The American healthcare system is broken, and a simple economics distinction can fix it: “scarcity and abundance.”
George Gilder (the New York Times bestselling author, economist, and writer of the foreword for my book) taught me that wealth flows to organizations or individuals who squander the abundant resource and protect the scarce. I’ve discovered that sometimes it’s really hard to figure out which is the abundant and which is the scarce, especially when there’s a technology shift.
In healthcare, it’s not hard at all to figure out what is scarce and what is abundant. Senior, qualified, research-trained doctors are scarce. Demand for healthcare services is growingly abundant. This collision of inadequate supply and a substantial increase in demand has been occurring for many years, even decades.
In a free market, when demand exceeds supply, price rises.
But our healthcare system is not a free market.
Demand cannot be reduced, and supply cannot be increased because of years of inappropriate regulations on insurance companies, doctors and hospitals.
So what happens when markets aren’t free, when price can’t adjust, when supply and demand cannot be balanced? Well, that’s called the VA hospital or the Canadian healthcare system.
When demand exceeds supply and prices can’t change, then the market mechanism for allocation is rationing the scarce resource across abundant demand. Since we have to take turns on the scarce resources, we find people in the VA hospital system and in Canada dying while waiting to see a doctor. Perhaps one of the cruelest methods of allocating scare resources is rationing by time, but that’s what we have.
This brings us back to the “just one thing” of this discussion – scarcity and abundance. The history of my life has been to try and figure out what’s scarce and what’s abundant and to prepare myself for those shifts.
What I’ve discovered in my own household is that throwing money at the healthcare problem doesn’t solve the problem. As consumers of healthcare, we opened our wallets but we couldn’t open them enough—we weren’t allowed to open them enough—to get a satisfactory resolution. Even our money can’t solve the problem of scarcity and abundance.
Our experience is a microcosm of the US healthcare crisis as a whole. If an abundance of money can’t solve the problem of scarce healthcare resources for one family, how can an even greater abundance of money from government taxation solve it for 126 million households?
The answer to this problem, the fix to our broken healthcare system is to let free market forces realign supply and demand. Just look at how well that’s worked for both patients and doctors in those medical systems where the customer and the payor are the same: Lasik eye surgery, veterinary care and optional cosmetic plastic surgery. Free market forces have assured these are abundant, not scarce, resources.