The Issue For American Healthcare...

A slight exaggeration, perhaps. But Warren Meyer of CoyoteBlog has been consistently making the point nicely illustrated on the graph at right: that as people have more personal responsibility for paying the costs of their medical care, the prices come down.

The blog post linked above makes the case in much more detail. The fundamental point, though, is very simple: when people have to pay for something themselves, they'll start making decisions based on the value to themselves.

Outside the healthcare arena, everybody seems to accept this notion without argument. For example, when you buy a car, you weigh the cost of a particular model against its value to you. This gives the manufacturers a huge incentive to deliver more value for the dollar – the direct result of which is we can buy the marvelous machines that are today's cars (or computers, or whatever) at historically astonishingly low prices.

But healthcare in America today doesn't work this way. Patients have zero incentive to shop for more healthcare value for the dollar. Why should they, when the insurance company is going to pay for nearly whatever they ask for? Ditto for doctors – they actually have disincentives for saving money. Their best interest (reduced litigation) is to over-order both diagnostics and theraputics.

Meyer's suggested fix is to reform healthcare to reintroduce market forces. I'm in 100% agreement with him on that general principal. There are a bazillion ways one could actually do this, and picking one would make an interesting public debate. But...I'm afraid that politically any such plan is dead on arrival. Americans have gotten used to their healthcare system, and they like the open-ended nature of it. Why wouldn't they? And, unfortunately, the vast majority of Americans do not understand that our current system is headed inexorably toward a very painful collision with the wall of economic reality...