Buttle's World

14 January, 2010

The Forgotten Elephant in the Room

Filed under: Posts — clgood @ 15:44

Veronique de Rugy has a good post up about the real reason healthcare prices are going up.

It should be incandescently obvious to anybody with the slightest understanding of economic reality.

Economists have shown that if a good’s price is zero or decreasing, then the demand for this good will likely increase. In 2008, consumers were only directly responsible for 11.9 percent of total national healthcare expenditures, down from 43 percent in 1965, according to new data from the U.S. Department of Health and Human Services. This means that someone other than consumers pays roughly 88 percent of all healthcare costs, giving consumers little incentive to mind costs and much incentive to over-consume.

But ignored in all of the current debates over health care costs is the reason why we are paying less out of pocket. As usual, when things are really screwed up you have to look to government meddling.

The first bit of bad juju in this story was the imposition of the income tax. Next was the Ponzi scheme called Social Security. Then came income tax witholdings (Milton Friedman’s one bad idea.) Once that big chunk was being taken out of paychecks, employers started offering “benefits” like health insurance to sweeten the pot. It started with “major medical”, and went downhill from there.

Not only did the taxes seem hidden once people got used to witholdings, but what once was spent out of pocket became hidden. (The subterfuge is double in the case of Social Securit. Half of what you’re paying is hidden as an “employer contribution.”) Once the HMO model got started, well, you can see the result on the chart.

Not only should the income tax be repealed (along with the XVI and XVII amendments) but, before that, tax witholdings should stop. If people had to write a check every April 15th we’d see a rapid shift toward smaller, more responsive government.

And health care costs would go down because there would be no reason to depend on your employer for health insurance.

Think about what costs you more now than it used to vs. what now costs you less. I think you’ll see a pattern.

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