Friday, January 23, 2015

Same Mechanism Bringing Affordability, also Accommodates Price Hikes

   If a bill is to be paid, someone has to pay it. And, as a corollary, The person must have the ability to pay. Simple truths, these are, and obvious.
   So, let's say you want to raise the price of your medical services, or the price you will charge for a college education. If you keep in mind the rules we just set forth, you won't just go out and jack up the prices.
   You will first seek out someone who can afford the bill.
   At first take, you might think you are in trouble. After all, medical patients often just don't have the money. Nor do poor college students.
   So, you get wise. You find a third party with deeper pockets. For the hospital bill, you get the insurance company. And for the college tuition, you sign on the student loan company. Suddenly, instead of small, average-income citizens, you have large corporations paying the bills. Regardless if you charge a high fee, they are going to have enough money to cover the bill.
   Here's the rough part: The small, average-aged citizen usually still ends up paying, in the long run. He doesn't have to come up with the money in one lump sum, which is the thing he cannot afford to do. But, he still pays the bill. It's just that he pays it across time. With insurance, he pays monthly premiums. With education, he pays off the loan with payments after the fact. It should be noted that sometimes, though, the citizen never ends up paying the full price. How much money he puts into insurance might never equal large medical bills. Other buyers of the insurance end up paying the rest. And, in some situations, another third party -- government -- steps in to help.
   So, we have an irony. The very system that allows the citizen to afford medical needs and to afford a college education, also serves to accommodate prices being raised.


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