April 18, 2008

Last Tuesday I spent most of the day working on my laptop from a hotel lobby. It made for a great office – view of a lake, comfortable furniture, completely connected with wi-fi and cell phone as if I were at home but without the distractions of other projects tumbling across the desk. I overheard the desk clerk quoting room rates for various groups of travelers. When the rate is $118 for the average business traveler, why is the “government rate” $76? Why does the government get a price break that isn't available to the average citizen? It occurred to me that the differential between the government rate and the basic rate represented a hidden subsidy for the government. On paper, the government looks like a thriftier purchaser of hotel rooms compared to private enterprise.

There is a similarity with Medicaid and Medicare. Neither government healthcare program pays the full cost of the care being provided. The difference between the cost of care in the marketplace and the amount paid by the government is a hidden subsidy of government health care, and makes any comparison of which system is more economically efficient nearly impossible. The arguments in favor of a nationalized healthcare system fail to take into account who is going to pay when we abolish the golden goose who pays the subsidy.

Every time we accept subsidies like this, we hide the true cost of government.