Wednesday, December 16, 2009

Health Care - Why Does It Cost So Much?

I'm curious to know what percentage of people who go to the emergency room do so because it is an actual emergency or because their liability to pay for said service in the emergency room is because some other entity is paying for it. What percentage of folks who use the emergency room are on Medicare, Medicaid, SCHIP, or some other State-sponsored health care (State's version of SCHIP)? I would think the percentage is pretty high.

Health care is a product/service just like any other consumable good (although it is somewhat inelastic since the doctor, nurse, surgeon requires a great deal of skill/education ). But the consumer hardly ever knows or is aware of the prices of what he/she is paying for when receiving a procedure. Thus, consumers have little if any incentive to shop around for the best value. When this happens, a distortion exists when calibrating supply and demand to allocate resources in the market.

Before the Great Society reforms (Medicare/Medicaid) and Health Maintenance act of 1973 (genesis of HMO style insurance) , patients used to pay their medical provider directly and providers had to be conscious of what they were charging to compete with other providers. Through these 2 reforms, the 3rd party payer (gov't/HMOs/Insurers) system transformed the free market of health care into a totally mixed market. One could argue that we have about a 50% single payer system with the gov't already deeply involved in dictating how care should be delivered.

But, instead of looking to the cause and affect through history and economics as our guide of learning how the free market has been totally distorted and has driven up costs... a majority of folks (namely in Washington) want MORE gov't control and distortion instead of less.

People should take responsibility for their health care and bear the sole responsibility of maintaining their care. They should be required to use the fruits of their labor to determine to what extent they are willing to pay for health care products and services just like individuals do for transportation, food, clothing, housing (which are far more essential goods than health care).

Catostrophic events do and will happen and life threatening disabilities, diseases, cancer, disorders, and other life-threatening things will affect people's health. But, that is where people should actually look for insurance to cover the unlikely or rare event instead of relying on it for every single element of ones health care.

It's really sad that our educational system is really deprived of applying the laws and science of economics and human action to the current debate of health care.

Hopefully what I've said will make people think more critically about health care when applying economics and history to this issue.

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