Universal Coverage Will Reduce Costs?

From Ezra Klein, regarding reducing costs in the Massachusetts health care system:

The mandate presumes residents can afford coverage, and it’ll spark a political revolt if voters find themselves penalized for not buying a product they can’t afford. In other words, one of two things can happen: Either Massachusetts can figure out how to control costs, or it can let the program become unaffordable and repeal the legislation.

This is, at least in the abstract, the political logic of focusing on access first: Expanding access creates pressures that force the system to figure out how to control costs. (emphasis added)

Really? Conservatives have tried this approach many times, with what they call the “starve the beast” mentality. Reduce taxes, reduce revenues, and eventually the government will restrain spending just out of necessity.

The truth is, though, I’ve never seen it happen. When they can’t raise tax revenue, government goes into deficit-spending mode. If that doesn’t work, they find a way to inflate their way into paying it. We’re in deficit mode now, and they’re trying to spend $50M a year on bedbugs.

You simply can’t assume that buy burdening the system, they’ll find a way to magically reduce costs. You can force cost reductions (as Medicare tries to do), or you can ration care (as Britain tries to do). But you can’t pile demand onto the system and simply assume that it’ll have economies of scale or other efficiency improvements that will reduce costs in any meaningful way.

Hat Tip: Cato@Liberty, who has some added snark on this topic.

  • tfr

    Pretty basic stuff. Less supply, same demand = costs go UP, not down.