Andy Card recently said that healthcare is a want, not a need. He's half-right. All needs are also wants, really. What makes a want a need is that someone will pay any price to get it. In economic terms, that means that for a need, demand is inelastic. No matter how high the price rises, it will still be in demand until people run out of the money. A need means life or death.
When conservatives say that health care is a "want", what they mean is that it should be regulated by markets, like all our other needs, such as food, shelter, and so on. Below, I sketch a description of why healthcare is special, and why we should treat it specially. Others have elaborately explained why public healthcare is better in micro-economic terms: economies of scale, reduced load on businesses, larger risk pools, and so on. This is my attempt to explain why public health care is better in a universal sense as well.
Health care is a scarce good, and in our society, we ration scarce goods by increasing prices. That's normally a good and fair system, but healthcare is special: demand for it is "inelastic".
That means that even as health care prices increase, demand doesn't decrease. It's easy to see why: a dying man will gladly spend his last dime to extend his life . Of course, when prices rise high enough, demand does decrease. That decrease in demand is called "demand destruction". In healthcare, that demand destruction comes when more and more people simply run out of money to pay the increasing prices.
Now, you might say, "but the market will produce additional health care. Supply will increase, and prices will come down!". If this were any other good, you'd be right. But healthcare is special: demand is infinite and inelastic. No matter how much health care is available, people will still prefer to spend more of it. That's not the case for food, water, or shelter. Plus, not everyone can become a doctor; supply is inherently slow to increase.
You might chime in again and say, "that can't be right! If that were true, healthcare would be making a killing. But doctors and hospitals are struggling." The common refrain of malpractice insurance has little to do with that problem. Instead, the blame lies with the market-distorting insurance companies: as we all know, insurance companies essentially dictate payments to doctors and hospitals by their huge size, and that insurance companies profit by the arbitrage of insurance premiums and payments to doctors. Because demand for healthcare is inelastic, patients will pay insurance companies all they have. But insurance companies are under no such survival imperative, and therefore pay care providers as little as they can get away with. Doctors can't refuse insurance payments because they represent such a huge segment of their business. Patients cannot readily bypass the insurance system because a combination of factors makes a la carte extremely expensive.
In the end, prices remain sky-high because of inelastic demand, insurance companies reap huge arbitrage profits, and health care is rationed. The system worked, didn't it?
Sure it did. Health care was rationed. But we can achieve a better macroeconomic outcome. Here's why:
We can agree that a healthy society is a productive one. To a point, increasing a population's health will increase its overall prosperity. However, there comes a point past which increased healthcare spending doesn't yield an overall increase in prosperity. Let's call X the average per-person point of diminishing returns. Remember that demand for healthcare is infinite and inelastic. A person will always want more than X.
Here's the crux of my argument: those with resources will spend far more than X on healthcare, and this spending will push the price of healthcare up for everyone. As a result, prices will be too high for many people to achieve even X.
This effect is a drag on the entire economy for two reasons:
1. Because some people are too sick to reach their full productivity, the total amount of economic activity is reduced.
2. Some people spend more on health care than they get back in productivity, so that money is mis-allocated and (ignoring moral considerations), "wasted".
Consequently, market-based healthcare, due to extremely inelastic demand, results in severe misallocation of economic resources.
Here's what we can do about it:
Have the government directly guarantee that everyone receives enough to keep him healthy, i.e., X. In real terms, that means making sure people are treated for common illnesses, that they receive vaccinations and preventative care, and that they can have broken bones set and so on. Of course, we can't provide expensive treatments that don't help very much, even if we want to do that emotionally. But we can provide basic health care to everyone. The government providing this care makes good economic sense. It counteracts the tendency to mis-allocate resources that results in too many people getting too little care.
Yes, demand is still infinite and inelastic, but, because the government is such a large buyer, it can dictate terms in the same way insurance companies can today (and Medicare does), and thereby ensure that care will be available for the price it chooses. (Of course there is a price floor, but that floor is far lower than the market equilibrium price described above.)
Of course, the market dynamics we see today will apply to additional care, but that's not such a problem when everyone is guaranteed a basic standard of health.