HICKS: Health care experts make poor economists

Back to TopCommentsE-mailPrintBookmark and Share
Mike Hicks

In almost every place that two or more Americans gather, health care is debated. Because the bills before Congress are inaccessible, the debate has shifted instead to principles such as the role of government and individual freedoms.

I think this a healthy thing. But for advocates of the bills before Congress, it exposes some tough questions.

Despite what you may hear, we have universal health coverage in the United States through a combination of private insurance, public assistance and regulatory restrictions on hospitals. The structure of this explains some of the growth in health care expenditures, but it is not all of the explanation.

Economists have long known that we spend an increasing share of our income on health care as we become wealthier. This is the textbook definition of a luxury good.

In truth, health care is a fairly simple personal service that is complicated by government rules and institutions (like the American Medical Association). Health care financing—which is part, but not all of the issue at hand—is very complex.

Despite the fundamental simplicity of the health care supply chain, advocacy research on the issues is confusing and often quite bad. I think this is because so many in health care also dabble in economic policy. It is as unwise to go to an economist for surgery as it is to visit a physician about economics, though the immediate results are less unpleasant.

My favorite example is the much-touted “health care costs” of smoking, which are said to run into the hundreds of billions of dollars annually. This is true, of course, but only if you would not otherwise die. Most of us will, and often of something more expensive to treat, such as old age.

The truth is we will spend more, not less, on health care as we become richer—and live to be older. We Americans have been doing both for well over 200 years. But, many folks do not like the way health care dollars are spent. We live in a world of scarcity, where everything is rationed. Free markets, not government commissions, will always be better at it. So, I think households are best suited to make these choices.

This brings us to the final folly of the health care debate—cost.

The bills before Congress are touted by their advocates to actually cut the cost of health care through a combination of regulatory changes and a government insurance option. The Congressional Budget Office and everyone with a lick of common sense disagrees.

The real anger, though, is aimed at the government insurance option. There is good reason for this, because any government insurance option can quickly crowd out all other forms of health-care delivery except for the very, very rich.

I am sure there is much good in the bill and, to be sure, health care insurance rules can use some tweaking. But if you like the government-insurance option, you no doubt think Fannie Mae and Freddie Mac were great for housing markets.•
Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. I took Bruce's comments to highlight a glaring issue when it comes to a state's image, and therefore its overall branding. An example is Michigan vs. Indiana. Michigan has done an excellent job of following through on its branding strategy around "Pure Michigan", even down to the detail of the rest stops. Since a state's branding is often targeted to visitors, it makes sense that rest stops, being that point of first impression, should be significant. It is clear that Indiana doesn't care as much about the impression it gives visitors even though our branding as the Crossroads of America does place importance on travel. Bruce's point is quite logical and accurate.

  2. I appreciated the article. I guess I have become so accustomed to making my "pit stops" at places where I can ALSO get gasoline and something hot to eat, that I hardly even notice public rest stops anymore. That said, I do concur with the rationale that our rest stops (if we are to have them at all) can and should be both fiscally-responsible AND designed to make a positive impression about our state.

  3. I don't know about the rest of you but I only stop at these places for one reason, and it's not to picnic. I move trucks for dealers and have been to rest areas in most all 48 lower states. Some of ours need upgrading no doubt. Many states rest areas are much worse than ours. In the rest area on I-70 just past Richmond truckers have to hike about a quarter of a mile. When I stop I;m generally in a bit of a hurry. Convenience,not beauty, is a primary concern.

  4. Community Hospital is the only system to not have layoffs? That is not true. Because I was one of the people who was laid off from East. And all of the LPN's have been laid off. Just because their layoffs were not announced or done all together does not mean people did not lose their jobs. They cherry-picked people from departments one by one. But you add them all up and it's several hundred. And East has had a dramatic drop I in patient beds from 800 to around 125. I know because I worked there for 30 years.

  5. I have obtained my 6 gallon badge for my donation of A Positive blood. I'm sorry to hear that my donation was nothing but a profit center for the Indiana Blood Center.