TOLFA Segment 13, Question 6

Explain the paradox: why does it raise costs when government makes services available free?

Government prints new money to pay the bills, and that causes prices to rise a little later on - as explained under "Inflation" in Segment 11.
It really doesn't raise them at all, this is a lie put out by Conservative interests.
There are 4 steps. (1) The price paid directly by the patient falls to zero, or maybe 10% of what it used to be. (2) Since it's now so cheap, he takes advantage of the service (eg a doctor's office visit) more often, even for minor ailments for which, were he paying the full price, he would not go. (3) Therefore, more work is piled on to the provider and (4) the provider gets paid the full price for each transaction, by government (which gets the money from taxpayers at gunpoint.)
In order to prevent runaway increase in health care spending, government imposes administrative burdens on providers to implement cost control. This has two effects: (a) the providers' costs increase - eg they need to hire a records clerk - and (b) if the cost of that cannot be recovered under the government's dictated price schedule, they quit the profession, see "Doctors Shrug" at the foot of Segment 13. Either way, (as money or loss of care) costs increase.
There is no free lunch. One way or another, bills do have to be paid.

Don't hurry away; even when you've got the right answer, try clicking on the others to see why they are wrong! Then when you have correctly answered this make notes in your student notebook, go to Question 7.

Segment 13 Page