A lot of blogging is about repeating what you’ve previously written about. I think, at one time or another, I’ve pointed out the various reasons for why healthcare costs so much. So here is a summary:
(1) No free market competition. Doctors have their fees set by insurance companies and Medicare, so they can’t advertise low prices. Nor can they advertise higher prices but better service. Liberals love this situation because it’s the only area of society that’s completely egalitarian. Rich people have to wait in the same waiting room from as poor people, and receive the same lousy healthcare from the same doctor.
Because abortions are the only procedure not covered by insurance, it’s the only part of healthcare that responds to free market forces. Consequently, we observe that abortions cost a fraction of the price of other types of medical procedures.
(2) Bureaucratic medical billing. Each doctor has to hire people to submit his bills to the insurance companies, who have their own people who look for reasons to reject the claims. All this extra labor costs lots of money.
(3) Malpractice insurance. Some doctors have to pay more than $100,000/year for malpractice insurance, and I’ve heard that obstetricians in litigious states are paying for then $200,000/year. These costs are passed on to consumers.
Fear of malpractice suits is also believed to cause doctors to order unnecessary tests a practice known as defensive medicine.
(4) Drug company advertising. I estimated from examining Pfizer’s public financial statements that twice as much money is spent on advertising and on commissions paid to salespeople than is spent on actual drug research.
Doctors are brainwashed by the drug companies into prescribing expensive drugs when generics are just as good. No one complains because neither the doctor nor the patient (if he has insurance) is paying for the drugs.
As with doctors, there is no free market competition. If people had to pay for their own drugs, and they could choose themselves between the $100 drug and the slightly inferior $10 drug, most people would buy the $10 drug, unless they were rich.
Drug companies, under the current scheme have no incentive to lower prices. The best way for them to maximize profits is high prices combined with very expensive marketing campaigns.
(5) The Emergency Medical Treatment and Active Labor Act of 1986. This is one of the most evil laws ever passed by Congress. All medical facilities are required, under severe penalty for noncompliance, to provide emergency care regardless of ability to pay. However, it’s an unfunded mandate. The government requires medical facilities to give away free services, but doesn’t reimburse them for the free services. Instead, they pass on the costs to paying customers. Because poor people show up at the emergency room without the ability to pay, the hospitals jack up the price for emergency room care to cover the costs. This causes people with the ability to pay to avoid emergency rooms if at all possible, which means costs have to be jacked up even higher because there are fewer paying customers.
Part of the reason why hospital visits, and health insurance which covers the costs of hospital visits, costs so much is because you are subsidizing the emergency medical care of people who can’t pay.
This law has also ruined the quality of hospital emergency rooms. Without this law, hospital emergency rooms could be a decent place to get affordable healthcare because they are run pretty efficiently and the doctors are salaried and don’t get paid as much as doctors in private practice.
It has also created a rather dangerous situation for the unemployed with the ability to pay. For poor people with no assets, the hospital emergency room is the equivalent of free universal healthcare. For people with money but no health insurance, they face a very tough choice. Let’s say a person doesn’t feel right—maybe it’s a heart attack, maybe it’s not. Erring on the side of caution and visiting the emergency room without insurance might mean a medical bill that’s a huge amount of money relative to their income and assets. Call me a bleeding heart, but I don’t think it’s fair that people are forced to make that choice.
(6) No triage. If a poor person has a kid with a cough, I don’t see any reason why a nurse with a bachelor’s degree can’t handle this simple problem, without requiring a much more highly paid doctor to get involved. Liberals, of course, hate the idea that poor people get less healthcare than rich people.
(7) Heroic and expensive medical efforts spent during the last months of life. The American ethic is that no expense be spared in an attempt to preserve life. But someone needs to make some harsh utilitarian judgments. $200,000 spent on a futile operation on an octogenarian could provide healthcare for a large number of young people.
* * *
So that’s my healthcare summary post. As I’ve pointed out many times, there is no free market in healthcare. We have a socialized healthcare system already. Although the healthcare workers are not direct government employees, the healthcare system is so highly regulated and there are so few free market forces at work, for all practical purposes you should consider it a socialized system. This means that a genuine socialized system might be better than the current system, because it could be designed from the ground up with fewer inefficiencies.
The primary beneficiaries of the current system are the medical insurance companies. They profit from the status quo and have no desire for any reform, although they are delighted with any suggestion that the government fund the healthcare insurance for the uninsured.