Wednesday, March 17, 2010

Health care overhaul cost

There is a lot of talk about the healthcare overhaul and how expensive it will be for the tax payers to fund this overhaul. Yes, there is a cost to the government to fund this overhaul and ultimately all government costs will be borne by the taxpayers. But tracking the cost is more of an accounting exercise and masks the real issues with it. We are spending more on healthcare as a percentage of our income but that is not a bad thing. 100 years back, people spent a high percentage of their income on food. There were a lot of people working in the agriculture sector. We automated a lot of things in farming and so didn't need that many human resources to make the same or more quantity of food today. That meant the human resources could be used in some other actitivity of the economy and it did happen with more people working in the manufacturing sector. Now we are able to get our manufactured goods made from human resources outside the country and so the human resources inside the country can provide other services to the economy. We all want to keep our health in a good shape, live longer and demand health services towards achieving those goals. There is a large number of people in the economy who are providing those health services. Economy is ultimately about exchange of services and goods among the human population. and we as a population will spend a higher percentage of our income on things that we value more. The economy grows as the velocity of exchange of goods and services increases. The money we pay the health care system is in turn spent on providing salaries to the doctors, nurses, equipment manufacturers who in turn spend that money getting other goods and services from the rest of the population.

The question on providing health care services to everybody in the population is more about fairness. If I can shine a shoe twice as fast as another person, I expect to receive more goods or services in return compaed to the slower shiner. Should I subsidize the goods and services for the slow shiner? The amount of money a person has in a society in a way measures the value of goods or services the person has provided to the society. Should a person who has less money be able to get a similar health care services as a person with more money? In owning automobiles, a person with less money can buy a cheaper car and a person with more money can buy an expensive car. But there doesn't seem to be a cheaper or expensive version of healthcare services - can a person get a lower quality heart-bypass?

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