Ezra Klein’s recent post’s title, You Don’t Know What Health Costs” is true and that itself is a great argument for healthcare reform. I wonder if he knows just how true it is. A more complete statement would be:
You don’t know what health costs. Nobody does because under our current system price discovery is impossible.
What is the market clearing price for an internist? For a stay overnight in the hospital? For a dose of Monopril?
Nobody knows the answer to any of those questions because the market is so fixed, regulated, supported, subsidized, and restricted that it’s impossible to determine the answers. In the absence of any interference in the market the prices might be half what they are now. Or they might be double. And to the best of my ability to determine there isn’t anything in any either the House bill, H. R. 3200, or Max Baucus’s bill that would materially change that.
Those who argue that a public option is a necessity for reducing costs are essentially proposing that they’ll fix costs in such a way that they go down. If the set price is lower than the market clearing price, it will create a shortage. If the set price is higher than the market clearing price, it will create a glut and will be a sub-optimal use of resources, stunting economic growth.