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Although there are still legislative procedures that need to be completed, and several years before the full health care plan is implemented we now know that health care will be changing in a substantial way. It will be months and indeed years before the full effects of this legislation are more clearly understood, but there are some enduring principles that can be considered even now. One such principle that needs to be addressed is supply and demand.

The current supply of healthcare, consisting of elements such as doctors, hospitals, and nurses, is based on the demand created by the current number of individuals with access to health care. President Obama has stated that the legislation will cover 32 million more Americans, so that 95% of American’s are covered. By making healthcare more affordable for people who could not afford it before, the demand¹ for healthcare goes up. When demand for a good increases, all other factors constant, the price of that good will rise. However, because of the very price controls that enable more people to access the health care system, the price of healthcare cannot rise to meet the increase in demand. Unless the government has a plan to increase the number of hospitals, doctors, nurses, etc, at a pace that meets the demand caused by 32 million new patients entering the system, there will be long lines, and shortages, and in all likelihood, the government will step in and begin rationing care.

Legal mandating the price of a good or service does nothing to increase the amount of that good or service. What provisions in the plan work to increase the amount of available medical care? Where will the doctors, hospitals, nurses, and everything that supports the practice of medicine come from and who will pay for it?

1. demand in the sense of capable buyers, not people who want healthcare [↩]

Berkshire Hathaway CEO Warren Buffet appeared on Bloomberg TV yesterday, and spoke out against President Obama’s plan to tax certain financial institutions. Bloomberg quotes the Oracle of Omaha:

“I don’t see any reason why they should be paying a special tax.” Supporters of the plan to tax the banks “are trying to punish people,” he said. “I don’t see the rationale for it.” “Look at the damage Fannie and Freddie caused, and they were run by the Congress,” said Buffett. “Should they have a special tax on congressmen because they let this thing happen to Freddie and Fannie? I don’t think so.”¹

Buffett held a fundraiser for Obama and advised the future president on economic issues during his campaign.

In addition to levying an additional tax on certain financial institutions, President Obama intends to impart new restrictions on banks. ² These are two factors that explain in part why the “Dow Turns Negative for ’10.”

1. http://www.bloomberg.com/apps/news?pid=20601087&sid=aPdhurDmpnhE&pos=1 [↩]
2. http://online.wsj.com/article/SB10001424052748703699204575016983630045768.html [↩]