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


"Michael Scheltgen" <mjs818@xxxxxxxxxxxxx> wrote in message
news:emuAi.95979$fJ5.52811@xxxxxxxxxxxx
royls@xxxxxxxxx wrote:
On Sun, 26 Aug 2007 09:21:46 -0500, "Peter Olcott"
<NoSpam@xxxxxxxxxxxxx> wrote:

<royls@xxxxxxxxx> wrote in message
news:46d0b4b3.1017297@xxxxxxxxxxxxxxxxx
On Sat, 25 Aug 2007 10:33:48 -0500, "Peter Olcott"
<NoSpam@xxxxxxxxxxxxx> wrote:

Why is the price of health care rising much faster than the
price of other goods and services?
Government-created and -enforced monopolies that shovel inconceivably
large quantitites of unearned wealth into the pockets of the rich.
It couldn't have anything to do with the fact that demand is
unconstrained by increases in price?

No, it couldn't, because the price elasticity of demand for medical
care is so low: people want the care they need, but no more. When was
the last time you went to the hospital for a little recreational knee
surgery, or a REALLY extreme makeover, like a liver transplant?

If you were interested in understanding anything about the economics
of health care, which you obviously are not, you would be willing to
know the fact that countries that provide medical care to their
citizens FOR FREE spend far less (in some cases little more than HALF
as much) on it per capita than the USA, where demand is "constrained"
by the resistance of insurance companies and HMOs to paying the
"market" price.

Excellent point, Roy. It also raises the very important question of what
does "demand" in medical market really mean? What I mean is when one
considers the information asymmetry existing between physicians and
patients who's really responsible for demand and driving cost? Obviously
the physician who controls access to advanced diagnostics, various
specialists, pharmaceuticals, hospital beds, etc. Because of this
information asymmetry physicians have a great deal of discretionary power
to shift patients' demand curves by suggesting treatments the patient
would not accept if they had the same information as physicians.

The major assumptions for markets to work are that consumers must have
full information and be rational. This is hardly the case in the health
care setting as outlined above. Anyone who thinks competition will fix
health care needs to google "market failure" and "health care" and start
reading.

I think it's far worse than that.

While I completely agree that physicians might take advantage of information
asymmetry in order to pad their pockets, I also think that even without that
incentive, they probably overtreat because of the "when you're a hammer,
everything looks like a nail" effect.

There's an excellent article on why the "market" is (and perhaps always will
be) unable to make rational cost/benefit decisions if the goal is _good
long-term health outcomes_:
http://www.washingtonmonthly.com/features/2005/0501.longman.html

Here's a link to a thread I started in this ng on that article:
http://groups.google.com/group/sci.econ/browse_frm/thread/058e1e48ba9748c1/2abc74e53be44681?&hl=en#2abc74e53be44681



Mike


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Relevant Pages

  • Re: What is the root cause of the rising cost of health care ?
    ... It couldn't have anything to do with the fact that demand is ... unconstrained by increases in price? ... care is so low: people want the care they need, ... information asymmetry physicians have a great deal of discretionary power ...
    (sci.econ)
  • Re: The Root Cause of Rising Health Care Costs
    ... lacks sufficient price elasticity of demand. ... Within the current way that health care is bought and paid for, ... Find a way to add price elasticity of demand to health care. ...
    (sci.econ)
  • Re: What is the root cause of the rising cost of health care ?
    ... It couldn't have anything to do with the fact that demand is unconstrained by increases in price? ... What I mean is when one considers the information asymmetry existing between physicians and patients who's really responsible for demand and driving cost? ... This is hardly the case in the health care setting as outlined above. ...
    (sci.econ)
  • Re: What is the root cause of the rising cost of health care ?
    ... It couldn't have anything to do with the fact that demand is ... unconstrained by increases in price? ... care is so low: people want the care they need, ... Because of this information asymmetry physicians have a great deal ...
    (sci.econ)
  • Re: What is the root cause of the rising cost of health care ?
    ... It couldn't have anything to do with the fact that demand is unconstrained by increases in price? ... What I mean is when one considers the information asymmetry existing between physicians and patients who's really responsible for demand and driving cost? ... This is hardly the case in the health care setting as outlined above. ...
    (sci.econ)