Obamacare Will Cut Costs? The Market Shows Otherwise

One of the promises of Obamacare has been that it would reduce health care costs.  The day after the House passed the Senate’s version of health care reform, this headline says “Health Care Companies Pull Stock Market Higher.” Clearly, money is being bet on health care costs increasing, putting more money, not less, into the health care sector.

That should not be surprising.  In a free market setting, individuals decide how much they want to spend on various services, including health care.  With increasing government control, spending on health care will increasingly be a political decision, not the aggregation of individual decisions.  Health care companies already have their lobbyists, who pull for more generous reimbursements.  Consumers (the elderly on Medicare, the poor (and increasingly middle class) on Medicaid, etc.)  will exert political pressures for more benefits.  Political allocation of resources will surely increase costs.

Taxpayers won’t like the idea of higher taxes, already a part of Obamacare, so expect the bulk of the increased cost to push the budget deficit higher.  Essentially, Congress has looked around the world and decided they’d like to shape our public sector to be more like Greece.  At least, by not being on the leading edge here, we can see what’s coming.

Randall G. Holcombe is Research Fellow at the Independent Institute and DeVoe Moore Professor of Economics at Florida State University. His Independent books include Housing America: Building Out of a Crisis (edited with Benjamin Powell); and Writing Off Ideas: Taxation, Foundations, and Philanthropy in America .
Full Biography and Recent Publications
Beacon Posts by Randall Holcombe | Full Biography and Publications
  • Catalyst
  • MyGovCost.org
  • FDAReview.org
  • OnPower.org
  • elindependent.org