The Myth of "Unaffordable" Health Insurance Just Won’t Die

When the 20th century dawned, automobiles were rarer than were exceedingly rare millionaires. If you had a car in 1900 it was a sign of your immense prosperity. Goodness, if you actually knew someone who owned a car you ran in high, high circles. 

In 1970 Dallas-based Texas Instruments released one of the first pocket calculators. This adding and subtracting machine that is standard on the internet and the most basic of smartphones today set you back $400 when the “Me” decade began. As for computers, by now most readers are aware that the first ones put on the market by IBM in the 1960s cost over $1 million despite them possessing a microscopic fraction of the capabilities found in models retailing for under $200 today.

Private flight? Once solely an activity enjoyed by the superrich, nowadays ads found in newspapers increasingly indicate that what was once a luxury indulged in by the seriously few is expanding its reach well beyond the few. As this column has been preaching for years, private flight will soon enough be a consumption item that’s accessible to the masses. 

Such is the way of capitalism. So What?

What's important is that market-driven, entrepreneurial endeavor has a brilliant track record of turning scarcity into abundance. The latter is frequently the source of great wealth in the U.S., and for that matter, around the world. People get rich by virtue of mass producing former luxuries. 

That’s what Henry Ford did with the car, what Michael Dell did with the computer, and what today’s and tomorrow’s entrepreneurs will do with private flight. Such is the way of capitalism. It replaces goods and services with better ones, introduces new goods and services that were formerly unfathomable, and all of this is invariably achieved alongside falling prices.

Which brings us to a recently released poll by the Kaiser Family Foundation about health insurance access. As the New York Times reported, “37 percent of the uninsured said that the reason they do not have insurance was because they could not afford it.” And then as readers can probably imagine, the rest of the Times article reported on the lack of affordable health insurance with a rather straight face. 

It's All About the Choices

Back to reality, 37 percent of Americans can’t “afford” health insurance in the way that bombshell actress Jennifer Aniston for the longest time "couldn’t find" a husband. More realistically, the endlessly desirable actress was in the position to choose among hundreds of millions of men around the world who would have given anything to be legally bound to the wildly talented, funny, and rather beautiful actress. Aniston was “unmarried” for a number of years in much the same way that future Hall of Fame wide receiver Calvin Johnson is presently retired, and by extension “unemployed.” If Johnson ever wants to play in the NFL again, there will be countless teams waiting to employ him. Aniston was “unmarried” until 2015 (when she tied the knot with actor, writer, and director Justin Theroux) because until then she hadn’t found the person she wanted to marry. Being single was a choice.

Old apartments and houses generally have closets that – gasp – residents can’t even walk into. All of this applies to health insurance quite a bit more than the pundit class would like to admit. It’s not that 37 percent of Americans can’t afford it as much as some can’t “afford” health insurance at the same time they fulfill all manner of other needs. Bombarded with affordable mobile phones, cars, computers, and clothes, many have decided that catastrophic health insurance that can be had for under $100/month is not “affordable” when measured against myriad other consumption options.

While pundits on the left and right would give readers the impression that Americans are living on the “edge,” wondering how they’ll clothe and feed themselves tomorrow, the reality is that Americans can afford more and more by the day. Though mobile phones were the ultimate status symbol in the 80s and 90s, today they’re commonplace across income classes.

What about clothes? Interesting there is that old apartments and houses generally have closets that – gasp – residents can’t even walk into. But with modern apartments and houses, walk-in closets are standard. They are because clothing has become more and more affordable to Americans of all income classes, and they need more space for all the clothes they own. 

Something Being Expensive Doesn't Make It a Crisis

Healthcare is no different. It’s just a market good like any other. All of this should remind readers that when pundits, politicians, and reporters write and pontificate about a shortage of a good or service, or for that matter a “crisis” in the delivery of a good or service, they’re almost certainly talking about an item that market forces haven’t touched with full force. To understand why, readers need only consider once again how scarce and expensive cars, computers, and mobile phones were until entrepreneurs turned them into common goods. Based on the cheap way pundits use "crisis" today there was a “crisis” involving each, but the more realistic truth is that entrepreneurs simply hadn’t reached those baubles of the rich yet. 

What’s crucial is that healthcare is no different. It’s just a market good like any other. And while “affordability” is a relative concept in a country where formerly expensive cars, computers, and mobile phones are once again ubiquitous, the only barrier to plummeting health insurance prices is a lack of entrepreneurs matched with capital and economic freedom. Indeed, expensive anything isn’t a “crisis” as much as it’s an opportunity to make affordable what presently isn’t. 

So while Americans on the left have resorted to force and fines in their failed attempts to make health insurance universal, their cluelessness represents an opportunity for the right. The original mobile phones in 1983 cost $3,995 and were wildly obscure. Nowadays they’re affordable and “universally” owned, all without government coercion. 

At this point, Republicans should, instead of replacing Obamacare with their own central plan, think about simply doing nothing other than ensuring there are no national governmental barriers limiting entrepreneurial entrance into the health insurance space. The rest will take care of itself with a good that is already affordable, but that logically could be even cheaper.  

Reprinted from RealClearMarkets