Why Healthcare Can Never Be A Public Good

Should health care be a public good? What does that mean? For most people the idea of a public good is simply something that is a good thing for society. Along those lines it is also assumed that the price of that good, if it is thought about at all, is low and made available to everyone. As it turns out there is more to it than that.

If we think about an actual public good we can get a feel for one of the basic requirements. Once a street light has been installed, anyone can use it at any time without any additional costs. It doesn’t matter how many people are on the street or looking from buildings along the street. In theory, someone from space could see the light from that streetlight. Regardless of the number of people, they will be able to use the illumination from that light.

Economists say that the light from the street lamp is non rivalrous. Just because one person is using the light doesn’t mean someone else can’t. Now contrast that with health care. It’s different because every minute of a doctor’s time, every hospital bed, and with every bandaid, if someone is using it no one else can. This is why health care can never be a public good. Unlike light, there is a finite quantity of health care available and each additional bit that is used has an associated cost.

That doesn’t mean that the state can’t provide that service but it’s important to keep in mind that there’s a reason that system is called a “single payer” system. Every aspect of health care has to be paid for and allocated. While what is and isn’t a public good may sound like an issue of economic semantics, it is vitally important to internalize the difference if we want to improve healthcare in the US.

Both the ACA and whatever it is that Republicans are proposing are about health insurance not healthcare. The underlying problem is that healthcare is too expensive, of course insuring against that will be expensive too. Policy targeting insurance accessibility does nothing to address the actual problem and will actually make things worse. My next couple of posts will be personal examples of that. While I am showing how current expectations of health insurance and the incentives they set up are making things worse, just keep in mind that all aspects of healthcare are personal and all need to be paid for somehow. We need to think about lowering costs, accessibility will follow. Stay tuned for some practical examples…