I recently wrote about the reasons for the extraordinary high cost of medical care in the US – Why is Medical Care So Expensive?. That post is a PowerPoint presentation of a talk I recently gave. The slide below lists the causes that I think are responsible for the extraordinary rise in medical costs over the last half century or so. Anyone interested in the details can view the presentation. What’s undeniable, regardless of the reason(s), is that the cost of medical care has gone up about eight times more than the cost of living.
Probably the single most important cause of medical inflation is health insurance – both public and private. Health insurance does not fit the definition of insurance which is: The equitable transfer of the risk of loss from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the possibility of a contingent uncertain loss.
Consider the furor currently raging over whether health insurance should cover contraception. I don’t wish to enter the controversy over such coverage save to comment that such coverage is not insurance. Read the above definition. Also the cost of contraceptive drugs is so cheap that anyone with a job can afford to buy it on her own. A months supply of an oral contraceptive costs $9 at Walmart. Plan B costs $46.87 from the same merchant The easiest way to solve this issue would be to make these drugs available without a prescription and let anyone who wants them buy them as needed. The cost of providing these drugs through an insurance scheme is probably 10 times greater than just going out and buying the stuff on your own.
Much of the care paid for by health insurance is not insurance. It is the reason that premiums are so high. Similarly coverage for pre-existing condition is not insurance, rather is a benefit and an expensive one. The only form of health insurance that really is insurance is a policy that protects against catastrophic illness.
To emphasize how prodigious this increase in medical cost has been, examine the bills below; they date from the fifties and sixties.. I have removed the name of the orthopedic practice that submitted them as well as the last names of the patients who received the invoiced services. Note that the most expensive charge was $75 for surgery. Initial visits (IV) were $10 while follow-up office visits (OV) were $5. You can read the other charges which are self explanatory. Also note that the patient promptly paid for these service without the need for a third party payer.
The issue of how to pay for medical care has been so politicized that rational discussion is impossible. The more irrational we get the higher medical costs rise. They will soon be in lunar orbit.