With the health care debate on everyone’s mind, this quote has been floating around some of my friends on the social networks:

“No one should die because they cannot afford health care, and no one should go broke because they get sick. If you agree, please post this as your status for the rest of the day.”

To that I say “of course”.

The question is, by what means do you want to establish affordable healthcare? Do you want to use the magical fairy dust method, which somehow brings about great service and better care, covers more people, and doesn’t cost a dime? Or, do you want to endorse the only method of reducing costs that has ever worked in the real world, the free market?

Some will say, “wait a minute, isn’t it the free market and the greed of corporations that caused ridiculously high prices in the first place?” No, it is not. There is no free market in health care right now, so the free market cannot be the cause of the high prices. Here’s an example to illustrate the point.

Let’s talk about a simple commodity: food, specifically fast food. Right now as consumers we have nearly limitless choices of places to go, and a broad variety of menu options at each restaurant. If prices at one place get too high, we go across the street. If the deluxe meal is too pricy, we forego the fries and drink, or choose from the dollar menu instead. Fast food is therefore inexpensive because of a relatively free market.

But if government regulated fast food like it does health care, it would be a very different story. We would first be forbidden from crossing the street to buy our lunch. We would be forced to take the one on our side of the street. Next we would be unable to choose among the various menu items and would be compelled to take the standard meal. Government mandates would require us to purchase the fries and drinks even if we didn’t intend to eat them. Prices would skyrocket due to few alternatives and coerced food purchases. This is the way health care is handled now, and this is why there is no free market in health care.

This situation came about due to building government intervention over many decades. During World War II the government engaged in wage and price fixing. This forced businesses to offer health benefits to attract employees, since they could not offer higher salaries. Prices rose as a result of ever increasing demand as more and more employers provided coverage. Higher prices led to a problem where retired people who didn’t work could no longer afford health care costs. The government’s solution was to institute Medicare, another program where artificial demand grew exponentially because there were no market controls. Then came Medicaid. Due to lobbies from various groups like big pharma and the AMA, government regulations restricted supply just as demand was ballooning, and this soon created a very un-free market that only helped to super inflate prices.

This was great for insurance companies, because if health care prices become unreasonable then it means you will have to purchase insurance. So the two industries have driven prices almost off a cliff. But instead of understanding that the solution would be to remove government involvement in health care, there are people who want to just build a higher cliff.

The $20 Snickers Bar

Okay, so here is the situation we’re in right now. There is a Snickers bar in front of you. You go to grab it, and I say, “hold on there big fella, that will be $20″. You say, “$20 for Snickers bar!? That is way, way too expensive!” That’s when I get a big grin and say, “that’s right, and I am with the government and I am here to help”. When you hear these words, it’s always a good idea to run.

Now, here come the solutions.

The Bigger Government Solution: Regulations and barriers to entry removed the supply of many colorful choices that used to be available. They then realize it’s now too expensive for you (notice the addition of “for you”) so they now propose to charge each of your friends $1, and then you can get that $20 snicker bar for only $1. Your friends are a little upset, and you have not actually changed the ridiculous price, but in some strange logic it has now been made “affordable”. In fact the $20 Snickers bar will become even more expensive as the government collective increases demand while even tighter regulations strangle supply.

The Free Market Solution:We realize it’s too expensive, so we remove the barriers to healthy competition and consumer choice. By keeping the government out of it and opening the free market, the next thing you know people are offering you Snickers bars for $10, then $5, then a Three Musketeers for $2, then a Milky Way for $1 and some guy shows up offering you a Snugget bar for $.50 (I have no idea what a Snugget is…but it sounds delicious).