The Maryland Public Policy Institute
By now, you’re probably getting sick of my “Nothing is Sacred” posts, even if you believe (as I do) that government spending needs to be reined in substantially. I promise that this one will be the last in the series, even though there are plenty more that could be written -- that’s the whole idea behind the Nothing is Sacred name. There is fat to be cut in almost all parts of the government; even in those areas that may appear underfunded.
Today we turn our attention to Medicare and Medicaid -- two of the three heads of the gruesome hydra that makes up about 40% of government spending each year. (The other one is Social Security, if you couldn’t guess.) Before we go into details on this one, I will state for the final time that these are “off the top of the noggin” ideas, and are meant more to start a discussion than as final solutions to our problems. The purpose is to illustrate that we will need to keep an open mind if we ever wish to get government spending under control -- and that this is not necessarily a bad thing.
At the heart of the Medicare/Medicaid debate are two rather enormous issues: a faith in Big Government™ to solve our problems and where we stand on the single-payer healthcare. Generally, if you like one, you like both -- and vice versa.
It should come as no suppose to a regular reader of this blog which side I fall on. I have little faith in government when it comes to solving my problems. Everywhere I look in the public sector I see fraud, waste, and inefficiency. These are things that I cannot tolerate.
On the other hand, it might come as quite a shock to some readers that I do favor some kind of individual mandate. I see access to affordable healthcare as an essential element of a quality life (everyone needs it at some point), and when people opt out, they end up passing the cost of their care onto others. I’m not saying I like the way it is being implemented now, but I do see it as a necessary step down the road -- but that is another issue.
Medicare and Medicaid, as I see them, are possible solutions to a problem. Namely: that some people cannot afford to buy health insurance. They are either too poor or old enough that they would automatically be placed into a high-risk (and thus very expensive) pool on the private market.
Unfortunately, both programs have grown larger and more expensive as the cost of healthcare has risen over the years. They will only get more bloated; more rife with fraud, waste, and inefficiency as the years go by. We can attempt to solve the problems of these agencies (and spend more tax dollars while we’re at it), or we can attempt to solve the root problem that they were initially created to solve.
True, the cost of healthcare is rising. That’s the bad news. The good news is this: the higher the perceived returns (profits) for entering an industry, the more people that will enter it. That is, unless barriers are erected to keep them out, which is exactly what our government is currently engaged in right now.
Every new law stipulating what type of services must be offered by any given health insurance plan makes that plan more expensive. The more intrusive the government is in the healthcare industry, the more expensive it becomes. Compliance is expensive. Even if a hospital has personal standards that surpass government ones, it will still have to spend money proving it each and every year.
In short: we have created two programs (Medicare and Medicaid) to solve the problem of overly-expensive healthcare for two disproportionately affected groups of people. Then, we went on to make that problem worse, thus drastically expanding the groups of disproportionately affected people.
The solution is not to keep throwing money at our initial solution -- it’s to go back to the drawing board and find a way to reduce the cost of compliance (while still maintaining some very necessary regulations in place) and thus the cost of care. As the cost of care drops, health insurance companies will be able to offer lower premiums. That, coupled with the price reductions that would inevitably accompany fewer regulations would enable many more Americans to afford coverage without government assistance.
We can keep Medicare and Medicaid around, if we really want to. But if we got serious about reducing the barriers to entry into the healthcare industry and the excessive regulations then we would see prices for quality healthcare fall to levels that would make both programs far less costly -- and (hopefully) unnecessary.
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