Thursday, July 16, 2009

The Provider-Consumer Disconnect = High Prices

Today there is a disconnect between providers and consumers. Almost all health insurance is covered by third parties--either insurance companies or governments--so patients rarely know what most health care services cost. If you go to a hospital and ask about prices, the staff's immediate reaction is that you must be uninsured. Why else would you want to know what something costs? Yet in just about every other aspect of our commercial lives the price of things is known.

No wonder health care doesn't experience the kind of productivity gains found elsewhere. For example, the cost of food as a proportion of one's income is a mere fraction of what it was decades ago (see chart above). Twenty years ago cell phones were bulky and expensive; today they have become cheap virtual computers with easy access to the Internet. They even take pictures and videos. There are 4 billion cell phones in use around the world.

In 1900 the automobile was a toy for the rich and cost the equivalent of about $100,000 today. Henry Ford's moving assembly line turned autos into something that any working person could afford.

We could attain similar and ongoing miracles in health care. We are already seeing some in a few areas. Conventional Lasik eye surgery costs a third of what it did ten years ago. And there has been virtually no inflation in the prices of cosmetic surgery, even though there have been enormous technological advances, and the demand for these procedures has increased sixfold since the early 1990s.

Special hospital facilities in India, Thailand, Singapore and elsewhere that engage in medical "tourism" have infection rates a fraction of those found in most U.S. hospitals. These positive results are driven by the fact that patients write the checks and are thus fully conscious of the costs, as well as by the fact that providers are under pressure to make their offerings more enticing and affordable.

Genuine free-market reforms in health care will slash the number of the uninsured and lead to the same kinds of innovations and efficiencies that are experienced in most of the rest of the economy.

~Steve Forbes (HT to Mark Dodson)

6 Comments:

At 7/16/2009 1:47 PM, Anonymous John said...

But don't you think letting the government manage our food supply would be a good idea?!?

Steve Forbes for president in 2012. We need someone who understands basic economic principles. Our current president and most members of Congress clearly do not.

 
At 7/16/2009 3:55 PM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 7/16/2009 4:27 PM, Blogger misterjosh said...

"No wonder health care doesn't experience the kind of productivity gains found elsewhere."

This doesn't jive with the fact that pet health care has risen just as fast as person health care.

I think the real explanation is that we have more ability to do medical stuff, and that's why we're spending more money on it.

 
At 7/17/2009 1:22 AM, Blogger sethstorm said...


Special hospital facilities in India, Thailand, Singapore and elsewhere that engage in medical "tourism" have infection rates a fraction of those found in most U.S. hospitals.

Where quality otherwise is questionable, and the country usually unstable.


Twenty years ago cell phones were bulky and expensive...

In 1900...
...the early 1990's

Well, that's a lot of junk out there, especially with the shoddy aftermarket parts that go with it; both usually made in countries far removed from any attempt to integrate quality.


As for healthcare reform:
Just close the loopholes without going for another public option.

 
At 7/17/2009 8:08 AM, Anonymous Chris said...

Put the government in charge of the Sahara Desert and they'll run out of sand in less than five years.

 
At 7/17/2009 2:17 PM, Anonymous Anonymous said...

America: too few doctors, too many lawyers, too many single-payers.
Mexico: too many doctors, too few lawyers, almost nobody is insured because they don't need it.

The USA solution: open the borders to any qualified medical people, Cap the limit on medical malpractice to correction cost and lost work-time. Don't allow any insurance to pay more than 75% or so of a medical bill. Then the patient will have motivation to ask prices and bargain.

 

Post a Comment

Links to this post:

Create a Link

<< Home