Sunday, April 30, 2006

Supply and Demand’s Impact on Gas Prices

Dear President Bush,

The talking heads on the Sunday morning news shows sounded a consistent theme about high gas prices, it comes down to supply and demand. Political pundits derided current political efforts to deal with the rapidly rising cost of gasoline. They suggested Congress and even the President are ineffective in their proposals to reduce prices in the short run.

Did you see where Saudi Arabia’s King is taking matters into his own hands to reduce prices at the Saudi pumps? King Abdullah issued a decree ordering gas prices lowered by approximately 25%. This means the King’s subjects will now pay just over 15 cents a gallon for gas. He wanted to reduce the “cost of living burden on Saudi citizens”.

Apparently a monarchy is able to effectively reduce prices. That the kingdom is boosted by profits from the state owned oil companies must gall our free and democratic government institutions, all seemingly powerless to impact the price of petrol in the short term.

I noted your supply and demand talk is very different for healthcare. There, despite imbalances, you suggest leveraging market forces to bring down its cost. Yet you propose no increases in the supply of physicians which you note is already constrained. Your signature strategy, high deductible health plans and health savings accounts, will add to the legions of under-insureds to the already scandalous nearly 50 million uninsureds in America.

Two government strategies even seem anti-Republican. Despite your refusal to price fix in the energy market, Medicare is implementing a back door price fix for cardiac implantable devices. And Congress is exploring the unfair advantages non profit hospitals have as they are tax exempt.

That anti-tax Republicans are even considering taxing safety net hospitals seems particularly cruel in light of their high burden in providing care for the uninsured. In my hometown the non profit system provides 80% of care for the uninsured vs. 20% for the Triad owned for profit hospital. Size differences alone do not account for the discrepancy.

To what do you attribute the difference in your energy vs. healthcare strategies as both are “market based”? Why does healthcare have the government price fixing and exploring new taxes while both are anathema in the energy market? Write me back, I want to know.

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