I’ve often explained that “third-party payer” is a major problem in our healthcare sector.
This occurs when consumers can buy healthcare with other people’s money. For instance, nearly half of all healthcare spending in America is directly financed by government. And a big chunk of supposedly private healthcare spending is actually the result of government policies that encourage and subsidize over-insurance (in which case, people may be buying healthcare with their own money, at least indirectly, but in a system akin to a pre-paid all-you-can-eat buffet).
Anyhow, one of the big downsides of this system is that third-party payer undermines market discipline and leads to higher prices and massive inefficiency in the health sector.
This then leads to a perverse outcome as politicians point to the higher prices and inefficiency and say this is evidence of market failure!! In a stereotypical example of “Mitchell’s Law,” they then propose more government to ostensibly deal with problems created by government (and people wonder why I have lots of gray hair).
We have the same problem in higher education, except it may be even worse if you look at these charts. Simply stated, government loans and grants have enabled colleges, schools, and universities to dramatically boost tuition and engage in massive bureaucratic featherbedding.
Interestingly, the Obama Administration has a proposal that sort of addresses this issue. The Department of Education is proposing “gainful employment” regulations that would, among other provisions, limit loans and financial aid on the basis of whether a school produces students with high student-loan debt relative to post-graduate earnings.
This sounds like it might be a good idea. After all, it would presumably lead to less government spending.
But there’s a catch. A giant catch, as explained by Brian Garst of the Center for Freedom and Prosperity.
…if it is truly needed to protect students, why are public and private non-profit universities excluded? For-profit schools only serve about 20% of all higher education students, and yet are the exclusive target of the regulation.
Yes, you read correctly. The Obama Administration is not trying to save money or impose accountability. Instead, it is seeking to undermine competition.
You may think I’m making this up, but a former senior bureaucrat at the Department of Education bragged, in a speech to a left-wing group, that the goal is to stamp out for-profit schools.
Here’s another excerpt from the folks at the Center for Freedom and Prosperity.
Former deputy undersecretary of education Robert Shireman, who initiated the Gainful Employment regulations, is currently under investigation for ethics violations and conflicts of interest relating to these effort. He has made clear through public comments that he sees eradicating private-sector colleges as his ultimate goal. In a recent speech delivered at the Center for American Progress, he said he does not believe that a business should own a college.
This fight illustrates why government intervention is so corrupting.
I don’t like any federal subsidies to education, whether for K-12 or for higher education. I don’t care whether the subsidies are for government schools, non-profit private schools, or for-profit private schools.
So I would like to cut off loans, grants, and other funds to for-profit schools, but that should happen at the same time that handouts also are being eliminated for other types of schools (Tim Carney has a very good explanation of why there are no good guys in this fight).
Let me close with an analogy.
I don’t want federal money in the healthcare system. So that means I don’t want payments of taxpayer money to private hospitals and private physicians.
But I would be even more agitated if the Obama White House said that it would “save money” by cutting off health funds, but only monies going to the private providers. The net result is that we all would be forced into VA-type treatment from government.
The moral of the story is to shrink government across the board.
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Ned, I agree wholeheartedly. Although, I can’t speak to the $5k per school-aged citizen, the annual budget of the Department of Education is about $80 billion, which comes to about $250 per breathing citizen.
I’ve got to agree with Quentin. There is a place for government in both healthcare and education, but it is certainly not in the management thereof. Vouchers or cash deposits into Heath/Education Savings Accounts would allow individual flexibility in both areas.
It’s my understanding that the federal government spends somewhere north of $5,000 per school age citizens. If we get rid of federal bureaucrats in education and distribute the cash directly we would immediately jump start our educational system.
Similarly we could use current funding to provide $3,000 per adult citizen for healthcare. The poor would have funds to purchase minimal healthcare while those with income would have the equivalent of $12,000 (at a 25% tax rate) tax deduction per adult to pay for health needs, but even better, any money spent over the $3,000 base would come 100% out of pocket, making for responsible decision making on healthcare costs.
In an ideal world, there would be no government involvement. However, in the world we live in, we can get rid of the bureaucrats and let people make decisions in their own best interest. That will kick start economic growth, while growth of government is minimized by getting rid of growth promoting bureaucrats and agencies.
I work for both a for profit college and a non-profit college and I can tell you that it is a clear way to stack the deck to make it harder for profit colleges. I find it hypocritical that the government preaches fairness yet they intentionally try to make the system unfair to competition.
*I don’t like any federal subsidies to education, whether for K-12 or for higher education. I don’t care whether the subsidies are for government schools, non-profit private schools, or for-profit private schools.*
Really? I would prefer no government subsidies for education, and I totally see how no *federal* subsidies is even more desirable. But I absolutely do care about the distinction between government funding and government provision. Government funding with no government provision – vouchers, for example, with all schools being privately operated – would be a massive improvement on the present situation.