Along with Utah Senator Mike Lee, the Republican Senator from Kansas, Jerry Moran, said Monday he would be unable to support the Better Care Reconciliation Act of 2017. The Better Care Reconciliation Act of 2017 is the Senate’s attempt to repeal and replace the Affordable Care Act. As I write this post there are reports that Republicans do not have sufficient votes to repeal the Affordable Care Act  without replacement – the Republican’s fall back plan with the failure of The Better Care Reconciliation Act. This is certainly an unfolding story with the final words of the script yet to be written.

The words that Senator Moran chose for his announcement are very telling.

We should not put our stamp of approval on bad policy. Furthermore, if we leave the federal government in control of everyday healthcare decisions, it is more likely that our healthcare system will devolve into a single-payer system, which would require a massive federal spending increase. We must now start fresh with an open legislative process to develop innovative solutions that provide greater personal choice, protections for pre-existing conditions, increased access and lower overall costs for Kansans.

Moran believes continued federal government control will cause our system will devolve into, a single-payer system. He may very well be correct.

The discussion that we are having about healthcare really is about how to pay for healthcare – not directly healthcare itself. The Affordable Care Act was an effort to control the escalating costs of healthcare. The ACA was destined to fail as will be all Republican or Democratic efforts at cost control focusing on who pays (insurance). In any market, you cannot control costs after the fact. If The Better Care Reconciliation Act passed it would still ultimately fail to achieve its purported goals. If the BCRA was made law of the land we would have been talking about and trying to control increasing healthcare costs again in several years or maybe months. Trying to control healthcare costs through insurance regulation is similar to a attempting a very complex price ceiling. Price ceilings are notorious failures and trying to control health costs after the fact will also fail. Costs must be controlled at the production stage. By far and away the best way to control costs is for the individual producers to see that is in their best interests to make cost and price lower. This could occur if individual healthcare providers had to compete against one another for your business.

Even if we could encourage market discipline in healthcare, the basic product that is sold is very price inelastic. This simply means that when the price of a product goes up you and I are likely to continue to buy the product. We could probably introduce more market logic into less serious health products and services. But less serious medical problems are not what is driving the ever increasing cost of healthcare. It is more serious issues that are causing the increase in the price of healthcare and we are very price inelastic about serious health problems. We will not deny the elderly the best care possible. If one of my loved ones has a serious medical problem cost will not be an important factor in choosing treatment. There is a significant demand side element to the increasing cost in healthcare.

In addition, improving medical technology is very expensive. The very technology that improves our physical standard of living and saves lives is very costly. The supply side of the market drives up cost and price also. Healthcare is going to be more expensive. Unless we radically change our expectations, healthcare costs will continue to rise. If we continue to want and to demand the best healthcare possible, healthcare will continue to be more and more expensive compared to the price of other goods and services. While altering the regulations on third party payment can certainly have some impact, the fundamentals of the healthcare market dictate that costs are going to continue to increase.

Does this mean that we will eventually arrive at a single-payer for our healthcare? A single-payer system is a highly likely eventuality. The federal government would become the single-payer to private medical and health care providers. When I first began to study economics I was taught that the primary difference between a market based economy and a socialist economy was ownership. We also recognize that whoever makes the decisions determines the outcome. With the federal government regulating our healthcare system as a single-payer the outcome would be very similar to out right federal government ownership of all elements of the healthcare market. I am afraid the clocks are going to strike thirteen.