Healthcare costs are out of control

The problem with healthcare in America is one of cost brought about by the lack of options. I see no difference, as economic transactions go, between buying a car, buying a meal, buying a lap dance and buying medical care. And yet, in three of these, as an American I have significant options as to the quality of the first three – and very few as to the quality of the healthcare services.

As an example, I paid $5.97 for my lunch today. I could have gone to McDonald’s and paid under $3.00 or I could have gone to Shula’s Steakhouse and paid $45.00. You can have $1,000 lunches at the Four Seasons in NYC (parking not included). All of these choices would keep me alive, with varying degrees of satisfaction. Similar arguments could be made about purchasing the car (Chevy to Bentley) and, presumably, the lap dance, although I have no first hand experience.

The economic value judgments that drive me to the middle class lunch, car and lap dance I can afford completely disappear when it comes to health care. In that case, I want the very best health care regardless of cost – because I am not paying for it. Essentially, Donald Trump and I get, by and large, the same medical care.

The obvious consequence is that while he definitely earns it, most of us cannot. And the only reason we get it is because the medical and legal establishment (principally the medical establishment) while setting the standard of care at a level that is economically unfeasible to sustain, have created an artificial mechanism to obfuscate its true cost. And thus, healthcare costs go up at several times the pace of inflation – and more and more people cannot afford healthcare or its financing (insurance).

How has this problem been addressed elsewhere?

Most of the rest of the industrialized world has simply made a subconscious choice to lower the standard of care to a level that those of us who are insured would consider mediocre at best. This is, however, a level that the involuntarily uninsured would consider a very good level indeed.

This has created a truly tiered situation, whereby European, Latin American and Canadian elites come to the U.S. to receive essentially the same medical care those of us who are insured get, whereas the vast majority of the people in those countries get a standard of care we Americans would mistakenly consider substandard.

What would I propose as a solution?

Well, there is no easy way to get the genie back in the bottle…. But here are some thoughts:

Our population might be duped into believing that the same standard of care we the insured enjoy today could be extended universally without it becoming either prohibitively expensive or lowering its quality. This is, of course, an economic impossibility in so far as, whatever savings arose from standardization of claims processing would be more than offset by the proliferation of fraud intrinsic to the programs we have today (Medicaid and Medicare), not to even speak of the inefficiencies inherent to all programs run with someone else’s money (think DoD and FEMA).
Ideally, employers would get out of the business of funding health insurance….and people would get exposed to the true costs of health insurance programs, where all transactions would be subject to a high percentage based co-payment (maybe up to 100%), with catastrophic coverage provided by a shared risk pool (an insurance company) for those who wished to participate.
Ideally, we would allow more people into medical schools and allow foreign doctors to come and practice in the U.S. with lower licensing standards (in the same fashion as we allow tomato pickers and computer programmers to come in and compete). The government’s role would be one of informing, rather than one of making choices on our behalf.
Ideally, there would be more competition and consolidation of the depreciable assets involved in healthcare conveyance. The $2MM MRI machine should be available to take a look at my kidney (and the transaction priced accordingly), but I should be able to go to a much cheaper place to take a look at my broken toe.

I’d appreciate alternative points of view.