Re: What is the root cause of the rising cost of health care ?


"Gordon Sande" <g.sande@xxxxxxxxxxxxxxxx> wrote in message
news:2007082613290216807-gsande@xxxxxxxxxxxxxxxxx
On 2007-08-26 13:13:59 -0300, "Peter Olcott"
<NoSpam@xxxxxxxxxxxxx> said:


"Gordon Sande" <g.sande@xxxxxxxxxxxxxxxx> wrote in
message
news:2007082612132916807-gsande@xxxxxxxxxxxxxxxxx
On 2007-08-26 11:34:41 -0300, "Peter Olcott"
<NoSpam@xxxxxxxxxxxxx> said:


"*Anarcissie*" <anarcissie@xxxxxxxxx> wrote in message
news:1188092053.508862.14730@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
On Aug 25, 12:34 pm, Gordon Sande
<g.sa...@xxxxxxxxxxxxxxxx> wrote:
On 2007-08-25 12:33:48 -0300, "Peter Olcott"
<NoS...@xxxxxxxxxxxxx> said:

Why is the price of health care rising much faster
than
the
price of other goods and services?
(See below)

It is purely a service. Like teachers, personal
trainers,
etc
the cost remains "constant" while the cost of
manufactured
goods "falls". So the costs of pure services go up
while
the
costs of goods go down. To become more "good"-like
health
care will need more streaming, specialization,
technical
aids and other forms of management, just like various
other
pure services. Think ATM machines instead of bank
tellers.
Automatic elevators with no operators. Direct dialing
rather
than telephone operators.

If your theory were correct, then the same amount
of labor ought to buy the same amount of medical
care even if the nominal price in monetary units
changes.

However, it is my impression that the cost of
medical care is rising considerably faster than
the average wage.


What would cause the cost of a good or service to rise
at
a
much faster rate than the rest of the economy? Could it
be
that the demand curve is artificially inelastic to
changes
in price?

The other side of the same question is what happens when
someone
develops a new cheaper way to produce Model T Fords or
flat screen
televisions. Does ALL the change just go into a price
redction of
that good or is there some rebalancing where the
producer
does
pretty well but neither as poorly of the complete new
lower cost of
production or a well as the old selling price. When one
component of
an aggregate falls some others will appear to rise
realtive to the
aggregate. Mix in changing demand for the components due
to both the
change in price and changes in demand and it gets more
complex.

If the price of one component falls for one supplier, and
demand would not rise disproportionally to a drop in
price,
this supplier may tend to keep price the same, and
realize
greater net profit margins.

This gets off track of my main point. My main point is
that
the root cause of any extreme increases
is the same for health care and anything else:
Fundamentally
its all a supply and demand thing. In the particular case
of
health care the root cause of the problem is that the
demand
curve is made artificially inelastic.

Since you knew the answer why did you bother asking the
question?
My point is that your notion of the answer is only part of
the
issue and that there are other independent systemic issues
that
mislead many. Your initial question showed such confusion
but it
turns out that you knew the answer in any case.

I phrased my statement as a question so that people could
come to their own realization and thus minimize the tendency
to reject statements out-of-hand.


What would happen to the price of food if we had food
insurance where everyone paid a fixed monthly premium,
and
then could buy anything they wanted at the grocery
store
as
long as they paid an additional 10% co-pay? Would this
effect the price of food? Would the demand for the more
expensive food items tend to increase if people only
had
to
pay an additional dime on the dollar?

If the demand for these more expensive food items did
substantially increase and supply remained relatively
constant (or grew at a much slower rate than the
increase
in
demand) what would happen to the price of these items?
Would
the price rise? If the price would rise, how much would
it
rise? Would it rise substantially?




.

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