Friday, August 7, 2009

More on health care

Several other reasons for high health care costs: *Consumers have limited information about prices charged by different providers, and about quality of different providers. *There is high concentration in some of these markets, particularly hospital care, insurance, and in some cases physician services (especially for specialties). The result is non-price competition which drives up costs. *Consumers receive their info about costs and benefits from providers, who often have an incentive to provide more procedures and visits. *Providers are required to provide uncompensated care, the costs of which are shifted onto paying customers. *The incentives are for uninsured individuals to skimp on preventative care and wait until they need high-cost catastrophic care. *The industry has been slow to adopt advances in information technology that have increased productivity everywhere else they have been applied. I think this has less to do with lack of cost-consciousness than with problems small providers have raising capital. I think the reform is aimed at addressing many of these problems. Some are directly addressed by, e.g., subsidizing info tech for providers, and doing more effectiveness research. But by getting everybody insured, the problems of uncompensated care and lack of prevention are reduced. My instincts are that this is a cost-saver, but as Steve says, it's an open question. I think you can buy a lot of generic statin for what a coronary-artery bypass costs. A universal mandate with limited community rating means much reduced administrative costs, which are ongoing. Competition is encouraged among insurers, who in turn use their market power to deal with the providers. We know this stuff works in other countries. We have by far the world's worst health care system, measured by cost-effectiveness. The only thing that prevents reform is our pride in refusing to learn from others who do it better. John Tiemstra

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