Money and health insurance are inherently worthless
A recent Wall Street Journal op-ed, "Congress Can't Enact a Chicken" (WSJ 072621), offered Washington a very important lesson in basic economics. Unfortunately, this will fall on intentionally deaf ears in D.C.
Mistaking a proxy for the real thing is dangerous and can even be fatal. Monetary policy and health care are obvious examples, but hardly the only ones.
A dollar bill per se has no value. It has worth only through its buying power. People don't want money — they want and need the ability to purchase goods and services. A dollar is a medium of exchange. The dollar you hand a seller is a proxy for your buying power in exchange for a seller's product or service. Money is the means by which a transaction can occur between buyer and seller. Without the transaction, the dollar is worthless or, more precisely, useless.
Price is a signal between buyer and seller. It tells sellers what products to make, in what quantity, in competition with other sellers. Price tells buyers how much purchasing power they must give up to acquire the product or service.
When the government prints more dollar bills, bad things happen to people, both buyers and sellers, in particular with the Federal Reserve's "easy money" (low-interest rate) policy. By adding more fiat dollars — money that does not represent production — Washington raises the inflation rate, which reduces the purchasing power of every dollar. People have more dollar bills in their wallets, but they can buy less with them. Inflation increases sellers' costs, forcing them to charge more and to reduce their workforce just to stay in business.
Historians remind us of Germany's 1923 hyperinflation when it took wheelbarrows filled with Weimar Deutschmarks to buy food.
Money is the proxy or surrogate. Buying power is what we want. When Washington simply gives people more dollar bills, Americans lose the ability to get what they need: food, clothing, shelter, work, and recreation.
In health care, mistaking the proxy for the real thing can be dangerous — it has even been deadly. The surrogate is the insurance policy, the vaunted health care coverage that progressives want to make universal. What people want is access to necessary care, timely access to medical services and goods. As government increases free insurance, viz., Medicaid expansion, more people are covered, and access to care goes down. This happens for the same reasons as in economics.
To provide no-charge Medicaid coverage to people, Washington expends trillions of dollars to pay its bureaucracy and to compensate insurance sellers who manage financial risk. These health care dollars are taken away from providers of care. One study projected that Bernie Sanders's Medicare for All plan would have to reduce physician reimbursement by 40 percent. Instead of waiting four months to see a doctor, the wait could become years.
As Robert Merritt of the Heritage Foundation warned Congress in 2009 before the ACA was rammed down our throats, "You can't get more of something by paying less for it."
Both money and health insurance policies are proxies. What is desired is buying power and timely medical care. Conflating one with the other can be hazardous to wallet and health.
Deane Waldman, M.D., MBA is professor emeritus of pediatrics, pathology, and decision science; former director of the Center for Healthcare Policy at Texas Public Policy Foundation; and author of the multi-award-winning book Curing the Cancer in U.S. Healthcare: StatesCare and Market-Based Medicine.
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