1). Disconnect between healthcare and opportunty costs. It is my opinion that one of the major factors driving up the cost of healthcare is the fact that those people who comsume healthcare (patients) are NOT the same people who directly pay for it. This results in a disconnect between choosing healthcare and the "opportunity costs" of choosing healthcare. When one only has $10 to spend, he can go to the movies OR have lunch. A choice to see a movie involves an opportunity cost (ie., the forgone lunch). Because insurance companies pay for medical care (generally) the patient doesn't have to choose between healthcare and some other set of goods and services. His costs are only impacted in the agrregate and indirectly when premiums are due. This disconnect leads to overconsumption.
2). Dissapearance of the concept of "value". Normally a consumer deciding between two sets of goods or services is attracted to that set which is of the highest utility to him. However, even the better set may be rejected in favor of a less usefull set of goods and services if it is a poor "value", or if a less good (for lack of a better term) set of goods and services represents a particularly good "value" due to a particularly low price. Feraris are nicer cars than Honda Accords. But there's no question which one represents the better value for most people. This sort of calculation does NOT take place when choosing between healthcare goods and services. Nobody says "that triple bi-pass is kind of expensive - I think I'll just go for the angioplasty". In healthcare the "best" set of goods and services is ALWAYS preferred and chosen regardless of cost or any calculation of "value". Again, this is because the consumers of healthcare are not the same ones who pay for it. The connection between consumption and "cost" is too indirect and tenuous.
3). and then there are a whole host of others including the tort system, the unending march of technology, the sale of "cosmetic" or "lifestyle" pharmaceuticals, etc.
In my estimation, one of the ways to bring the cost of healthcare under control (and at the same time, perhaps, improve doctor salaries) is to encourage the sale and purchase of ONLY catastrophic healthcare coverage. This way routine medical care costs are borne directly by those who consume it. This will lead to less over-all consumption but, perhaps, greater overall salaries as doctors will be able to bill and collect a reasonable fee for the time spent. Somehow the dentists have understood this for years. Dental insurance is useless except for catastrophic incidences. Dentists do amazingly well.
Judd
