In all the heated rhetoric about health care reform, there never seems to be any review of some basic facts. Whatever we might decide to do about financing and delivering health care, we ought to recognize some fundamental constraints.

1) It costs money to provide health care. Nothing is free. People’s time and the products of their labor are required, and they must either be paid for or we need to revert to slavery. If we assume that health care cost remains fixed (I know, not accurate, but let’s start here), then changing who pays does not change how much must be paid. Health care reform is sold, in part, as a way for individuals to evade their responsibility to pay for their own health care. However, the only way for that to happen is for someone else to pay for it, either other taxpayers, or the providers (through lower income). Most Americans have become accustomed to the bulk of their health care cost being covered by their employers. In reality, this is just a pay reduction, but since it has been in place for so long, it scares people to think of having to shoulder the cost themselves. The reality is, that in any largely middle-class society, on average, each person will have to pay his or her own costs, either through direct charges by providers or through taxes, which are relatively invisible.

2) True health care costs are under constant pressure to increase. There are several reasons for this. In order of importance, I think that they are: 1) more disposable income to spend, leading to higher demand for the best in medical care; 2) the aging of the population; 3) the trend to less healthy living; 4) the insulation of the consumer from the payment; 5) the greater relative value we place on being free from physical debility (perhaps this is just number 1 again); 6) the rise of financial parasitism on the health care system (frivolous lawsuits, trial lawyers, etc). None of these trends seems likely to change in the foreseeable future. We have some control over 4), but the others are not amenable to direct manipulation. It is silly to say we can’t afford increasing costs. Let’s illustrate. If my true health care cost is $5000 per year, and my income is $40,000, increasing my expenditure may be difficult and financially painful. But if my income increases say, 5% per year, then I could, in theory, devote all that 5% to buying better health care, so I might spend $7000 the next year, and over $9000 the third year. This represents an over 80% increase in health care cost, but my income after health care has remained the same. The richer we get, the more we are free to spend our wealth on what we choose. If we choose to buy better (more expensive) health care with it, who is to say that is the wrong choice?

3) There is a great deal of waste in health care expenditures. No one knows how much. Much of it is due to the degree of regulation, CYA activity and multiplying layers of management. There is no doubt in my mind that if free competition were possible in health care provision, someone would have devised a less wasteful system by now. Without incentives to be more efficient (competition is the best such incentive I know of), we cannot believe any claims that greater efficiency will be achieved.

4) We have known for a long time that cost plays a role in rationing health care. If people are given free health care, they will consume roughly twice as much as people who must pay some significant portion of the cost. Any system that ignores this reality cannot possibly control expenditures, except by refusing to provide services.

5) Individuals differ in their need and desire for health care. Some of these differences are due to circumstances outside that individual’s control. Some are not. In the simplest example, someone who engages in extreme sports, like skydiving or snow skiing or cliff diving will, on average, require more health care services than someone who does not. Who is responsible for bearing this greater expense? More importantly, who decides who will be responsible for any given greater expense? Here lies a difficult moral quandary, in my view.