The Costs of 'Free' Health Care

What is it about the health-care system in America that makes politicians think they can fix it by giving it away to more people for free? Remember Economics 101, Rule No. 1: Whenever you price something at less than it costs, people will use more of it than they need. This is true whether you subsidize cars, corn or health care. Rule No. 2: People will not buy something for what it's worth if the government will give it to them for free. Rule No. 3: If you charge people more when they can get it elsewhere less expensively, then they will get it elsewhere.

With this in mind, let me tell you what are our caring politicians are cooking up for us in Sacramento. Assembly Speaker Fabian Nunez (D-Los Angeles) has proposed a bill that has three main aspects that I will focus on.

First, it gives free or almost-free health insurance to families that make up to 300% of the federal poverty level, which is $61,950 per year ($31 per hour) for a family of four.

Secondly, this grand idea will be paid for by every business in California that has more than two employees and a payroll over $100,000 per year, with a 7.5% additional payroll tax on employers who do not provide health insurance to all employees and their dependants. When did it become the responsibility of business owners to provide health care to everyone?

Lastly, the Healthy Families Program, which is a state program that uses federal funds (paid for by you, the taxpayer) would, "delete as an eligibility requirement … that the child must meet citizen and immigration status requirements." By the way, the program is already running in the red and will spend $3 billion more than it takes in within just five years, so trying to add 1 million children of illegal immigrants may not be the best idea.

So let's look at the consequences of this brilliant solution.

1) Do you think people will use more or less health care if it is free than if they had to pay a portion of it? Think about it: You have a runny nose? Go to the doctor — heck, it's free! Hurt your ankle? Let's do an MRI — hey, it's free! The fact is, consumers like you and me need to be invested in our own health.

2) People who are now paying for their own health care as responsible parents and adults will quit paying for it and get it free from the government. Do you think that might wreck the assemblyman's budget when the already self-insured jump on board the government gravy train? Also, do you think you might get a few more people to come across the border if they get free health care, no questions asked? Heck, why not bring the whole family? It's free!

3) Let's say I am a widget maker in California and you charge me an additional $5,000 per year for every $31-per-hour worker I have, compared with say Arizona, Nevada or Texas. You can bet that over time I will take my widget factory and that $31-an-hour job to Arizona, Nevada or Texas. This leaves California with more people on free health care and less jobs to support them.

In the end, it does what all socialized health-care systems in the world do where health care is "free": Use goes up and the price goes out of sight. Next, the government has to ration it out. One-year wait for a hip replacement, unless you are over 68 and then they rationalize that the benefit to society is not that important if you walk anymore or not. Next thing you know, we are discussing doctor-assisted suicide as a way to cut costs. This is not fiction. Any European will tell you that it is happening in Europe today.

Now, it may not be perfect, but the United States of America has one of the finest health-care systems in the world. And I know enough that "free" healthcare is the most expensive health care you can get.