Intentions do not equal outcomes


Here is a letter I recently sent to the Midland Daily news:

Colin Mealey, in his recent letter, offers a good analysis of the recent health care situation in America (“Join the Private Sector?,” April 15). The following two recommendations in the concluding paragraph, however, would likely worsen the situation: “…instead of totally revamping the system, why not just put a cap on how much health insurance can cost? Another idea, if the government thinks they can take over something as complex as healthcare, let them set up their own system and join the private sector for a little while.”

The first suggestion, to impose a price cap, would only result in shortages. Shortages always occur when a maximum price, also known as a price ceiling, is placed below the market price. For instance, if health insurance is generally provided for $800 a month and a maximum price of $600 a month is set, fewer suppliers will be willing to supply it and more demanders will be willing to purchase it.

The second suggestion, which would allow the government to “compete” against private companies, would result in lower prices for health insurance and increased taxes (whether it is in the form of a tax, debt, or inflation). Businesses, unlike governments, must serve consumers to exist. If a business does not serve enough customers to profit, it must file for bankruptcy or dissolve. Governments, on the other hand, have the ability to tax, or, put another way, have the ability to earn income regardless of the outcomes generated. This unique capability would conceivably allow the government to set health insurance prices below market prices by subsidizing its losses with taxes until all businesses were out of the market.

Kurt Bouwhuis

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s