The title of this post may be a slight exaggeration. I actually recommend you read the entire two-page paper by Devon Herrick of the National Center for Policy Analysis. But this chart from that study is an excellent visual display of what’s wrong with the health care system.
You can see that the price of medical care is rising twice as fast as inflation, but you can also see that prices for cosmetic services are rising only half as fast as the general price level. Why are general health care prices soaring, yet prices in one segment of the health care world are very stable (and actually falling relative to all other prices)? The answer is simple. As Devon writes:
A primary reason why health care costs are soaring is that most of the time when people enter the medical marketplace, they are spending someone else’s money. When patients pay their own medical bills, they are conservative consumers. Economic studies and common sense confirm that people are less likely to be prudent, careful shoppers if someone else is picking up the tab. Thus, the increase in spending has occurred because third parties – employers, insurance companies or government – pay almost all the bills.
Study this image for two minutes and contemplate the implications. After that, you’ll know more about healthcare economics than 98 percent of all politicians (though that’s not exactly a huge accomplishment).
I just finished a paper on this topic, using Arnold Kling’s “Crisis of Abundance” as my economic framework.
But cosmetic surgery is discretionary, while most other medical costs are necessary. That has to be a main reason why costs have not risen for cosmetic surgery.
I agree with Bragg, the demand curve for discretionary purchases is always going to be more responsive to prices than the curve for necessities.
In addition, aren’t the conservative economists the ones who argue that employer paid health care is actually passed on to the employee in the form of lower pay? If so, then payment for both cosmetic care and other care is coming out of the patient’s pocket.
[...] the market for things such as computers. But here’s a chart (click to enlarge) showing that relative prices are falling in one of the few areas of the healthcare system where consumers spend t…. And I’ve previously noted that the same thing applies with abortion, where prices have been [...]
[...] the market for things such as computers. But here’s a chart (click to enlarge) showing that relative prices are falling in one of the few areas of the healthcare system where consumers spend t…. And I’ve previously noted that the same thing applies with abortion, where prices have been [...]
[...] the market for things such as computers. But here’s a chart (click to enlarge) showing that relative prices are falling in one of the few areas of the healthcare system where consumers spend t…. And I’ve previously noted that the same thing applies with abortion, where prices have been [...]
[...] the market for things such as computers. But here’s a chart (click to enlarge) showing that relative prices are falling in one of the few areas of the healthcare system where consumers spend t…. And I’ve previously noted that the same thing applies with abortion, where prices have been [...]
[...] than the market for things such as computers. But here’s a chart (click to enlarge) showing that relative prices are falling in one of the few areas of the healthcare system where consumers spend t…. And I’ve previously noted that the same thing applies with abortion, where prices have been [...]
Bragg -
The argument that most medical services are a necessity compared to cosmetic surgery is a weak one. The IOM recently released a report detailing that $750 billion of health care spending (30%) is actually excess cost. $210 billion was identified as unecessary services, $130 inefficient services, $105 billion excessive prices. This is in line with many studies showing provider induced demand and consumer preference drives large variations in small area utilization of procedures such back surgery and cardiac cath. These variations can’t be explained by medical necessity.
[...] In fact, Cato economist Dan Mitchell adds: Defenders of the status quo argue that the market for healthcare somehow is different than the market for things such as computers. But here’s a chart showing that relative prices are falling in one of the few areas of the healthcare system where consumers spend t…. [...]
[...] In fact, Cato economist Dan Mitchell adds: Defenders of the status quo argue that the market for healthcare somehow is different than the market for things such as computers. But here’s a chart showing that relative prices are falling in one of the few areas of the healthcare system where consumers spend t…. [...]
[...] In fact, Cato economist Dan Mitchell adds: Defenders of the status quo argue that the market for healthcare somehow is different than the market for things such as computers. But here’s a chart showing that relative prices are falling in one of the few areas of the healthcare system where consumers spend t…. [...]
[...] system is not an endorsement in any way of the US’s government-dominated healthcare system. America’s system is almost as screwed up, largely because government intervention has created a massive third-party-payer [...]
[...] deduction for fringe benefits such as health insurance. This special tax break has helped create a very inefficient healthcare system and a third-party payer crisis. It is unclear, though, whether this pernicious tax distortion is [...]
[...] deduction for fringe benefits such as health insurance. This special tax break has helped create a very inefficient healthcare system and a third-party payer crisis. It is unclear, though, whether this pernicious tax distortion is [...]
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[...] and markets, but then drew exactly the wrong conclusion about what was needed to solve the third-party payer problem in health [...]
I think the “discretionary purchase” argument is weak, also, but not for the reasons stated so far. Just because you have to buy something doesn’t mean you want to pay more for it than you have to. Food and housing are not discretionary purchases, either. You still shop around to find the best price.
People think that you have to buy a kidney transplant so you will pay whatever the doctor asks, but, as long as you have time to make a choice, you will find the best price. If one is having a heart attack or is otherwise constrained from shopping around then the purchase is genuinely non-discretionary and the consumer would be open to being gouged, but the proportion of medical care purchases that fall into this category is probably not large.
[...] is the problem, not inequality. As I’ve explained before, American healthcare suffers from a third-party payer crisis caused by too much government [...]
[...] For all intents and purposes, Professor Cochrane is explaining the economics of third-party payer, which occurs when government intervention undermines the ability of markets to promote efficiency and low prices. [...]
[...] in the few areas where out-of-pocket expenditures dominate, such as cosmetic surgery and abortion, we find that prices are stable or even [...]
[...] to learn that those are areas – such as cosmetic surgery (or even abortion) – where costs are restrained and quality keeps rising. Rate this:Share this:PrintEmailFacebookTwitterMoredeliciousDiggFarkLinkedInRedditStumbleUponLike [...]
[...] that will be very difficult precisely because people like the illusion that they don’t pay (even though they do bear the costs in the form of lower take-home wages and higher [...]
[...] often complained that government-created third-party payer is the main problem with America’s healthcare system, and I was making that point well before Obamacare was [...]
[...] often complained that government-created third-party payer is the main problem with America’s healthcare system, and I was making that point well before Obamacare was imposed [...]
[...] in the same building as Michael Cannon, I’ve learned that government-created third-party payer is a big problem with America’s healthcare system. Simply stated, people won’t be smart consumers and [...]
[...] but not least, check out this chart and you’ll begin to understand the potential benefits of fixing the third-party payer [...]
[...] often complained that government-created third-party payer is the main problem with America’s healthcare system, and I was making that point well before Obamacare was imposed [...]
[...] often complained that government-created third-party payer is the main problem with America’s healthcare system, and I was making that point well before Obamacare was imposed [...]
[...] insurance works for home ownership and automobiles. And I cite examples of genuine free markets for cosmetic surgery and even (regardless of your views) [...]
[...] already shared an amazing chart and a very powerful video to help explain how government subsidies in health care have created a [...]
[...] already shared an amazing chart and a very powerful video to help explain how government subsidies in health care have created a [...]
[...] the few well-functioning parts of the American healthcare system is cosmetic surgery. Why? Because consumers largely pay out of pocket and, as a result, costs are [...]
[…] insurance works for home ownership and automobiles. And I cite examples of genuine free markets for cosmetic surgery and even (regardless of your views) […]