Via Ezra Klein’s blog, I found this new survey about health care in the U.S. Lot’s of interesting findings, and this is what Klein has to say about the respondents’ views on why health care costs are rising:
As for what’s driving all these high costs, the reported culprits, in descending order, are excess profits of drug and insurance companies, medical malpractice lawsuits, fraud and waste, overpaid doctors, administrative costs, unnecessary treatments, unhealthy lifestyles, expensive new treatments, the aging population, and better medical care. That’s depressing. In order to get an accurate view of what’s driving health costs, you’d need to basically invert that list. To say the American people have it backwards is to be unusually precise.
I wouldn’t say that they have it backward so much as I would say that the survey didn’t ask about the primary driver of health care costs: the third-party payer system (although, in fairness, few Americans would probably know what that is.) In a third-party payer system, the consumer does not directly pay the provider. Rather, a third-party-in the case of health care, an insurance company or the government-pays the provider. Under such an arrangement, the consumer has no incentive to consider costs or quality, or to shop around for the best deal because he perceives that “someone else” is paying the bill. Indeed, most of the problems on that list are really symptoms of the third-party payer system.
The simple fact is that the biggest problem in the American health care system is that we do not pay enough of our own money directly for our health care. As more and more people pay directly for more of their health care, you will see fewer administrative costs, less fraud and waste, fewer unnecessary treatments, more innovation so that new treatments become, over time, cheaper, and people living healthier lives, and doctors’ will be paid more market-based rates. It might also have a beneficial effect on providing treatment to an aging population, as more competition results in more innovative ways to provide medical care cheaper.
As for excess profits, it’s difficult to know whether such a problem would decline since the term is a lot like the oil industry’s so-called “windfall profits” in that no one making such a charge ever defines the term. And getting people to pay for more of their health care directly will have little impact (at least directly) on the tort system.
Health care in this country needs more market-based cures like health savings accounts. Otherwise, we are only treating the symptoms.