No Such Thing as a Free Lunch—or Free Healthcare

Posted By Dr. Tracy C. Miller On October 15, 2010 @ 12:00 am In Featured on Front Page,The Big Picture | 3 Comments

A few days ago, I received an email from the daughter of our congresswoman—a mass email, of course. She explained that because of healthcare reform, which her mother supported, she no longer had to pay a $25 copayment for each prenatal appointment. This will save a family “that lives paycheck to paycheck” over $500 per year.

Such savings make healthcare reform sound like a wonderful gift until you stop to reflect: Who pays the $25 that the consumer no longer pays each time she visits the doctor?

The answer: Someone. Specifically, for those who have health insurance, the elimination of co-pays will mean higher premiums. In other words, paychecks will become smaller as insurance rates rise to cover this new government mandate.

Proponents of this new rule emphasize that if people do not have to pay for preventative care, they are less likely to require more expensive hospitalization or treatment in the future. Thus, mandating no co-pays on preventative care may reduce healthcare expenditures in the long run.

Unfortunately, this line of argument is fundamentally flawed. It assumes that the government knows or can find out how much preventative healthcare each person needs and mandate insurance companies to pay for the required number of visits. The number of doctor visits covered as preventative healthcare will be a political decision, and self-interested medical professionals will undoubtedly play an important role in that decision. Thus, we should not be surprised if the government mandates more free preventative care than would be cost effective for most patients.

We live in a world of scarcity. Money spent on healthcare cannot be spent on something else. If an insurance company provides a certain number of “free” doctor visits, each person covered by insurance will pay for the number of times the average person visits the doctor, regardless of how often the person visits the doctor.

One person’s visit to the doctor has an imperceptible impact on the per-capita cost of healthcare borne by a large insurance company. Thus, the monetary cost to each patient for a doctor visit for “preventative care” is effectively zero. The quantity of healthcare demanded will be greater at a zero price than at a $25 price. Since almost everyone will demand more healthcare at the zero price, insurance premiums will rise for everyone, and because more healthcare is being consumed, the total cost of healthcare will be greater than if everyone had to pay a $25 (or higher) co-pay.

If you are covered by a typical health insurance plan which requires you to pay part of the cost of each doctor visit, Congress has not saved you money by passing healthcare reform. Instead, it has mandated that you spend more than you might choose to spend on so-called “preventative” healthcare. If you don’t pay for it up front with co-pays, you will pay for it through higher premiums. The only way to keep premiums from rising is if the “free” care is taxpayer funded, and then someone still pays for it.

There is no free lunch, and there ain’t no free healthcare either.

Instead of “Obama Care,” which takes away our freedom, what we need is healthcare reform that gives the consumer more freedom to decide how much healthcare to purchase with his own money.

Dr. Tracy C. Miller is an associate professor of economics at Grove City College and contributing scholar with The Center for Vision & Values. He holds a Ph.D. from University of Chicago.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.