It’s the Lack of Capitalism in Health Care that Makes it so Expensive and Inaccessible

Posted by PITHOCRATES - November 6th, 2011

Week in Review

Why is health care so expensive in the U.S.?  Apparently it’s because of doctors and insurance companies.  Not the people who set the rules doctors and insurance companies must play by (see Health insurance in America: Obamacare is making health insurers bigger posted 10/29/2011 on The Economist).

Good, cheap health care has long eluded America. Doctors are paid for each service, so they deliver as many as possible, necessary or not. Insurers protect margins by micromanaging claims and hiking premiums.  These perverse incentives are addressed, faintly, by Obamacare. For example, there are pilots to reward hospitals for the quality rather than the quantity of their care. Mostly, however, the reform deals with the symptoms of muddled incentives: high premiums and poor access.

Yes, these are perverse incentives.  But this is what happens when you exclude capitalism from health care.

All of the problems, and I mean ALL of the problems, of health care go back to one fatal flaw in how we pay for health care.  We don’t.  That is, we don’t pay for our own health care.  Others do.  And when the recipient of services rendered doesn’t pay for the services rendered you can’t help but to have these perverse incentives.

When you buy a new fridge you don’t let the salesman sell you the most expensive one with the most features if you can’t afford it.  Because you’re going to say no.  Because you can’t afford it.  Those features are nice.  But they’re not necessary for a happy and healthy life of refrigerating stuff.

But if someone else is paying the bill, guess what?  You’re probably going to get the best.  Because it won’t cost you anymore.

Just like people with good prescription coverage don’t buy generics.  Because it doesn’t cost them any more to buy the name brand.

This is what happens when you don’t pay for what you buy.  This is why health care costs are out of control.  And fixing this problem by making the original problem bigger, having other people pay for your health care, as in Obamacare, won’t do a thing to cut costs or provide more access.  What will happen is what has happened in nations with national health care.  Higher taxes and a rationing of services.  To pay for the out of control rise of costs.  Which, surprise surprise, keep rising.  Even in these countries that have ‘solved’ the problem of out of control costs.

If you want to control costs you have to increase the amount of capitalism in the system.  Not reduce it.  Because this is what capitalism does.  And what bureaucrats can’t do.

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