Posted 3/6/12 on Cracking Health Costs
Ezra Klein wrote and article in the Washington Post on March 2, 2012 on this subject. He wrote, “There is a simple reason health care in the United States costs more than it does anywhere else: The prices are higher.”
That’s true enough. Klein goes on to say,”…unlike in other countries, sellers of health-care services in America have considerable power to set prices, and so they set them quite high.” Click here to read the article.
Again, why is that way in America but not in other resource advantaged countries?
Here’s why. In the US we are trying to maintain a fiction that the free market should basically rule in the the area of pricing for health care services….with some limitations, of course…but national policy is to let the “market” basically rule.
That is deeply flawed thinking. In a free market, prices of goods and services will achieve an “equilibrium” at a certain demand and supply intersect. That can never happen in health care because the “buyers” of health care are not thepayers….hence no price equilibrium, not now, not ever. “Market” economics does not work when someone else pays your bills. That’s called wealth transfer.
Other countries simply understand this better than we do and make appropriate adjustments to offset the lack of market economics.
We are not yet there in America. If our national view of this remains static, expect prices to go up forever. It’s that simple.
Thanks to Galen Thorp for sending me this article.