Wednesday, June 22, 2005

Senators Stand in the way of Healthcare Reform

Opposition exists in the Senate against the LBJ Board decision to raise rates for medical services. Senator Alo says, “We cannot give the hospital a blank check without knowing the full impact on our people.” He wants LBJ to conduct and present an assessment to the Fono and the public “before doing away with current sections of the law dealing with the hospital.” I smell micromanagement in the air. Why not have the Fono run LBJ then? Surely, the omniscience of the legislature provides no need for the hospital’s board of directors. But let’s not stop there. The Fono should also make policy decisions for all our businesses, our schools, our families and anything else that tickles their fancy.

Obviously, democracy is a tool to run the state, not society. 60,000 individuals make billions of decisions every day in American Samoa. The Fono doesn’t have the capacity to consider all of the factors involved and decide in the best interest of the public. Neither does a board of directors, but at least they recognized what can: a flexible pricing system.

When the price for something is high, it signals that the market is profitable. Many would-be profit-seekers would join the action and increase the supply of services and jobs at the same time. A higher supply now lowers the price, thus lowering profits and cutting jobs. This process can go back and forth depending on hundreds of factors that countless assessments would fail to capture.

But Senator Alo’s concern is the “impact” of a flexible price system. But let’s talk about the impact of the status quo first. If price isn’t allowed to go higher when demand increases, society suffers shortages. If you don’t raise rates on water when there is a drought, you’ll still have people watering their lawns in times of crisis. People arrange their priorities according to the circumstances, and there no better indicator of the current situation other than the market price.

Higher prices not only make us prioritize how much we really need in times of uncertainty but they also encourage productive profit-seekers to direct their capital to areas where we need their business the most. Whenever the territory gets hit by a hurricane, for example, prices for hardware go up, which entices entrepreneurs to increase supply. No one motive other than profit does this unless the ASG plans to use the end of a gun’s barrel.

There are other consequences of artificially low prices of health care. Since the public perceives it to be free, people don’t take care of themselves as much as they would if they had to pay, instead of the mainland taxpayer, for what they receive. At the same time, low cost health care is a form of U.S. subsidy to the rich in American Samoa since they can spend the cash they save on luxuries.

Problems that readers of Samoa News usually blame on McDonalds and SUV’s are due to artificially inexpensive medical care. That is the impact Senator Alo should be considering.

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