The Health Care Dilemma

A follow-up on last week’s post on the myth of American overconsumption, the Wall Street Journal has two extended articles which illustrate some of the depth of the US health care crisis. Readers will recall Michael Santoli’s assertion that most of the growth in consumer spending over the last few decades was due to rising health care costs, not wanton consumerism. Maybe Santoli is onto something:

No easy answers wait for us at the end of this debate. The right argues vehemently against a public insurance option, which they claim would disadvantage the private insurers in the industry. But we’ve listened to these same people assert that the private market is much more efficient than the public sector, ad nauseum. Trust me, I live in California, the poster child for wasteful public spending, so I do not say this lightly, but the notion of efficient private markets has failed our health care system.

Put another way, private markets are very efficient at maximizing profits, not at maximizing system effectiveness. As an example, Microsoft’s efficiency in marketing its products has led to monopoly status in operating system and productivity software. Does this necessarily mean that Microsoft’s Windows software is the most efficient operating system available? No! In fact, Linux performs ably well, especially when one considers the fact that almost all PC hardware and programs are designed specifically for Windows, not Linux.

Companies are efficient at looking out for their own bottom line, as it should be. When I invest in an oil company, I do not want them wasting my money on building wind farms for the sake of the environment — investment and charity are two different enterprises. So industry giants like UnitedHealth Group (UNH) or Wellpoint (WLP) shouldn’t be blamed for the state of our health care system. Their job is to maximize profits, not necessarily our health or the health of the overall economy. And that is why the government may need to step in.

Whether President Obama has the stomach to take this debate as far as it needs to go remains to be seen.

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