(…) But enough about higher education, is anyone else starting to see the parallels with healthcare? And the result? Rising costs are likely due to over-utilization on the demand side driven by third-party financing, not as a result of costs or technology on the supply side. A study at MIT by Amy Finkelstein suggests that third-party payers (the way they are utilized in healthcare) are responsible for more than half the growth of healthcare spending!
The steady erosion of direct-spend patient dollars, replaced by someone else’s money, has blunted the important price signals that would have occurred in a normally functioning market. This results in healthcare price “insulation”, as opposed to situation where true insurance would work in tandem with a healthy non-insurance market for routine care.
And the cost spiral caused by inflated billed prices (and the extreme variation we see in similar markets) and the ability to cost shift, are two sides of the same coin. They can only exist within a closed loop billing protocol (mandatory CPT billing via contracts with payers) driven by and designed for massive amounts of third-party money; and where simple direct cash transactions between providers and patients are purposefully not part of the rules of engagement of the payment system.
The healthcare sector does indeed operate in the economic stratosphere above the rest of the economy. No other industry comes close to healthcare with the kind of excessive mark-up of routine items that are so ridiculous only a complex payment system that can be manipulated like a shell game would support such nonsense.
So what is it that keeps prices so high and so difficult to pin down?