Federal Student Loans and Health Care

There’s a very interesting article on Reason about Federal student loans and the push to drop the rates. One of the most important points in the article is that when someone else is (indirectly) paying the bill, consumers tend to ignore the costs. It follows that when the costs rise, consumers tend to ignore it. Therefore, costs rise.

If you couldn’t already tell, I’m against subsidizing pretty much everything. In almost every case, the free market is perfectly capable of solving these types of problems.

But I digress. As far as how subsidies affect the price of education goes, I think we are seeing the same thing in health care right now. For instance, I’m lucky enough to have excellent health insurance through my job, so I’ve never inquired about cost from a doctor. The best and worst doctors both cost $20 per visit to me. Therefore, I have no incentive to NOT go to the more expensive doctor for something as simple as a tetanus shot. Why would I?

Health Savings Accounts (HSAs) are a good option to help solve this issue. HSAs are available to people with high deductible insurance. They allow you to save money tax free to be applied toward health care. This situation causes people to know how much they are going to pay before services are ever rendered. In the case of the tetanus shot, one would probably choose to go to a low-cost clinic instead of a more expesive doctor for something so simple. This would in turn cause better competition in the market.

In my opinion, HSAs should be available to everyone. I think they could do for health care what 401ks did for retirement–put the power of the market into the hands of the consumer. The result would be lower cost and more efficient health care with consumers making informed choices on the health care purchases.

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