Health Care

"PORTSMOUTH, N.H. – President Barack Obama says Americans wary of a government-run health care plan should look no further than Medicare." - AP via Yahoo!

I couldn't agree more. Consider Medicare:

"The present value of unfunded obligations under all parts of Medicare during FY 2007 is approximately $34.1 trillion. In other words, this amount would have to be set aside today such that the principal and interest would cover the shortfall over the next 75 years." - Wikipedia

At first, I wondered why he didn't use a more favorable example of a federal entitlement program, but then realized that's probably as good as it gets.

Some people argue that government involvement will drive medical costs down. How so? Medicare has done the exact opposite. During the 1980s, the federal government attempted to shore up Medicare's unsustainability by underpaying for procedures. To think this didn't affect the cost of medical care and private insurance is incredibly naive. The medical providers who were stiffed on their bills did what every business does under similar circumstances - they made up the difference by charging more to their other customers - patients covered by private insurance.

But that's not all. Because most private insurance is paid for by employers (thanks to government wage controls during World War II), much of the rising costs of insurance are hidden from individuals. But that doesn't mean they don't feel the effects. If premiums for employer provided insurance are 50% higher due to government involvement, employers have less money to pay their employees, resulting in lower salaries. It also means businesses have less money to hire workers or expand production, resulting in higher unemployment. It also means that businesses are less profitable, resulting in worse stock performance. It further means that people have less money to spend, resulting in lower demand for their products, which further contributes to all of the above.

Keep in mind that suppresed stock performance doesn't just hurt corporate fat cats. It hurts anyone with a 401k, IRA, pension, or mutual fund. That includes a lot of people, including young people starting families, retired teachers and firemen. This is especially true in light of the fact that artificially low interest rates set by the Federal Reserve, along with the resulting inflation, have eliminated the viability of using traditional savings methods to fund retirement.

Government attempts to make housing and college tuition more affordable have similarly backfired. Social Security is a huge disaster. Any of its alleged benefits are grossly outweighed by its costs - both apparent and hidden. All of the above programs are careening toward insolvency. Why should we believe government health care will be any different?