13 thoughts on “The Reason Health-Care Costs Are High”
Exactly. People talk about tort reform as if it’s the magic bullet to lowering medical costs, but the main culprit is the fact that the cost-containing genius of the average consumer has been surgically removed from the corpus of the medical system. Once we pay for our “insurance” plans, which are really not insurance plans at all, we are free to behave as if we had a ticket to an all-you-can-eat medical buffet.
Only when we get to a place where people pay for their own health care as they use it, like buying food or gas or paying the electric bill, will there be real downward pressure on costs. The moral here is that If you want to make something really, really expensive — make it free. What we need to do now is make it un-free.
1) Mandate that insurance companies must provide plans targeting the entire spectrum of deductibles for anything that they do cover. $0, $50, $100… $10,000, $50,000.
2) Mandate that yearly all insurance return 5% of the payments to a personal (directly owned, tax free, giftable, inheritable) account and allow choosing a new deductible level.
Yes, there’s an inherent 5% increase in initial levels. But:
Current: $12,000
New Plan, Year 0: $12600 w/ 0 deductible, $600 comes back. Suddenly I’m liking the $300 deductible a lot more than the $0 deductible.
Year 1: $11,400 w/300 deductible, or whatever.
At the very least it provides more options for paying for the little stuff whose pricing is the most insane.
Plenty of opportunity for pet redistribution schemes as well. But if it is recognized as “your money” and as “your kids inheritance” there are at least some nominal checks and market thinking instead of victim thinking.
The moral here is that If you want to make something really, really expensive — make it free.
Then why is health care most expensive in the one developed country where it isn’t free?
Then why is health care most expensive in the one developed country where it isn’t free?
Where is it “free”? Not anywhere else in the world.
Where is it “free”?
It is free (or near-free) to the consumer (i.e. in the sense that notanexpert was referring to) everywhere in the developed world besides the U.S.
Rand says “We don’t pay for it,” but in fact the U.S. is the only country (among our peers) where you can go bankrupt for failing to “pay for it.” And yet our health care costs are the highest.
Making everyone “pay for it” won’t fix the problem. The fundamental problem in healthcare costs is Baumol’s cost disease. Until we figure out how to make health care productivity increases match the general productivity increases in the economy, it will continue to get more expensive. Unfortunately, the major area that can cut costs (pharmaceuticals) is a major target for the left.
It is free (or near-free) to the consumer (i.e. in the sense that notanexpert was referring to) everywhere in the developed world besides the U.S.
You should have said that in the first place. How long do you have to wait to get this “free” health care? The typical cost for “free” stuff is waiting in line for a long time.
Then why is health care most expensive in the one developed country where it isn’t free?
In the literal sense, health care isn’t any more free in other developed countries than in the U.S. Only the method of payment differs. Are you calling health care free in the U.K. because the people there pay for it through the tax system instead of an employer-based system like we have here? If we’re paying X% out of our wages for health “insurance” and UKers are paying X% higher taxes to fund health insurnace, how does that make health care free in one place and not the other?
But. The point of my post, and I believe Rand’s as well, was that the way we pay for health care allows us to consume health services as if it were free. I believe the economists would call this a marginal cost issue. Once I’m locked into a payment plan — regardless of how much that costs me — my self-interest is to consume all I need without considering the cost, because the extra cost for doing so is little or nothing. In fact, the higher my fixed cost — what I pay for my insurance plan — the greater the perverse incentive to consume health services I may not even need in order to get my “money’s worth.” It’s a very twisted system.
The point of my post, and I believe Rand’s as well, was that the way we pay for health care allows us to consume health services as if it were free
But it is even more that way in other countries, where they’ve never heard of things like deductibles, coinsurance, or lifetime benefit caps. And yet those countries end up spending less.
Which suggests that there are ways to lower costs that don’t involve having all health care spending come out of pocket.
The typical cost for “free” stuff is waiting in line for a long time.
No, that is not typical, and in fact the “free” stuff is better at keeping people alive than what we have (see research estimating that if our system was as good as France’s at preventing medically avoidable fatalities, we’d save 20,000 lives a year).
But it is even more that way in other countries, where they’ve never heard of things like deductibles, coinsurance, or lifetime benefit caps. And yet those countries end up spending less.
Do they spend less because they’re more efficient or because they deliver less services? (I believe that was the meaning of the Karl’s “long lines” comment — you can always cut costs by simply producing or delivering less.) Will you be okay with the US government reducing mecial costs by arbitrarily reducing services? Because ultimately that’s what will happen. Every time Obama says that he will do “whatever is necessary” it should send a shiver down your spine.
DISCLAIMER: The “the Karl’s” in my previous post was a typo, not any kind of a commentary on Karl or his past posts. (I just want to make that clear for the sake of comity in the TM comments section.)
Only a small minority of the public pays attention to things like these. The rest of us are content to live in ignorance until the state gives us something sold with fear and plastered all over the “free” press. That and crime and celebrity “news” are all that seem to easily enter our collective consciousness.
Exactly. People talk about tort reform as if it’s the magic bullet to lowering medical costs, but the main culprit is the fact that the cost-containing genius of the average consumer has been surgically removed from the corpus of the medical system. Once we pay for our “insurance” plans, which are really not insurance plans at all, we are free to behave as if we had a ticket to an all-you-can-eat medical buffet.
Only when we get to a place where people pay for their own health care as they use it, like buying food or gas or paying the electric bill, will there be real downward pressure on costs. The moral here is that If you want to make something really, really expensive — make it free. What we need to do now is make it un-free.
1) Mandate that insurance companies must provide plans targeting the entire spectrum of deductibles for anything that they do cover. $0, $50, $100… $10,000, $50,000.
2) Mandate that yearly all insurance return 5% of the payments to a personal (directly owned, tax free, giftable, inheritable) account and allow choosing a new deductible level.
Yes, there’s an inherent 5% increase in initial levels. But:
Current: $12,000
New Plan, Year 0: $12600 w/ 0 deductible, $600 comes back. Suddenly I’m liking the $300 deductible a lot more than the $0 deductible.
Year 1: $11,400 w/300 deductible, or whatever.
At the very least it provides more options for paying for the little stuff whose pricing is the most insane.
Plenty of opportunity for pet redistribution schemes as well. But if it is recognized as “your money” and as “your kids inheritance” there are at least some nominal checks and market thinking instead of victim thinking.
The moral here is that If you want to make something really, really expensive — make it free.
Then why is health care most expensive in the one developed country where it isn’t free?
Then why is health care most expensive in the one developed country where it isn’t free?
Where is it “free”? Not anywhere else in the world.
Where is it “free”?
It is free (or near-free) to the consumer (i.e. in the sense that notanexpert was referring to) everywhere in the developed world besides the U.S.
Rand says “We don’t pay for it,” but in fact the U.S. is the only country (among our peers) where you can go bankrupt for failing to “pay for it.” And yet our health care costs are the highest.
Making everyone “pay for it” won’t fix the problem. The fundamental problem in healthcare costs is Baumol’s cost disease. Until we figure out how to make health care productivity increases match the general productivity increases in the economy, it will continue to get more expensive. Unfortunately, the major area that can cut costs (pharmaceuticals) is a major target for the left.
It is free (or near-free) to the consumer (i.e. in the sense that notanexpert was referring to) everywhere in the developed world besides the U.S.
You should have said that in the first place. How long do you have to wait to get this “free” health care? The typical cost for “free” stuff is waiting in line for a long time.
Then why is health care most expensive in the one developed country where it isn’t free?
In the literal sense, health care isn’t any more free in other developed countries than in the U.S. Only the method of payment differs. Are you calling health care free in the U.K. because the people there pay for it through the tax system instead of an employer-based system like we have here? If we’re paying X% out of our wages for health “insurance” and UKers are paying X% higher taxes to fund health insurnace, how does that make health care free in one place and not the other?
But. The point of my post, and I believe Rand’s as well, was that the way we pay for health care allows us to consume health services as if it were free. I believe the economists would call this a marginal cost issue. Once I’m locked into a payment plan — regardless of how much that costs me — my self-interest is to consume all I need without considering the cost, because the extra cost for doing so is little or nothing. In fact, the higher my fixed cost — what I pay for my insurance plan — the greater the perverse incentive to consume health services I may not even need in order to get my “money’s worth.” It’s a very twisted system.
The point of my post, and I believe Rand’s as well, was that the way we pay for health care allows us to consume health services as if it were free
But it is even more that way in other countries, where they’ve never heard of things like deductibles, coinsurance, or lifetime benefit caps. And yet those countries end up spending less.
Which suggests that there are ways to lower costs that don’t involve having all health care spending come out of pocket.
The typical cost for “free” stuff is waiting in line for a long time.
No, that is not typical, and in fact the “free” stuff is better at keeping people alive than what we have (see research estimating that if our system was as good as France’s at preventing medically avoidable fatalities, we’d save 20,000 lives a year).
But it is even more that way in other countries, where they’ve never heard of things like deductibles, coinsurance, or lifetime benefit caps. And yet those countries end up spending less.
Do they spend less because they’re more efficient or because they deliver less services? (I believe that was the meaning of the Karl’s “long lines” comment — you can always cut costs by simply producing or delivering less.) Will you be okay with the US government reducing mecial costs by arbitrarily reducing services? Because ultimately that’s what will happen. Every time Obama says that he will do “whatever is necessary” it should send a shiver down your spine.
DISCLAIMER: The “the Karl’s” in my previous post was a typo, not any kind of a commentary on Karl or his past posts. (I just want to make that clear for the sake of comity in the TM comments section.)
Only a small minority of the public pays attention to things like these. The rest of us are content to live in ignorance until the state gives us something sold with fear and plastered all over the “free” press. That and crime and celebrity “news” are all that seem to easily enter our collective consciousness.