People Pay With Time, Not Money, For Health Care
The RAND Health Insurance Experiment shows that:
1. Patients are responsive to out-of-pocket costs; if people face a high deductible, rather than first-dollar coverage, they will reduce their health care spending by about 30%.
2. This reduction in health care spending has no effect on the patient's health care in most cases.
3. Patients reduce their spending not by comparing the marginal value of various medical services with other uses of money; rather, they reduce their spending by deciding not to initiate care in the first place.
According to John Goodman, the "Father of Health Savings Accounts":
The health care system is a bureaucratic, institutionalized structure, in which normal market processes have been systematically suppressed. Since most people pay with time, not money, when they buy care, providers are not competing on price or quality. Since price and quality data are not available, patients find it impossible to trade off money against health services, the way they would do in a normal market. Hence, their only real choice is whether to enter the system at all. And the higher the expected cost of entry, the less likely they are to do so.
Sources: NCPA and John Goodman's Blog