More on the hilarity of "mixed economies": Hawaii quits out on child healthcare
Apparently, Hawaii’s hailed “universal child health care” initiative has been, well, uninitiated.
HONOLULU – Hawaii is dropping the only state universal child health care program in the country just seven months after it launched.
Gov. Linda Lingle’s administration cited budget shortfalls and other available health care options for eliminating funding for the program. A state official said families were dropping private coverage so their children would be eligible for the subsidized plan.
“People who were already able to afford health care began to stop paying for it so they could get it for free,” said Dr. Kenny Fink, the administrator for Med-QUEST at the Department of Human Services. “I don’t believe that was the intent of the program.”
Basically, this is an illustration of why mixed economies don’t work effectively. If the government guarantees a good or service of certain value to those who don’t have it, it will be exploited. More broadly, any entitlement system will be exploited because it’s simply economically stupid to do otherwise. If you can foist the cost of anything you need onto someone else and you don’t notice or have no moral qualms about the force involved, why wouldn’t you?
In terms of health care costs, the long-run result of this kind of health care plan is a distribution of health care costs precisely along the lines of the discriminatory tax system. In other words, what you end up “paying” for healthcare is a direct function of your politically-determined tax burden, not your level of health care consumption. And where individuals can consume without cost or consequence to themselves, there will naturally be an explosion of cost and consequence.
So what then must you do to preserve the system? Regulate individuals’ behavior? If smokers have to pay for their own healthcare, that’s an incentive against smoking. If someone else is going to pay the difference between the smoker’s tax contribution and their health care needs, then that’s simply going to fail to discourage smoking. OK, so regulate smoking. Tax cigarettes.
But then what about dietary considerations? Shall we regulate that as well, since people’s dietary decisions ultimately play a large role in determining their lifetime health care costs? Sure; regulate that, too.
What about genetic considerations? If some couples don’t have to pay for healthcare on their first two genetically ailing children, then they can afford two more that they otherwise wouldn’t have had if they had to foot their entire healthcare bill. Regulate that, as well?
It is clear that with an entitlement system like health care, one is put in the ethically compromising position of deciding what’s more important: sustaining the system of entitlements’ ability to meet its obligations, or allowing individuals to live their lives with their own bodies how they please. The two form a source of constant tension. And it’s not surprising: the former is socialism, the latter is the free market.
Economically, for reasons like the the craziness above, mixed economies simply are not sustainable in the long run. The moment a system of entitlements is put in place, incentives for good behavior go down for those who don’t have to pay for the consequences of their actions. This results in the system becoming costlier, to the point where it can not be sustained as is. At that point, there are two options: end the system or try to legislate cost-reducing good behavior (or against cost-raising bad behavior). Forgoing option 1, which Hawaii quite wisely took, we must then ask the question: does legislating good behavior work? Further, is it possible to not only legislate, but enforce every behavior which has a significant effect on healthcare costs? And if it is possible, are the costs of doing so even higher than the costs of letting bad behavior grow freely?