April 11, 2012

The Wrong Debate Being Had Over Health Care

Matthew D. Mitchell

Senior Research Fellow
Summary

As Supreme Court justices peppered lawyers with questions during the oral arguments last month, health industry stocks seemed to move with every Supreme utterance. They were down on Tuesday when it appeared that moderate justices might not allow the government to force people to buy insurance.

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This excerpt was originally published in US News and World Report

As Supreme Court justices peppered lawyers with questions during the oral arguments last month, health industry stocks seemed to move with every Supreme utterance. They were down on Tuesday when it appeared that moderate justices might not allow the government to force people to buy insurance. But they were back up on Wednesday when it appeared that these same justices might overturn the entire law, saving insurance companies a number of other costs. These fluctuations make it clear that it isn't just political capital riding on the case. A lot of private capital is at stake too.

Though the healthcare issue is often framed in terms of "Government" versus "Business," it is much more complex. In reality, government intervention in the market often helps some private businesses (such as the big insurance companies), but these gains come at the expense of other less well connected businesses. When governments grant privileges to particular firms, they tend to undermine competition, raise prices, lower quality, and hobble innovation.