This article was printed in the Boulder Daily Camera on July 14, 2012.
One reason medical care costs so much because patients pay so little for it directly. Most Americans’ health coverage is not real insurance, which covers large unexpected expenses. It’s really prepaid medicine that also covers small predictable expenses. The tax code is the main culprit. It punishes cash payment for medical care and rewards payment through insurance. Medicaid and Medicare are also prepaid medical plans.
Costs soar because patients are consumers, but not paying customers. Like business travelers dining on their employers’ expense accounts, patients are largely insulated from medical costs, and hence pay scant attention to price. For example, if a doctor recommends a high-end treatment, a patient has little incentive to inquire about its necessity or the availability of lower cost alternatives.
Costs stay low when patients pay, rather than when insurers or government health plans pay. For example, The Guttmacher Institute reports that 57% of abortion patients pay out-of-pocket, while abortion prices have been fairly constant for decades.
Real health insurance can save money – for example – high-deductible insurance combined with Health Savings Accounts for out-of-pocket medical expenses. Such “plans can produce significant (even substantial) savings without adversely affecting member health status,” reported the American Academy of Actuaries. The RAND Health Insurance Experiment reached similar conclusions.
But so-called “reform” does not address these problems. Rather, it entrenches them by mandating costly health plan benefits, limiting tax-exempt medical purchases, and threatening to ban high-deductible insurance policies.
See also “Why are health costs rising?” by Devon Herrick.