of health care consumers. Let’s say the nation decided to deal with the problem of the hungry by saying that everyone had to buy a food plan. If you couldn’t afford it (or might have to give up your iPhone to buy it) the government would subsidize it. The food plan provided that you could go in the store and get whatever you wanted. Pretty soon you’d have shortages of everything, as people ran in to stock up on stuff. The price of food would skyrocket and the “need” for government to subsidize food plans would seem more critical every year.
This seems absurd to us, because we have experienced a (mostly) free market in food. But what if this experiment with food plans had begun decades ago? What if virtually nobody alive remembered what it was like to have a free market in food? If someone like me came along and said: “Dude! I found your problem! It’s these food plans! You just need to have a free market in food!” I would be derided as an ivory-tower egghead. Food isn’t like other commodities! I’d be told. It’s not a luxury item. You need food to live. People aren’t going to give up their free food. And what? You want millions to starve?
And if some narcissistic blow-dried ignoramus came along and told us that the Magic Solution was to institute a New Five Year Food Plan, I’d keep telling everyone the same thing: “We have to have a free market in food. Free markets are the only way you’ll get the costs down. I know you don’t understand this because you’ve had food plans your whole life. But empty shelves and lining up for hours for cheese isn’t normal. There’s a better way!”
Well, there’s a better way for health care, too. In any area not covered by insurance (like LASIK), prices have come down and quality has gone up. Having a third-party payer system, which has arisen because of government distortions in the market, will keep prices high — and subsidies, whether you call them subsidies or “refundable tax credits,” will only make it worse.
Freedom. The market. These are the mechanisms that will drive down the cost of health care and make it affordable. Tinkering with different ways to redistribute the wealth won’t work. It never has and it never will.