Sunday, July 12, 2009

Discuss and contrast the problems of a tax basis for financing universal health coverage and an employer based financing of such a program.

P.J. O'Rourke quipped "If you think health care is expensive now, wait until it is 'free'." National healthcare is one of the most destructive enemies of a market economy. The problems regarding the tax base to finance national healthcare are pretty straight forward. Like any other subsidy or price control, the healthcare market will achieve unprecedented and severe inefficiencies that will be characterized by service and labor shortages, excessive costs, and a crippling tax burden.

Like food stamps, bank bailouts, or any other subsidy funded by taxes taken from productive individuals, the impact on the market economy will be enormous. More and more taxes will be withdrawn from the economy to funds these giveaways that benefit certain groups, and are funded by others. Less income will be available for other goods and services, and laborers will have to work that much harder to support the less productive. The results would be catastrophic.

Employer based financing, while better than national healthcare, is still inefficient. The burden is shifted from the taxpayer to the employer. The employer must now raise prices, cut jobs, or take other measures necessary as a result of the requirement to flip the bill for his employees. This requirement is usually because of an intervention from government, which remains the undisputed champion of creating economic efficiency.

The ideal system, which used to exist in the US, is a market system unhampered by the government. Individuals in a free market, paying for services rendered from the providers they choose. Continuing on the path we are currently on will have dire consequences, in the trillions and trillions of debt that must be paid for.

This USA Today article from 2008 spells some of this out:
http://www.usatoday.com/news/washington/2008-05-18-Redink_N.htm

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