Thursday, March 18, 2010

The Cost of Health Care

Who is to blame for the high cost of health care? The answer may surprise you. In order to understand why health care is so expensive, one must first watch this John Stossel video about the health insurance market. Also helpful would be reading an analysis provided by Dr. Francois Melese: Privatizing Public Hospitals. Further insight as to the reason why employers provide health care insurance has been documented by David Boaz:

"Why don't consumers pay for their own health care? The answer leads us to a great example of the vicious circle of government intervention, one regulation creating problems that lead to another regulation and then another. During World War II the federal government imposed wage-and-price controls to conceal massive inflation that it was creating by printing money. Wage controls made it hard to hold good employees or to attract new ones. Companies came up with the idea of offering health insurance as an employee benefit not banned by the wage controls. After the war the benefit was so well established that Congress decided not to count health insurance as part of an employee's taxable income, which meant that other companies began to offer it because it was cheaper for both employee and employer to pay for medical insurance with pretax dollars.

Because the employer was paying for health insurance and the insurance was paying for medical costs, patients became indifferent to costs."

Libertarianism: A Primer, by David Boaz (pages 224 and 225)

In summary, if one is not paying for the care they receive; one has no reason to reject a particular test or procedure that may not be needed. If insured, one is incentivized to take more risks that they might avoid otherwise (moral hazard).

3 comments:

health insurance australia said...

Privatizing public hospitals is a terrifying thing. Sadly, it is not a myth. Health insurance in Australia is so much better.

Nursing Homes in NJ said...

I believe that this has been a long issue but it never get support from the majority. I think they should just stop targeting these hospitals and focus more on other concerns and solutions to the problems.

Alex Stephen said...

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