Re: The Root Cause of Rising Health Care Costs
- From: S. Doo <none@xxxxxxxxxxxx>
- Date: Wed, 20 Dec 2006 15:52:58 -0500
On Wed, 20 Dec 2006 10:31:53 -0600, "Peter Olcott"
<NoSpam@xxxxxxxxxxxxx> wrote:
The root cause of the problem with rising health care costs is that health care
lacks sufficient price elasticity of demand. Within the free enterprise system a
rational supplier will continue to raise prices until they are stopped by
falling demand.
Within the current way that health care is bought and paid for, this is not
going to happen. This only leaves two possible choices to fix the problem:
(1) Find a way to add price elasticity of demand to health care.
(2) Provide a system for purchasing health care outside of the free enterprise
system.
The bulk of health care is *already* purchased outside the free
enterprise system in the US.
That's what's caused this whole mess.
What's the "price elasticity of demand" when there's no price to the
consumer, eh? When the health care is "free" via Medicare, Medicaid,
etc, and paid for through taxes; or provided through "benefits" that
separate the cost of an item from obtaining it, and which themselves
are heavily tax subsidized, reducing the real price to everyone but
taxpayers?
Imagine this was food instead. Suppose the politicians said food is
*too important to life* to be supplied unfairly by the free market, so
the government must provide it to all instead. So they nationalized
most of the food stores, took the previous average food expenditure of
the average person, stocked its nationalized stores with "free" food
in that amount, and then hit everyone with taxes to pay for it.
What would happen? Well, obviously, everybody who was very happy with
hamburger and tuna five days a week previously would head right to
collect filet mignon and lobster every day -- and why not, they've
already paid for it with their taxes haven't they??
And the very same thing happens when businesses provide food through
tax-subsidized benefits that separate price from provision, because
they are "free" after you've had their cost subtracted from your pay
regardless of what you actually eat. Meanwhile, the very *few* who
try to provide or receive food through a free market are totally
screwed because they are caught in the totally artificial cost and
demand web that these politicians have imposed.
So food demand explodes, taxes have to explode to pay for all that
extra steak and caviar, the few survivors in the ruins of the free
market are screwed, and astute proponents of new national food
controls now opine: "The problem is that there is no price elasticity
of demand for food, as evidenced by its exploding cost combined with
rising consumption, food is *unique* in this regard, which is
understandable as it is the root necessity of life itself, so we
obviously do not have *enough* political regulation and provision of
it and need more!"
Reality: The data show that there is ample price elasticity of demand
for medical services *when people actually pay the price of it*.
Now, besides that, you are wrong on your basic premise.
The problem with the cost of medical care is lack of cost-reducing
innovation.
In *every* market-driven industry, including food and housing, which
are much more immediately fundamental to life than medical care,
market competition among providers has driven innovation that has
HUGELY reduced cost to consumers over time.
That is, *even if* price elasticty of demand for X is low, so if the
price of X rises consumers will demand almost as much of it, still, if
an innovator comes along and offers the same X at a lower price
*consumers will rush to buy it at the lower price*.
There is no doubt at all that the vast government provision of and
price setting for medical care in the US (medicare, medicaid, etc) and
regulation of private care has slaughtered innovative cost
competition.
E.g. there are *many* studies showing that where Medicare and Medicaid
pay the most the quality of service received is the least, because the
government price setters pay high prices for known "proven" expensive
procedures, but won't pay at all for cost-saving innovations because
they aren't part of the system, and the hurdles that must be overcome
for them to become part of the system are huge and costly.
So if you were a provider looking to get paid from taxes and by
regulators, what would *you* do ... provide an existing very expensive
(as possible!) bureaucrat-"approved" service to get paid as much as
you can, maybe adding a new technical twist to get paid even more? Or
look for a cost saving means of providing the same quality service at
lower price, for which you won't get paid squat??
Just guess what you'd do. ;-)
And people call say the problems of the current health care system in
the US show "failure of the free market". Bwah! ha! ha! ;-)
Here is an option that is NEVER going to work:
(3) Wait until someone else fixes the problem.
Right on!
My health insurance premiums have grown at the annual geometric average rate of
20% for the last eleven years. If they continue to grow at this rate, (and if
no fundamental changes are made this is inevitable) twenty years from now almost
no one will be able to afford health insurance coverage.
Let's begin by recognizing and directly addressing the actual root cause of the
problem!
Great idea! How about you starting right now to lobby your favorite
politicians to solve the problem by passing laws and regulations
*mandating* increased price elastiity of demand and more cost saving
innovation!
That ought to do it!
.
- Follow-Ups:
- Re: The Root Cause of Rising Health Care Costs
- From: maxwelton
- Re: The Root Cause of Rising Health Care Costs
- From: Nospam
- Re: The Root Cause of Rising Health Care Costs
- From: Peter Olcott
- Re: The Root Cause of Rising Health Care Costs
- References:
- The Root Cause of Rising Health Care Costs
- From: Peter Olcott
- The Root Cause of Rising Health Care Costs
- Prev by Date: Maddala's first name
- Next by Date: Re: How Would You Define Freedom?
- Previous by thread: Re: The Root Cause of Rising Health Care Costs
- Next by thread: Re: The Root Cause of Rising Health Care Costs
- Index(es):
Relevant Pages
|
Loading
