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

On Wed, 29 Aug 2007 19:00:56 -0500, "Peter Olcott"
<NoSpam@xxxxxxxxxxxxx> wrote:

<royls@xxxxxxxxx> wrote in message
news:46d44732.3542639@xxxxxxxxxxxxxxxxx
On Mon, 27 Aug 2007 18:16:40 -0500, "Peter Olcott"
<NoSpam@xxxxxxxxxxxxx> wrote:

You completely ignored my example about Nexium didn't you?

Yes, because it did not mean what you thought it meant.

Nexium is much more expensive than Prilosec, yet because
of
the subsidy of health insurance Nexium is cheaper for me
than Prilosec, so I choose Nexium.

That has nothing to do with demand being unconstrained by
price. It's

Sure it does. My demand for Nexium only exists because I
don't have to actually pay the price myself directly.

No. Your demand for Nexium or an equivalent product exists because
you need it. Inelastic demand is a characteristic of medical goods
and services, but that is not what makes them expensive, as the low
price of Prilosec proves (and if Prilosec is equivalent, I don't know
why your insurance would make Nexium cheaper). What you are missing
is _why_ Nexium is much more expensive than Prilosec. What allows the
manufacturer to charge so much more for it?

Suppose we talk about water instead of Nexium. You need water to
live, probably even more urgently than you need Nexium. Because it is
necessary to life, your demand for water is likewise unconstrained by
price: whatever the price, you would pay it as long as you could
afford it, because the alternative is death. But because the _supply_
of water is not restricted, you pay almost nothing for it.

Get it? Price does not just depend on demand, no matter how price
inelastic it might be.

If I
had to actually pay the price myself directly I would choose
the more cost effective alternative.

You're not paying attention:

about price being unconstrained by market competition.
Hint: how much
(if any) more does it cost to _make_ Nexium than Prilosec?

What governs Nexium's price, the inelasticity of your demand? Nope.
The low price of Prilosec proves it is the restriction of _supply_
that makes Nexium cost so much, not inelastic demand.

-- Roy L
.

Relevant Pages