Why US health care costs grow: The most important chart in health policy
theincidentaleconomist.com
theincidentaleconomist.com
1.) Insurance drives up the cost and hides true costs from consumers. What we buy isn't even insurance it's pre-paying for health care (thinking of HMOs here). My wife took medication for awhile that was $50 a pill. We paid $100 for 3 months worth of the stuff. Those true costs are hidden from us.
2.) You can't outsource it to China or India. If you've been to a Toys R' Us ever you will notice that every toy there is pretty cheap by any standard that you'd want to use. The reason is the cheap outsourced labor. If you want stuff that isn't made in China you end up paying prices that are much higher and more consistent with what you'd expect from the rate of inflation in the last 30 years.
We've been engaging in a devaluation of the US dollar for the last 30 years (continuing a trend that's been happening since 1910). Those new dollars have to end up somewhere so they end up in cost of medicine, lawyers, computer programmers, etc. As a computer programmer it benefits me but after meeting some family who are in less in-demand fields times are tough even for those who have jobs.
This wan't your point, precisely, but I just wanted to point it out.
When the patient doesn't personally pay for the service, the cost of the service has every incentive to go up. Is the service better? Generally, yes. Is the "better-ness" necessary? In the case of my teeth, probably not.
Emergency medicine, life threatening medicine, you don't shop around for the lowest cost, cause you won't be able to be happy about how much money you saved when you're dead.
I also believe an issues with the health insurance industry is that businesses are their primary customers, not consumers. That substantially reduces competition and incentives to provide good customer service and rates. If insurance was not provided by the employer and everyone had to purchase their own health insurance just like they do car insurance, I'm certainly we'd see a lot more commercials saying, "Save 15% or more by switching to Blue Shield!"
1.) Insurance drives up the cost and hides true costs from consumers.
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The problem with this argument is that all the available evidence says exactly the opposite. Private U.S. health-insurance exposes more of the cost of health care to the patient than any other first-world health system, and yet it's more expensive than any other first-world health system (including America's own socialist insurance scheme, Medicare).
Moreover, the trend over the last 30 years or so in private U.S. health insurance has been to increase the exposure of the patient to costs of care (i.e. we pay much more in deductibles and co-pays than Americans a generation ago did). The result has not been a decrease in health care inflation. Quite the contrary, actually.
Price Inelasticity = "Man, I hope this rebar sticking out of my chest doesn't kill me. What is this ambulance doing to me? Hope it's not too expensive. Now what's going on? What is this tube sticking out of me? And, what's the nurse sticking into it with that needle? Whoa, there are two doctors? Why? Who authorized this? Whatever, my eyes are heavy. I'll figure this all out after some rest."
Supplier-induced Demand = "Look, Patient X, you're going to need Foo, Bar, and Baz done. I'm doing it not because you need it (because I think you're fine), but because there is a 1000000:1 chance you might need it, and if you did, and I didn't do it, you'd sue me out of my profession. But don't worry, you're covered, right?" (He'll also make more money, too).
Bi-partisan solution? Cap malpractice awards (screw the patient) and institute price controls like Singapore, Switzerland, and Japan (screw the healthcare provider).
Share the pain. It's the American way.
There is no precedent to compare against so it is unknown whether not taking those measures would have been better or worse.
In my view healthcare is no different than national defense, in fact it is a a form of national defense. Any argument that can be made for or against nationalized healthcare can be made for a nationalized army and or police force. The only difference between the two is which DNA is being defended against, other humans, or microrganisms and our own DNA.
We all know national defense is expensive, but should it be privatized? I know I do not want to shop around for my own private army to defend my life, I also do not want to shop around for healthcare to defend my life, I want the best the the society I live in can provide.
It also seems highly relevant if other countries fall on the same line on the graph or not. If other countries confirm the conclusion then it would be much more solid, but if other countries have entirely different curves, then it seems much more arbitrary that the US falls on the shown curve.
Finally, note that a tiny wiggle on this graph turns into a huge saving of health care expenses. For instance, the difference between 9.0 and 9.1 on a Log scale is 25%. I think this invalidates the claim that health care costs can't be controlled, even if you accept the assumption that the future will continue to follow the graph.
I would add social stability to this list. Health costs per capita aren't distributed evenly any more than GDP is. While society can tolerate that some get a bigger share of the GDP pie on the plausible rationale that their industriousness contributes to their wealth, it is less tolerant of the idea that the wealthy should live while the poor die. If the new US health care laws do nothing more than create a more equitable distribution of health care then they would be a success.
Not sure I agree with the wording here. You could just as easily say that increasing wealth leads to increasing life expectancy and increased obesity which leads to higher expenditures. I certainly don't view healthcare as a luxury good on which I chose to spend more.
But from a purely analytic standpoint the two situations are similar.
A luxury is something of value that most people don't have because it is cost prohibitive. Well most people outside the western world don't live as long as we do and aren't as obese as we are. Because they don't have the money to pay for the health care that we do.
So in the limited confines of the study I think their assessment is accurate. With the caveat being their study was very limited in that it doesn't address individual acts that would surely bring health care costs down (as an example negotiating on a national level for drugs is sure to brings costs down though it might have other disadvantages)
There is no reason the government has to put up with increasing costs, since it has power to drive prices down by virtue of being the biggest buyer. The opposite happens in the US only because health cost providers have figured out that the government will absorb any cost increases (until it goes bankrupt).