Public Healthcare: Cost-Based Analysis

As was demonstrated recently with public schools, the costs of provision often, if not always, outweigh the benefits of providing said public good through the state apparatus, or other non-market based means. Today’s blog will analyze the costs of another seemingly public good, healthcare. However, the costs of public healthcare that will be analyzed here extend beyond that of mere resource distribution and diversion, but enter into the realm of personal sovereignty and self-determination.

The provision of healthcare, is, like any service, ultimately limited by the nature of scarcity in our reality. Despite the arguments in favor of treating it as a positive right, the fact remains that, in accordance with the Law of Diminishing Marginal Returns, the closer we get to full healthcare coverage, the higher the costs of provision will become, and the more we will have to sacrifice in other fields, services, and goods to arrive at universal coverage.

Furthermore, the nature of public provision of goods and services eliminates the market mechanism, which makes the efficient allocation of resources impossible. With no voluntary transactions for consumers to demonstrate their true preferences in relation to the realities of their limited resources, healthcare providers are left fumbling through the dark, with only the ability to guess the proper amounts of coverage, accompanied by success rates closer to, if not merely or even worse than, random chance.

However, unlike many other goods and services generally deemed suitable for market provision, healthcare is often given a special treatment in public discourse. It is argued that, due to the intrinsic need for healthcare services when those needs arrive, and the inelastic nature of the demand side of the market (this merely means that consumers are less affected by changes in price, such that high prices discourage inelastic consumers less than elastic consumers), the market is unsuitable for the provision of healthcare. Because of these aspects of healthcare, everyone is entitled to healthcare coverage since it plays an important role in fighting off diseases and prolonging life, and the provision of healthcare should be free of market forces, namely prices.

Implicit in this view is the idea that government provision of healthcare will be of an equal or higher quality than market-based provision, and will be able to provide this healthcare equally to all citizens, without detrimental opportunity costs or negative social effects. As discussed many times before, the universal provision of a good such as healthcare will carry with it enormous amounts of costs, which will take many different shapes and forms. The elimination of prices does not eliminate the reality that there is a limited amount of resources at our disposal at any given time, and these resources have to be allocated, preferably efficiently so as to minimize or ideally eliminate waste, which has its own set of issues.

Aside from this, it is not at all clear that government provision of healthcare will be able to maintain the same quality, standards, and life-saving innovations private healthcare can provide. Absent market competition, and the drive for profit along with the penalization of losses, healthcare providers will have little to no incentive to adopt Avante-Garde methods of treatment, prevention, medical practices, etc.

In a field like medicine, where innovation is often critical in order to stay one step ahead of diseases, the implications of this cannot be understated. What good is universal access to healthcare if said health care is of a very low quality such that many lives are lost regardless? And how can we quantify the unseen costs of the life-saving processes that weren’t implemented because there was no pressure to do so?

Moving away from these points, another aspect of government provided healthcare that is all too often overlooked is the nature of centrally planning healthcare resources. In these government systems, the bureaucratic agency in charge of healthcare manages the limited health resources available and ultimately decides who receives what treatment, when, and for what reasons. Scarcity is our reality, and no amount of positive rights dialogue can change the fact that these sorts of hard decisions will need to be made regarding patients and their often unique needs.

In a private system, the final say of what treatments are used, to what lengths lives are fought over, and other similar yet nonetheless difficult questions are answered by the individuals affected, or by loved ones dear to them. In a public system of healthcare, however, these decisions have to pass by the government, since they are the ones who have the final say on how health resources are managed. Because of this, death panels are often created to judge the cases of citizens in need of healthcare services, and the conflicting world, moral, and spiritual views of patients and panelists can oftentimes exacerbate this system.

Such was the more recent case of Charlie Gard, a baby born to British parents who suffered from a rare, life-threatening mitochondrial disease. The British courts had ruled that the health services being provided to Charlie so as to keep him alive were to be terminated, despite the fact that in this case, the parents had voluntarily raised the necessary funds to treat Charlie in various foreign and willing hospitals. After a prolonged legal battle, the rulings sided with the British government, and Charlie was denied the hope of treatment and passed away in 2017.

In a market system, the final call for these difficult situations lies in the hands of those most affected by them, whereas in a public system, bureaucrats who are insulated to varying degrees from the consequences of their actions have the power to make these decisions. The nature of our reality makes the preclusion of tragic healthcare related cases inescapable, yet, it is important to understand the facts behind the proposed solutions for healthcare provision, and the consequences these systems will have on everyone involved.

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