A friend of mine recounted a conversation with his 6-year-old granddaughter about helping poor people. Her solution was direct and eloquent. “If they don’t have enough money, let’s print more money and give it to them. Then they won’t be poor anymore.”
How does granddad explain to a child that her sweet but fanciful plan not only doesn’t work but would plunge us into economic trouble, hurting a lot more people? How do you explain to the simple and well-intentioned that we just can’t will happy outcomes?
How do we explain that to our governor?
Last week Gov. Jared Polis declared that “the days of insulin price gouging are over in Colorado” as he signed a bill making our state the first in the nation to cap the price of insulin insurance co-payments.
Co-pays for insulin have been running between $600 and $900 according to KCNC-Channel 4. The democratic socialists in the legislature and our “libertarian” governor have decided the right price for insulin shall never be more than $100 for a month’s supply, ever. Good thing they are so very smart and know what prices should be.
During the depression, President Franklin D. Rosevelt knew what the price of gold should be. He outlawed the private ownership of gold bullion and required people to turn in their gold in exchange for $20.67 an ounce. (Adjusted for inflation that would be about $400 an ounce today even though the current market price for gold is almost $1,300.) Fun fact, after FDR confiscated it, he then set the price of gold at $35 an ounce, giving the feds a tidy little profit. It’s good to be king.
President Richard Nixon, being smarter than the market, imposed wage and price control to stop inflation. Imagine the surprise when it led ranchers not to sell their cattle and to consumers emptying store shelves.
The desire to control prices is overpowering for those whose intelligence is vastly superior to the complexity of the market place. And when those smarter-than-the-market folks find themselves in power, it’s impossible to contain themselves.
Sadly, the laws of supply and demand can never be broken, only disguised.
The great economist Henry Hazlett had a saying, “Finish the equation.” When you distort the market to benefit a special interest, no matter how sympathetic, someone has to pay for it.
Polis’ manipulation is welcome news to most diabetics needing insulin, but finish the equation. Their price break will be paid for by increasing costs on all other policyholders.
Polis just increased your healthcare costs. To everyone’s wallets, except people with diabetes, this is a tax increase.
Colorado’s healthcare system already has enough government-mandated distortions. Trying to help by adding even more market manipulations will only create a cascade of market obstruction further separating consumers, including insurance companies, from the true cost of what they are buying.
Pricing is the key feedback signal in a market. Price is information. Price tells investors when it’s time to put their money into a venture, like making more insulin, and when not.
So, what information, or misinformation, is Colorado now sending?
As Polis’ dream of socialized healthcare, billed as “Medicare for all,” keeps grinding toward reality, this game of political favoritism in healthcare will become the norm. The key to getting breaks for one’s medical condition will be for those with the condition to ingratiate themselves to those in power.
Those with more friends in power will get better deals at the expense of those without political sway. Less politically favorable conditions will be denied the special breaks.
Remember the beginning of the AIDS outbreak? Some moralists thought this was God’s vengeance for an evil lifestyle. How hard is it to imagine a moralistic legislature (think Bible-belt) letting AIDS patients pay more for meds so other groups can pay less?
People with diabetes aren’t the only people with chronic conditions requiring pricey meds. Now that we’ve capped the price of insulin at a sixth of its going rate, those with cardiovascular disease should demand the same. Don’t good folks dealing with Alzheimer’s, asthma, arthritis, cancer, and obesity deserve special dispensation too?
Polis and his gang fully understand the game they’re playing. They know costs will be passed along to policyholders until the cost of health insurance is so crippling that government-run healthcare will seem like a deal.
And healthcare will never be more expensive than when it’s “free.”
Jon Caldara is president of the Independence Institute, a free market think tank in Denver.
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