The problem with healthcare simplified :
Imagine there is a part called a wiket. Wiket’s are interesting for a variety of reasons, first and foremost because they are an essential part of many different things that people need. This need for wiket’s of course keeps wiket’s in very high demand.
Wikets are also very complicated to make, and require the skills of only the best and brightest to make properly. Making wiket’s properly also requires many extra years of specialized study at top universities, and is a sort of messy process which reduces the number of people interested in making them.
For these and many other reasons, those who choose to enter the wiket business want a high rate of return on their investment. A typical wiket manufacture sells a million wiket’s a year at $2 each. Since wiket’s cost $1 to make, wiket owners typically earn a million dollar a year profit, or a 100% return on their yearly investment. At this price everyone who needs a wiket can afford it, wiket manufactures make a decent living, and everyone is happy with their wikets and all is good.
But one day the government decides to regulate the wiket business.
The government passes legislation requiring wiket manufactures to file mountains of paperwork each year, and that wikets be provide for free to the poor and to illegal aliens who might be having a wiket emergency, special taxes are imposed on the wiket making process, and the government starts requiring that wikets be made of more expensive components, and that wiket factories comply with costly environmental regulations, ect. And if all that wasn’t enough, the government makes it easier for people to sue wiket manufactures for variety of frivolous reasons, forcing wiket business owners to purchase costly liability insurance policies.
This interference by the government artificially inflates the cost of making a wiket from $1 to $10.
In response, wiket manufactures raise the cost of the wikets they sell to $20. Their rate of return is still the same (100%) but now a typical wiket owner makes $10 million a year, and a typical person has to pay 10 times more for the wikets they need.
At this point the government steps in and declares a “wiket problem”
The first thing the government does is set up a “wiket welfare” system. The needy (bottom 50% of customers) will now get their wikets paid for by the government at no cost to themselves. But the problem is, the government refuses to pay $20 each to the wiket manufactures, and instead will only pay $10.
Since half of their wiket customers are now using wiket welfare, wiket manufactures in order to make the same return on investment have no choice but to raise the cost of wikets for everyone not using wiket welfare to $30. This causes some who don’t qualify for wiket welfare but are far from affluent to be no longer able to afford wikets.
As this point the government steps in and declares a “wiket crisis” and that the only solution to the problem is a public option.
The government then opens its own wiket manufacturing business and sells its wikets at $8 a wiket, $2 less than it costs private wiket companies to even manufacture a wiket.
After a short while everyone is buying their wikets from the government, and all privately owned wiket companies are out of business
Gradually, since there is no competition in the wiket industry, even the government made wikets begin to increase in price ... and the quality begins to erode.