Posted by: erichosemann | November 7, 2009

Soda Pop and Health Care

Here is a neat example of how much diversity can exist in a free society. Every soda in Galco’s Soda Pop Stop is made for someone who likes to drink it.  Cucumber soda.  Rose soda. Banana soda.  Coffee soda.  Sodas for every taste and budget.

The market for microbrewed beer is much the same.  Enormous variety, ample choice for everyone.

Why can’t provision of health care follow the same rules?  There is diversity in the health care market, certainly, but it’s obvious that there isn’t enough to satisfy every taste and budget.  People go without, or pay too much.  And now our elected officials are on the cusp of creating something that will make more people go without and pay too much.  Instead of creating more diversity they are going to abolish what little there is.

[BTW–I’m not blind to the irony of using a wonderland of soda to prove a point about socialized medicine.  As John Nese says–instead of drinking a diet soda, drink less of regular soda.  Sage advice for caring for one’s health.]

If you don’t believe my contention that a federally subsidized “public option” will erode economic diversity, listen to this short segment from NPR’s All Things Considered. “In years past, I’ve actually had to close our business down, because I know that we are capping our income.  As crazy as that may seem, it’s more important to us to have the health insurance than the extra $1000 a month.”  That quote is from a woman interviewed in the segment whose family is enrolled in Washington state’s state-subsidized health care insurance program.  It doesn’t sound crazy at all–it’s perfectly rational for her to do so.  She’s simply doing what the state tells her to do: make less money, and we’ll subsidize your health care.

While listening to that segment, I knew I was going to hear something like the above quote.  I knew, once I learned that enrollment in Washington’s insurance program was based on ability to pay, that those enrolled would do whatever was necessary to keep their insurance, even if that meant being less productive.  And sure enough, that poor woman admits that she will do whatever it takes to keep her “cheap” insurance, even if it means she must sell fewer of her husband’s hand-made kaleidoscopes.

Here’s the thing: if she forces herself to sell fewer of them, she’s not meeting the demand for hand-made kaleidoscopes.  There is still unsatisfied demand for these things out there, but because she’s committed to keeping her state-funded insurance plan, she can’t meet it.  So demand for hand-made kaleidoscopes goes unfulfilled.  What do you think happens to the price of kaleidoscopes?  It increases.  Demand for them hasn’t changed, but market supply has shrunk.

Now imagine if the producers of every soda in Galco’s Soda Pop Stop had the same issue.  They needed to keep their sales artificially low to satisfy the income criteria for enrollment in their state-subsidized insurance programs.  Do you think there would even be such a place as Galco’s?  At the very least, the inventory at such a store would shrink considerably, and soda prices would increase.  Apply this same reasoning to every other commodity you can think of–beer, artisan cheeses, arugula, jeans, tomato paste, car tires, mustard–and the world starts to look a lot less diverse.
You can believe what you want about the vaunted “public option,” but don’t for a moment believe it will mean increased choice.

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