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The Cost of Inefficiency

The latest estimates from the Congressional Budget Office have boosted the price tag for ObamaCare by $500 billion dollars, for a revised total cost of $1.445 trillion.  These soaring costs illustrate how the inefficiency of collectivist solutions causes them to become horrendously expensive.

Health care is an unusual resource.  Supply is very limited, while demand occurs largely at random, rather than being a reasoned expression of desire.  People get sick without warning, and those with limited means can find themselves in need of expensive treatments.

The most logical method for connecting this random demand with expensive resources is through the medium of insurance.  An insurance company sells relatively low-cost insurance policies to a large clientele, many of whom will never need to use it.  The customers who have to make expensive claims are an expense the company can absorb, while still turning a profit.

To calculate the most competitive prices for their policies, insurance companies play the odds.  A young and healthy person, who is unlikely to make claims, can be charged a much lower price than an older person with bad habits and chronic illness. 

Naturally, the companies don’t want to extend low rates to people who are guaranteed to cost them money, due to serious pre-existing conditions.  Not only would this result in predictable losses on individual policies, it would also create an incentive for others to wait until they get sick to purchase insurance.  Those low-cost policies for healthy people would no longer be a highly efficient method of providing expensive resources to a few unlucky souls.  Instead, they would become a sucker play, bought only by chumps who don’t have the good sense to wait until they get sick to purchase a policy.

To deal with this problem, ObamaCare will force everyone to buy government-approved health insurance, through the famous “individual mandate.”  This is supposed to offset the losses of “insurance” companies, which will be forced to provide a product that is no longer the sale of calculated risk.  Because individuals can’t easily afford this expensive mandated insurance, their employers will be forced to absorb much of the cost on their behalf.

The crucial point to consider is that compulsion is always less efficient than voluntary action.  It takes a certain amount of effort to ensure compliance, and there will always be some degree of effective resistance.  Someone must swing the whip, and cooperation from the other end is bound to be grudging at best. 

Much of ObamaCare’s staggering cost comes from regulations and enforcement mechanisms.  The entire affair was put in place because a fairly small number of Americans were uninsured.  Instead of dealing directly with them, the entire health insurance system was infused with compulsion, and therefore became even more inefficient than the ramshackle maze of third-party payments that had developed over the last century.  In fact, the last option that was on the table for Democrats was directing compulsive force at the uninsured – that would have been “cruel,” not to mention providing a far smaller windfall of new power to the political class.  Instead, the government will compel the living daylights out of everyone… except the favored few who receive those precious ObamaCare waivers.

It’s no surprise that government-controlled health insurance is fantastically expensive, and the costs are spiraling out of control even in the earliest years of the program.  Some variation of the same process occurs every time the government tries to force something to become cheaper.  There will always be more value in what we choose to do than in what we are made to do.  

Written By

John Hayward began his blogging career as a guest writer at Hot Air under the pen name "Doctor Zero," producing a collection of essays entitled Doctor Zero: Year One. He is a great admirer of free-market thinkers such as Arthur Laffer, Milton Friedman, and Thomas Sowell. He writes both political and cultural commentary, including book and movie reviews. An avid fan of horror and fantasy fiction, he has produced an e-book collection of short horror stories entitled Persistent Dread. John is a former staff writer for Human Events. He is a regular guest on the Rusty Humphries radio show, and has appeared on numerous other local and national radio programs, including G. Gordon Liddy, BattleLine, and Dennis Miller.

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