Tuesday, November 30, 2010
Obama putting a quota on output, a firm would have to put out more then what they normally would have to put out in order to max their profit. In forcing health care providers to provide more healthcare, beyond their profit maximizing level is not good for health care providers. This will end up lowering their revenue for health care providers in both the long run and the short run. Health care is good for all to have but, it will hurt healthcare provides by lowering revenues earned by the health care provider. People will have healthcare easily and readily available to them but, but health care providers will be operating at marginal cost or even negative profit margins. This will end badly for health care providers; they will be forced to operate at such a low profit or marginal cost and sometimes negative profits. You will need to expect health care premiums to increase so that the providers can be able to function at a profit and not at a loss, they will have to be functioning at a level where marginal cost equals marginal revenue. These ideas will actual make it harder for people to get healthcare. Although Obama’s health care for everyone plan sounds like an excellent idea, and it is well-intended, it could have long run consequences that could effectively lower the amount of health care available to the American People. When Obama requires insurance companies to provide a certain amount of health care, if that amount is beyond what they normally would’ve provided at their profit maximizing point, their revenues will effectively be lowered, as will their profits, in both the long run and short run. If this is the case, provided that revenues become lower enough, it could result in some insurance firms exiting the industry in the long run. Obviously, this is not at all what Obama intended, so the far reaching consequences of his well-intended regulation could end up doing exactly the opposite of what he wanted them to do. There is no such thing as a free lunch.