The simple answer to the question, “how to make medical services more affordable?”, is to remove all government-imposed barriers to entry in the medical services area. This should be a no-brainer but unfortunately it isn’t. Not just in medical services, but in every kind of human enterprise, all government-imposed barriers to entry should be discarded.
Let’s invoke a general principle, or a law if you will, of economics. All price controls are pernicious. Mandating price ceiling is bad, as are price floors. Nothing good can ever come out of it. Why? Because they create barriers to entry and exit. They impede the functioning of a free market. Just to be sure what we mean by a “free market”, it’s one in which there are no barriers to entry or exit. In free markets, all voluntary trades are mutually beneficial. In technical terms, Pareto optimal outcomes obtain in free markets. What’s Pareto optimality? It’s a situation such that you cannot make anyone better off though any intervention without making at least one person worse off. Continue reading