The Dangers of Decompartmentalized Health Care Spending

So the Democrats have a problem convincing senior citizens that socialized medicine won’t diminish the already dubious quality of care they receive through Medicare. [h/t Instapundit]

Seniors no doubt base this suspicion in large part on their 50+ adult years of watching politicians over-promise and under-deliver. They probably remember back to 1965 when Medicare itself was sold as a cost-saving measure, and today we’re told it’s going to bankrupt the government unless we socialize 15% of the economy. They no doubt wonder how long it will be before Obama’s ideological descendants will tell us that Obama’s miracle plan is a disaster than can only be solved by more socialism.

Seniors have another reason to be nervous. Obama’s plan will put them in direct competition with everyone else for health care spending.

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Rationing Versus Allocation

Economists commonly talk about the entire economy as a “rationing” system because all resources are finite and human desire is infinite. In terms of standard dictionary terminology, the day-to-day economy does not ration. We use the term rationing only to describe situations when an individual gets a fixed amount of something regardless of price. For example, during a mass evacuation, we stop using a price mechanism to control an individual’s access to gasoline and instead set a fixed limit of gallons per vehicle.

When opponents of politically-managed health care claim that politically-managed health care will lead to rationing, they use the term in the ordinary sense. Proponents of politically-managed health care have dishonestly tried to obscure the debate by substituting the specialized definition that economists use for the standard definition, so they can claim the current system already “rations” care so nothing will change.

It’s thinly possible that some proponents of politically-managed health care are honestly confused and aren’t just intentionally employing rhetorical tricks to hide the real consequences of the policies they advocate. For those people, I offer the following explanation that uses the common definition of rationing.

It involves tires.

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