Supply And Demand.

by w3woody

It’s The Francisco Franco Of Policy Initiatives: Obamacare Is Still Failing.

In any case, the thing that is slowly killing Obamacare, with or without Republican help, is the same thing that is making it so hard for the GOP to come up with an alternative: American health care costs too much. Solving this problem isn’t just about litigating the merits of Obamacare or Trumpcare; it’s about ensuring that the American people have access to the health care they want and need while keeping the country solvent.

If you are, as I am, a believer in the Supply/Demand curve, then the reason for the high cost of American health care is quite simple.

There is too little of it.

Meaning that when there is less supply than demand for a product, the price of that product goes up. It’s as inevitable as gravity.

And the problem we have had with health care for the past fifty years or so is that government has done everything it can to attack the problem at the demand-side of the equation. That is, government has done everything it can to cap costs, to characterize what it (and by extension, private insurance companies) will pay, to shift the costs of health care onto corporations and onto the wealthy. Obamacare is simply the latest in half a century of government meddling, an attempt to make something cheaper by rearranging who will pay for it and how much they will pay and by what administrative processes payment will be made.

This never works.

This never works because no matter how you alter the payment structure, no matter how you alter the management of insurance companies, no matter even if we move to a “single-payer” form of insurance, we have not changed the fundamental reality in our country:

There is too little of it.

Now it’s not to say that providing health care isn’t expensive. A stay in an ICU for example runs about $10,000 per day. But there is an odd reality about the supply and demand curve: if you know prices are being driven up by the economics of the supply/demand curve and you know in the process you will receive $X for your relatively rare commodity, then you have an incentive to preserve the status quo by consuming all of the money you are paid for your services. That way, if a customer can see how their money is paid, it is easier for customers to justify the high price–and it becomes easier (given the lack of supply-side competition) to convince the public of a form of “lock-in”. Meaning if you have a lot of money you can convince people your service is inherently expensive, rather than allow them to realize that your service is inherently expensive because there is no competition.

So here we are, with some of the most expensive health care in the world, yet according to certain surveys the quality of the health care we receive is not significantly better across the board to that of other countries. (Of course I wouldn’t want to come down with cancer in most of Europe; survival rates in the United States is significantly higher, but I digress.)

And that’s because there is too little health care.


Now Obamacare is undeniably failing; most people who are not so deeply partisan that they believe any pablum fed to them can see health care insurance rates are rising for most people, health care expenses are falling, and the number of uninsured remains stubbornly high.

But that’s because there is too little health care–and Obamacare only sought to tackle problems with insurance companies–with the demand side of the equation. Obamacare also sought to rearrange the medical community through the creation of ACO’s, which again, was seeking to solve the problem on the demand side. (ACOs don’t encourage more doctors to enter the field; in fact, it discourages doctors by attempting to reduce entrepreneurialship which was considered a source of a lot of unnecessary tests.)

And even the few attempts made to reduce the health care supply shortage was handled through trying to drive down demand, by discouraging the consumption of so much health care. (Of course this was nipped pretty quick by partisan complaints about “death panels.”)


Does this mean anything Trump and the GOP may put together will be better?

Probably not. Sadly, unless we fix the basic problem, anything that the GOP may attempt will probably face the same problems that Obamacare now faces: increasing prices, limited choice, and longer delays.

The basic problem, of course, being there isn’t enough health care.


If I were emperor for a day, the first thing I’d do is wade into the health care shortage problem. Don’t worry about single payer, don’t worry about health care insurance reform, don’t worry about anything on the demand side of the equation.

We’ve already fucked that up pretty bad.

I’d instead wade into the supply side of the problem.

Why don’t we have more hospitals? Why don’t we have easier access to urgent care? Why don’t we allow, for example, companies such as Walgreens to wade into the urgent care business by allowing them to hire nurses to handle simple non-emergency issues such as colds and upset stomaches and injured limbs? I mean, if I’m already in a Walgreens because I have a headache and a runny nose, why can’t I see a nurse if I’m concerned it’s something worse?

Why don’t we allow a more streamlined process for allowing medical equipment to be approved by the FDA? There is no reason, for example, that a lot of common diagnostic equipment needs to be so expensive in a world where we carry supercomputers in our pockets to play “Angry Birds” on. Why can’t Silicon Valley wade into the medical business and “disrupt” suppliers of electronic charting systems or to re-evaluate the processes used to provide most routine medical services? I’m sure there are a thousand things the bright folks in the computer industry could do, from cryptographically secure personal records to more efficient predictive processes to streamline hospital operations.

Increased competition is how the supply side provides cheaper cell phones and better cars and more healthy pre-prepared meals. That’s because the more people looking at a problem, the more potential solutions they provide, and that helps increase supply and drive down cost.

I’m not suggesting we allow medicine to become the wild-wild west. And there are areas in health care which should be more regulated and which should receive more government support. Emergency room visits for true emergencies should be free, and we should have a government-backed pool of taxpayer dollars which are used to deal with more expensive pre-existing conditions. (I’ve personally favored the idea that government should back-stop insurance companies for individuals who reach an individual maximum: once you’ve run up more than (say) $1 million in medical bills, the rest of your care should come from taxpayer dollars rather than from insurance company dollars. You get all the medical care you need, but it is taxpayer money which pays beyond the cap.)

But the supply side right now is broken: in the face of manifest need, too many people have their hands tied and are not allowed to step into the fray to make things better.


Until we address the supply side of the equation–until we address the glaringly obvious fact that there is a shortage of health care in our country and a lack of competition for more efficient devices, processes and business practices–prices for health care will remain high.

And so long as we fail to address the supply side of the equation, any health care plan proposed by Democrats or Republicans will simply rearrange the deck chairs on a sinking ship.

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