Who Can Afford the Affordable Healthcare Act?

Recently I visited a church I hadn’t been to for years.  I was very impressed at the improvements they had made.  The music was better, the sermon was better and the entire experience was much better.  Churches are notoriously slow to make these types of changes.  So what was at work here?  Was it the “unseen hand” of God?  No, it was the “invisible hand” of competitive markets as described by economist Adam Smith in 1759.

Adam Smith was one smart guy!

This church made these changes because a large, very popular, mega-church in a near-by city decided to build a satellite church two miles down the road.  When faced with this strong competitive threat, the church quickly made the improvements necessary to retain, and even grow, its congregation.

Competition is an essential part of our free markets.  Promoting competition   is a key factor in the U.S. economy being the largest in the world.  Americans love competition. That is why billions are spent on professional sports.

Companies compete aggressively for consumers’ dollars.  This results in better products, better service and lower prices.  When competition is reduced, you get lower quality products, poor service and higher costs.

When government provides services, competition is reduced and usually product/service quality suffers and costs (which are the taxes that pay for it) increase.  The best example of this is education.   The idea of providing standardized education to all children was a great and noble concept that worked well for years. But in the absence of competition:

-        Product quality diminished

-        There is a lack of innovation

-        There is strong resistance to change

-        People have figured out how to “scam” the system for their financial gain

-        Costs have skyrocketed (can we just pass another levy?)
 

We have tried to increase competition in education by way of vouchers.  So far the public schools have spent more time and money trying to thwart the new competition rather than trying to improve their product.

The Affordable Care Act (ACA) now gives government a larger role in the healthcare markets.  The ACA is supposed to help limit the growth of healthcare costs, but I see nothing in the law that actually does this.  Usually more government control means less competition and less competition always leads to higher costs.

In addition, the current government healthcare programs (Medicare and Medicaid) waste large amounts of money from both illegal fraud and “legal” gaming of the system.  It can be assumed that the ACA will result in similar waste as soon as people figure out how to take advantage.

Whenever proponents of the ACA admit that costs will go up for individuals, their answer is that the higher costs will be offset by government subsidies.

This would be fine if the government was sitting on a big old pile of money that needed to be spent on something.  But we are broke. It’s really the Unaffordable Care Act and who do you think is going to end up paying for all the expensive promises the government has made?  The costs are going to start rising next year and I’m not sure they are ever going to stop.

And the economic law of “Unintended Consequences” continues to impact the ACA.  The benefits and number of new people getting insurance is greatly overestimated.  The estimates were based on companies just accepting the new rules without responding.  But businesses are cutting employees hours, limiting hiring and doing whatever is necessary to control costs. 

Nobody knows exactly how this will all play out because people are finally reading the entire law and getting legal clarification of all the confusing details. More onerous, costly, provisions are suddenly being “discovered”. This could get very, very, ugly.

The best solution to the healthcare problem is to increase supply and competition so that the cost of healthcare is reduced to the point where it is truly affordable, with government having a limited role in managing the process.