Health Care Costs

We keep hearing that the cost of health care is going up each year.  I think there are two components in that idea of “cost” and if such is the case I imagine the distinction needs to be considered and understood in any reform efforts.  When someone says, “health care costs rose by six percent over last year” three conclusions can be drawn.

1.  The cost of health care services and goods rose per unit price by 6%.

2.  Patients requested and received 6% more services than last year.

3.  A combination of the two.

What is interesting is number 2.  Suppose the auto industry announced that it had sold six percent more cars this year than last.  Everyone would rejoice.  Good news.  But if because of expanded coverage, new procedures or increased demand the “health care industry” makes six percent more sales than last year, everyone goes “stiff legged” and bemoans the “increasing cost of health care.”

This reaction is, of course, because few if anyone actually pays for their own health care.  The insurance company or the government pays.  So when more sales are made this causes the “price” of health care to rise not because doctors have necessarily raised their fees but perhaps because they saw more patients, ordered more tests and performed more procedures. This is the item 2 component.  In fact, some medical costs have actually fallen.

The conclusion of this analysis would therefore be that Americans (largely defined) are “buying” more health care than they can afford.  Now that is one difficult problem to solve.

The question now becomes this:  How do we create a WalMart model for the delivery of health care services?  At WalMart the quality is good and the prices are low.  But when the customer doesn’t pay the cost, how is the customer attracted to an efficient WalHealthMart?

Wish I had the answer.



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