“The bureaucracy is expanding to meet the needs of an expanding bureaucracy”  -Unknown

This week the Obama Administration will host a summit on healthcare reform.  The format will resemble last month’s summit on fiscal responsibility, meaning attendees will have a large morning meeting followed by “break-out sessions”, camp-fire singing, canoeing, and other summer camp activities we all know and love.  Then by the end of the day the nation’s healthcare woes will magically be solved and we will all enjoy an average life span of 100+ years…  If any of this sounds too good to be true, it’s probably because you’re using the logical part of your brain.

The Administration has announced that this year’s budget will contain $634 billion to be spent on three gereral areas of “reform”: 1) increasing coverage, 2) raising quality, and 3) lowering costs.  Don’t get me wrong, providing more of a product at a higher quality and lower price is a noble goal, in fact that is the basic driving force behind a free market economy.  However only in the mind of a liberal could this task be accomplished by increasing regulation and creating a government controlled monopoly.  Instead of deregulating insurance providers and allowing policies to be sold accross state lines, the summit is likely to suggest tax-payer subsidies of insurance coverage and adult versions of programs like SCHIP.

Part of the problem with our current system is that it is not a simple two-way exchange of payment for services.  Instead three parties participate in each transaction, a provider, a recipient, and a payer.  In this system supply and demand are uncoupled and the provider is stuck between a  recipient who has no incentive to limit the amount of goods consumed and is rarely satisfied with the results, and a payer who has no incentive to purchase the product as he sees no direct benefit from it.  A successful solution to this problem will require a mechanism whereby the consumer has an interest in limiting consumption of healthcare resources and the payer sees some benefit in purchasing the item.

In our current model, co-pays theoretically provide the incentive to limit consumption, while healthier clients provide an interest for insurance companies to provide care (as it theoretically limits future expenses and increases long-term profitability).  In a government run system, where healthcare is free to the consumer at point of purchase, demand sky-rockets and incentives for providing only the most beneficial services disappear as tax-payer’s are gouged for increasing costs.  The amount of time patients wait for access then increases.  Soon limited medical resources become spread across an ever expanding patient population with no mechanism to prioritize where they should go and the quality of care declines.  This rapidly leads to a scenario that is no better than our current situation (however liberals will call it justice since we all become miserable together).

The results of the summit should be interesting, but don’t look for all of our problems to be solved in a day; unfortunately our healthcare woes, like herpes, still have no cure.