In the ongoing health care debate, it is often difficult to understand the complexity of the problems that are going to be caused by rising health care costs over the next few years. With the population aging and programs like Medicare quickly running out of funds, there are few easy answers about how to effectively manage the costs associated with health care over the next several decades. However, there are some proposed "solutions" that fail to address the undeniable economic realities of health care costs. In a thoughtful "Wall Street Journal" column from yesterday, Arthur Laffer discussed the economic realities of health care and how liberal health care reform does not address those realities.
Laffer wrote the following:
"The health-care wedge is an economic term that reflects the difference between what health-care costs the specific provider and what the patient actually pays. When health care is subsidized, no one should be surprised that people demand more of it and that the costs to produce it increase... The bottom line is that when the government spends money on health care, the patient does not. The patient is then separated from the transaction in the sense that costs are no longer his concern."
Laffer later noted that Obama's proposed plans will increase the health care wedge and raise the cost of health care over the long term. Laffer's analysis sounds simple but such a conclusion is often undermined by liberals who believe that the government will create a more fair health care system for the American people. Instead of debating this conclusion, many on the left are trying to have a debate about who is behind recent town hall protests and whether or not the protestors at those events are speaking on their own accord or on behalf of large conservative groups. Liberals advocating for health care reform do not want protest groups getting in the way of elected officials and their constitutents, one would assume. However, shouldn't those same liberals want no one, including the government, to get in the way of constituents and their health care?
At the end of the Laffer quote noted above, Laffer wrote that "when the government spends money on health care, the patient does not." It is a clear statement about the reality of health care but the deeper reality behind that statement is that when the government is spending money on health care, that money is coming from people. Those people may be patients or they may be healthy but someone is paying for health care through taxes, fees or through other means. There will continue to be a cost to pay for health care in the future. The question that Laffer asks and the one that liberal advocates of health care reform should answer is what relationship that cost will have to the patient who is utilizing the health care and what cost will be passed on to the taxpayers?