Thursday, August 20, 2009

Healthcare Bubble

Two years ago, few people felt that there could possibly be nationwide correction in real-estate prices. Real estate goes up in price. Always had. Always will. The people who bought with this assumption discovered the hardships of being on the downside of a bubble.

Last year saw an energy boom and bust. Before that we so a dotcom boom and bust.

An insane mix of investment tools and government meddlings appears to have put all sectors of the economy into boom and bust cycles.

Currently, we have a situation where the price we pay for health care is multiples of the cost of actually delivering the care.

The Bush administration expanded government spending at the fastest rate since LBJ. The spending included major expansions of SCHIPS and created programs for prescription drug coverage.

If we are in a bubble, then no matter what the government does, we will probably see lower prices for medical care in the future.

BTW, one way to tell if an economy is in a bubble is to look at the willingness of industry leaders to look toward government for help. In a rapidly expanding market, industry leaders are hostile to regulation. As the market becomes saturated, industry leaders turn progressive and start demanding regulation. As the bubble crash unfolds, industry leaders ask the government for bailouts or actions to create false demand.

The fact that big health insurance, big pharmacy and big medicine are all on board with this so-called "healthcare reform" is a strong indication that the medical bubble is on the verge of bursting.

I contend that, if we did nothing, prices would fall further than if we pasts the plan.

If free market radicals pulled their care from the insurance companies into health savings account we could see an epic drop in the cost of healthcare.

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