Obamacare and the Laws of Supply and Demand

Posted by PITHOCRATES - September 30th, 2013

Economics 101

A Scarce Thing has a Higher Price because Everyone that Wants One can’t Have One

Economics is the study of the use of scarce resources.  Scarce resources that have alternative uses.  For example, we can use corn for human food.  Animal feed.  We can make bourbon from it.  And we can even use it for fuel to power our cars.  So there are alternative uses for corn.

And corn is scarce.  There is not an unlimited supply of it.  During the drought the United States suffered in 2012 farmers brought in a greatly reduced corn harvest.  Which caused corn prices to rise.  Per the laws of supply and demand.  If demand remains relatively constant while the supply falls the price of corn rises.  Why?

Scarce things always have a higher price.  A painting by Vincent van Gogh has a very high price because each painting is a one of a kind.  And only one person can own it.  So those who want to own it bid against each other.  And the person who places the greatest value on the painting will get the painting.  Because they will pay more for it than anyone else.  Whereas no one would pay for a cartoon in a newspaper.  Because they are not scarce.  As they appear in every newspaper.  Newspapers we throw away or put in the recycling tub every week.  Something that would never happen with a Vincent van Gogh painting.

Price Controls fail because People won’t Change their Purchasing Habits when Buying Scarce Resources

Government spending exploded during the late Sixties and early Seventies.  Paid for with printed money.  A lot of it.  Igniting inflation.  Causing a great outflow of gold from the country.  And with inflation spiking prices soared.  Rising prices reduced the purchasing power of American paychecks.  Add in an oil shock and the people were reeling.  Demanding relief from the government.

With the price of gasoline going through the stratosphere President Nixon stepped in to fix that problem.  Or so he thought.  First he decoupled the dollar from gold.  So they could print more dollars.  Causing even more inflation.  And even higher prices.  Then to solve the high prices Nixon implemented price controls.  Setting a maximum price for gasoline.  Among other things.  Sounds nice.  Wouldn’t you like to see gas prices held down to a maximum price so it consumed less of your paycheck?  But there is only one problem when you do this.    People won’t change their purchasing habits when it comes to buying scarce resources.

Why is this a problem?  Because the oil shock caused a reduction in supply.  With the same amount of gas purchasing with a reduced supply the supply will run out.  Which is what happened.  Gas stations ran out of gas.  Which they addressed with gas rationing.  Which led to long gas lines at gas stations.  With people pushing their cars to the pump as they ran out of gas in line.

Obamacare will Fail because no matter how Good the Intentions you cannot Change the Laws of Supply and Demand

Obamacare is increasing the demand for health care.  By providing health care for millions who didn’t have health insurance before.  So demand is increasing while supply remains the same.  There is only one problem with this.  With more people consuming the supply of health care resources those health care resources will run out.  Leading to rationing.  And longer wait-times for health care resources.  Just like gasoline in the Seventies.

One of the stated goals of Obamacare was to lower health care costs.  But what happens when you increase demand while supply remains relatively constant?  Prices rise.  Because more people are bidding up the price of those scarce resources.  Obamacare may try to limit what doctors and hospitals can charge like they do in Medicare, but everything feeding into the health care industry will feel that demand.  And raise their prices.  Which will trickle down to the doctors and hospitals.  And if they can’t pass on those higher prices to whoever pays their bills they will have to cut costs.  Which means fewer doctors, fewer nurses, fewer technicians and fewer tests and procedures.  Which means rationing.  And longer wait-times for scarce health care resources.

President Obama may say he’s going to provide health care to more people while cutting health care costs but the laws of supply and demand say otherwise.  In fact the laws of supply and demand say Obamacare will do the exact opposite.  So whatever rosy picture they paint no one will be linking arms and singing Kumbaya.  Unless they like paying higher taxes, waiting longer and traveling farther to see a doctor.  Which is what is happening in the United Kingdom.  And in Canada.  Which is why Obamacare will fail. Because no matter how good the intentions you cannot change the laws of supply and demand.



Tags: , , , , , , , , , , , , , , , , ,

Obamacare will likely Include a Liverpool Care Pathway type of Death Panel

Posted by PITHOCRATES - November 10th, 2012

Week in Review

There are no death panels in the NHS.  At least, by name.  Though some would say the Liverpool Care Pathway is a death panel (see NHS constitution reform to include new end-of-life care commitments posted 11/4/2012 in the guardian).

New commitments on end-of-life care and single-sex wards are set to be included in the NHS constitution under proposals unveiled on Monday…

Rules on involving patients and families in treatment decisions are being strengthened following an outcry over secretive use of the Liverpool Care Pathway which involves withdrawal of fluids and food…

Imelda Redmond, director of policy and public affairs at Marie Curie, said: “The Liverpool Care Pathway has enabled thousands of people to experience dignified care in the last hours and days of life. It was developed to spread the hospice model of end of life care into hospitals and other healthcare settings.

“We have become increasingly concerned about the damaging media coverage which reports negative experiences of people in hospital and the end of life. That is why we are calling for the next independent national audit to be brought forward so that we can identify as soon as possible where these failings are taking place.

One thing the British have learned is that sick people who don’t have the decency to die quickly cost a lot of money.  And these sick people who refuse to die quickly consume a lot of NHS resources.  Resources that they are no longer paying for as they have long since left the workforce.  So some family members have had their loved ones placed on the Liverpool Care Pathway even though some questioned why later?  Was the decision made in the best interests of the patient consuming all of those health care resources?  Or was the decision made in the best interests of the health service trying to make those limited health care resources stretch as far as possible?

They don’t call it a death panel.  But when it appears they’re choosing to let some people die for economic reasons (to stretch those limited health care resources as far as possible) one can’t help but think of the Liverpool Care Pathway as a death panel.  Hence the revision of the NHS constitution.

Obamacare doesn’t include any death panels.  By name.  But it includes a lot of ‘as the authority shall determine’.  Which means some bureaucrat has the last say on spending decisions.  And if those spending decisions involve the withdrawal of fluids and food it is a life and death decision.  Exactly the kind of decision a death panel will make.



Tags: , , , , ,

People going to the Accident and Emergency Departments for Routine Health Care in the NHS

Posted by PITHOCRATES - October 20th, 2012

Week in Review

One of the arguments for passing Obamacare in the US was that we were already paying for the uninsured via costly emergency room visits.  Overburdening our emergency departments.  And denying valuable resources to those who truly needed them.  For looking at a child with a sore throat diverts valuable health care resources from accident victims and people suffering medical emergencies like heart attacks.  Obamacare was going to fix that.  And make our health care system as perfect as it is in the NHS.

But it is not the utopia Americans think it is in the NHS.  As an aging population is causing enormous cost pressures on their limited resources leading to budget cuts, increasing wait times, rationing of services and doctor & nurse shortages that are making it difficult to staff both emergency and non-emergency health care facilities.  Causing people to still turn to the emergency department (A&E in the UK) for routine care (see Rise in child throat infections treated in hospital, study finds posted 10/19/2012 on BBC News Health).

Children admitted to hospital with throat infections have increased by 76% over the past 10 years, according to a study from Imperial College London…

Pressures on doctors and a maximum waiting time in A&E could be the reason behind the increase in admissions…

The researchers found no evidence of a link between tonsillectomy trends and admission rates for acute throat infections.

Instead, they suggest that the sharp rise in hospital cases of children with throat infections is probably explained by the large number of children being taken to A&E instead of to see their GP, especially if the infection flares up outside surgery hours.

Dr Elizabeth Koshy, lead study author from the school of public health at Imperial College London, said the rise in hospital admissions for this type of infection was concerning.

“Our findings relating to short hospital stays suggest that many of the children admitted with acute throat infections could have been effectively managed in the community.

“Our study highlights the need to urgently address the issue of healthcare access, with improved models of integrated care within primary and secondary care, to avoid potentially unnecessary hospital admissions for relatively minor infections in the future.”

The introduction of a four-hour maximum waiting time in A&E, in 2002, could have led under-pressure doctors to admit children with less serious throat infections, she said.

Even a national health care service doesn’t eliminate people using emergency departments for routine care.  Because with cuts in the NHS budget closing local facilities or reducing their hours of operation where else are the people to go?  To the only place that is open.  The emergency department.

So national health care has come full circle.  At least in the Obamacare argument.  We need national health care to get people to stop using emergency departments for their routine health care needs.  Trying to offer everything to everyone and an aging population has forced budget cuts and the closing of facilities that provide for routine health care needs.  Forcing these people right back to where the national health care service was trying to get them away from.  Thus they have the same problem as they did before.  And as they do in America.  Only with a massive national health care system on top of all their other problems.  Guaranteeing further cost pressures, closures and more crowded emergency departments.

Proponents of Obamacare should heed this lesson well.  For Obamacare will not be the utopia they think it will be.  In fact, it will be worse than the NHS.  Because America has about five times the population of the UK.  And will have about five times the cost pressures the UK has.  Calling for even more budget cuts, increasing wait times, rationing of services and doctor & nurse shortages that will make it more difficult to staff both emergency and non-emergency health care facilities.  Leading to even more overcrowded emergency departments.  Which will make health care more costly and less loved than it ever was before Obamacare.  Making the case for repealing Obamacare ever more appealing the more we learn about the reality of national health care from the NHS.



Tags: , , , , , , , , , , , , , ,