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Health care reform and basic economics

AndrewC

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Commentary: US health costs out of control - CNN.com
Increased efficiency in health care is indeed possible, but assuring "high quality, affordable care for every American," as the administration seeks to do, is not. Here's why.

Most health care is paid for by insurance. When people are insured they do not pay the full costs of the medical care they receive, so they demand the best and pay little attention to the expense. Patients opt for surgery rather than medication or wait-and-see, even when the medical advantages are small.

Patients choose new, expensive medications rather than existing, cheaper generics in search of minor reductions in side effects. Family members exhaust every life-saving intervention for an elderly relative, even when the prospects of significant life extension are minimal. Doctors order excessive diagnostic tests, partially to avoid malpractice liability.

If most people paid the full cost of their insurance, the incentives that insurance creates for excessive care would be modest. Insurance companies would utilize co-pays, deductibles, coverage limitations, and other contractual features that discourage inefficient levels of care, and more generous policies would be more expensive, discouraging demand for such coverage.

The above is an excellent article on health care reform. It uses basic economic principles and common sense to lay out a plan for reform. By trying to provide equal care for all Americans. We have destroyed the low cost health care that was so common in the United States.

Simply put, price manipulation leads to poor or unsustainable decision making. This is what caused the financial crisis. Government distorting prices and economic forces lead to businesses and individuals making bad decisions. You cannot regulate greed. You cannot make decisions for all Americans and expect them to accept it and it to be efficient. Prices, the true value of money and supply and demand are the best check for greed. They help inform economic participants on how to behave and maximize efficiency.
 
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