How did healthcare become so impervious to improvements which citizens could feel comfortable "getting behind"? An apt quote from Josh Barro recently made the rounds:
All healthcare is unpopular because healthcare is 1/6 of our economy, but nobody wants to spend 1/6 of their income on it.Even though it may appear that overuse of healthcare is the pertinent issue, many of us know individuals who try to avoid a doctor's office unless absolutely necessary. Indeed, not all these individuals are necessarily limited by wages in doing so. Nevertheless, healthcare continues to crowd other economic activity in the marketplace - in part because of how its incentive structures are aligned.
In a broader sense, the inefficient organizational capacity of healthcare could also be negatively impacting international monetary flows. How so? First, consider that even as the Fed attempts to maintain economic stability in the U.S., it also bears a degree of responsibility for a worldwide level of resource capacity. That's how important the Fed's influence became, for monetary flows in the twentieth century. But consider the juggling act the Fed seeks at home, as it attempts to counter any potential internal inflation, regardless of the source, via a 2% inflation cap.
Unfortunately, these hard limits on aggregate spending capacity - even as pressing real economy factors continue to be neglected - are leading to further sectoral imbalance. Consequently, healthcare's internal inflation contributes to the current Fed tightening cycle, which gradually diminishes total resource capacity even as other developed nations are attempting to maintain sufficient aggregate spending capacity. In all of this, Washington attempts to cut long term healthcare expenses by trimming the provision of healthcare, altogether. Of this current tightening cycle, Charlie Billello of Pension Partners writes:
In stark contrast, the Bank of Japan (BOJ), Bank of England (BOE), and European Central Bank (ECB) have all cut rates since December 2015.Clearly, there are many contributing factors to the Baumol effect other than healthcare. Even so, this sector is a major component of today's open-ended equilibrium approach to the redistribution and nominal compensation of time value and human capital. And yet even though U.S. healthcare costs are high in relation to other developed nations, that's not to say single payer markets don't face their own sets of problems in terms of marketplace choice.
At a basic level, the problem which exists for healthcare, is like that for many other forms of time based product: inadequate representation of overall time value in the marketplace. One reason it is so difficult for healthcare to provide sufficient price signals in the U.S., is the fact price signals first need to coordinate resource capacity which is fully represented. Unlike a wide range of resource utilization in the marketplace, overall time value is woefully underrepresented in terms of system potential.
Since time aggregates are a fixed scarcity in relation to the random scarcities of other resource capacity, the option of time value in relation to itself, would finally make free markets in time value a reasonable option. Further, time value as a price signalling process, would particularly help democracies which now face tremendous struggles in their attempts to coordinate welfare states. In order for healthcare to gain free market options in terms of choice and preference, more participants need to be brought into the process.