Saturday, July 25, 2009

The Good, the Bad, and Healthcare

Critics of government backed health care seem schizophrenic: on one hand, they argue government run health care will be really awful. On the other hand, they argue it will crowd out private health care if the two compete. How can it be so bad no one will want it but so good everyone will abandon all other options?

The two seem to be mutually exclusive and on some level they are. For example, the post office competes with FedEx all the time for package delivers. Sometimes people use one, sometimes the other. No doubt that the existence of competition improved the government system, though how much better is not obvious.

There is an area, though, where the government system is quite low quality but people still attend it: public schools. Ignore your personal experiences for the moment. People complain a lot more about public schools than they do about private ones. And while I seem to remember some data that, like FedEx, private schools improve their government counterpart, again the degree is difficult to pin down.

How is this possible? How are public schools so popular but so bad? There's lots of possible reasons but one reason sticks out: it's really cheap. In fact, baring fees and supplies, it's free. Those costs are then burdened onto everyone else and the public subsidizes a low quality service. There is some value to public schools, of course, which is why people still send their kids there. Everyone else, including private schools, indirectly pays for a product they either don't value that much or compete with. So is the nature of taxes.

Health care risks walking down the same path. In fact, it already has. Medicare and Medicaid, by law, buy hospital services at about 20% less than the cost to the hospital. It is one of the reasons why everyday objects, like Tylenol, run several dollars a pill. Hospitals have to make up the difference somewhere. Adopting this policy for everyone follows depressingly close to Bastiat's take on government: "Government is the great fiction through which everybody endeavors to live at the expense of everybody else." A great fiction indeed.


Anonymous said...

Public schools are not free.
You know better than that.

David said...

They are free (or at least tremendously reduced in price) from the perspective of the family getting the good.

Anonymous said...

what does your data show for the annual per student cost in the public schools? I'm not buying even the "tremendously reduced in price" gammit. Reduced as compared to what? Private schools? Come on, admit Private schools do a better job at less expense. The teacher's unions have hamstrung public education so people are getting less for their money and it cost more than the private sector. UB

Sue said...

public schools are not free... just like everything else