America's Healthcare System

In my last article, I talked about the rise of government involvement in American healthcare. Increased government involvement hasn't brought costs down. Rather, costs have continued to spiral out of control. This is exactly what has happened in another mixed public-private market -- education. According to data from the Bureau of Labor Statistics, college costs have grown at an even faster rate than medical costs.

This isn't surprising if you consider the expected results of subsidies. Prices go up as providers are able to charge more. You can cap costs by denying people the right to buy private care or education. You can reduce demand by reducing subsidies. However, if you leave the system as is, costs will continue to rise. As the American population ages (pushing more Americans into Medicare) and programs like SCHIP are expanded, demand for government programs will increase, increasing prices.

But, subsidies aren't the only problem. True competition is hobbled by government regulation. For instance, companies get a tax break for providing employee health insurance. Individuals, though, can not receive this tax break unless the can show that they are not able to qualify for a group plan. Individuals and groups alike are not able to seek health plans over state lines. Individual states have entire departments dedicated to devising insurance regulations, causing wide discrepances in health costs from state to state.

So, the health insurance industry is both highly subisidized and highly regulated. Both of these factors drive up prices, and yet we're not talking about fixing either problem. Granted, removing subisidies for people who can't afford health care seems heartless, but if we were able to reduce costs by decreasing regulation, then fewer people would need subsidies. The spiral would effectively be put into reverse and the government's role in our personal health choices would also be reduced.