A major problem with America’s healthcare system, both before and after Obamacare, is the fact that consumers very rarely spend their own money when obtaining healthcare. Known as third-party payer, this problem exists in part because government directly finances almost 50 percent of healthcare expenditures. But even a majority of supposedly private healthcare spending is financed by employer-provided policies that are heavily distorted by a preference in the tax code that encourages insurance payments even for routine expenses. According to government data, only 12 percent of healthcare costs are financed directly by consumers. And since consumers almost always are buying healthcare with somebody else’s money, it should come as no surprise that this system results in rising costs and inefficiency. This is why repealing Obamacare is just the first step that is needed if policymakers genuinely want to restore a free market healthcare system (all of which is explained in this 4-minute video).
Unfortunately, many people think that market forces don’t work in the healthcare system and that costs will always rise faster than prices for other goods and services. There are a few examples showing that this is not true, and proponents of liberalization usually cite cosmetic surgery and laser-eye surgery as examples of treatments that generally are financed by out-of-pocket payments. Not surprisingly, prices for these treatments have been quite stable – particularly when increases in quality are added to the equation.
I just ran across another example, and this one could be important since it may resonate with those who normally are very suspicious of free markets. As the chart from the Alan Guttmacher Institute shows, the price of an abortion has been remarkably stable over the past 20-plus years. Let’s connect the dots to make everything clear. Abortions generally are financed by out-of-pocket payments. People therefore have an incentive to shop carefully and get good value since they are spending their own money. And because market forces are allowed, the cost of abortions is stable. The logical conclusion to draw from this, of course, is that allowing market forces for other medical services will generate the same positive results in terms of cost and efficiency.
None of this analysis, by the way, implies that abortion is good or bad, or that it should be legal or illegal. The only lesson to be learned is that market forces control costs and promote efficiency and that more government spending and intervention exacerbate the third-party payer crisis.
[…] P.S. You can see the impact (or lack thereof) of third-party payer by looking at prices for birth control, plastic surgery, and abortion. […]
[…] Regardless of one’s views on abortion, it’s another example of how markets can work in […]
[…] Regardless of one’s views on abortion, it’s another example of how markets can work in […]
[…] P.P.S. Setting aside the debate about whether it’s right or wrong, the abortion market also is an interesting case study of how prices don’t rise when consumers pay out of pocket. […]
[…] a few sectors where consumers are still in charge. And in those areas, such as cosmetic surgery and abortion, prices are falling in relative […]
[…] spending their own money, and in these areas – such as cosmetic surgery, laser eye surgery, and abortion (regardless of whether you approve or disapprove) – we find stable prices and rising […]
[…] spending their own money, and in these areas – such as cosmetic surgery, laser eye surgery, and abortion (regardless of whether you approve or disapprove) – we find stable prices and rising […]
[…] When explaining how government has screwed up private health insurance, I talk about third-party payer and how genuinely private insurance works for home ownership and automobiles. And I cite examples of genuine free markets for cosmetic surgery and even (regardless of your views) abortion. […]
[…] their own money, and in these areas – such as cosmetic surgery, laser eye surgery, and abortion – we find stable prices and rising […]
[…] When explaining how government has screwed up private health insurance, I talk about third-party payer and how genuinely private insurance works for home ownership and automobiles. And I cite examples of genuine free markets for cosmetic surgery and even (regardless of your views) abortion. […]
[…] I almost never venture into the abortion debate (the only exceptions being here and here), and I’m not going to change my pattern […]
[…] Our challenge is that it’s very difficult to put toothpaste back in a tube. Thanks to government programs and backdoor intervention through the tax code, the United States healthcare system is nowhere close to a free market (with a few minor exceptions such as cosmetic surgery and – regardless of what you think of the procedure – abortion). […]
[…] When explaining how government has screwed up private health insurance, I talk about third-party payer and how genuinely private insurance works for home ownership and automobiles. And I cite examples of genuine free markets for cosmetic surgery and even (regardless of your views) abortion. […]
[…] P.P.S. Setting aside the debate about whether it’s right or wrong, the abortion market also is an interesting case study of how prices don’t rise when consumers pay out of pocket. […]
[…] P.P.S. Setting aside the debate about whether it’s right or wrong, the abortion market also is an interesting case study of how prices don’t rise when consumers pay out of pocket. […]
The same is true for elective procedures, whether it’s lasik surgery or cosmetic surgery. Doctors are no different than other business people, who are often forced through free markets to reduce prices or go out of business.
[…] P.P.S. Setting aside the debate about whether it’s right or wrong, the abortion market also is an interesting case study of how prices don’t rise when consumers pay out of pocket. […]
[…] days ago while nit-picking about an otherwise excellent column by Robert Samuelson (and I’ve even used the abortion market to make the point that prices don’t rise when consumers are spending their own money). var […]
[…] ago while nit-picking about an otherwise excellent column by Robert Samuelson (and I’ve even used the abortion market to make the point that prices don’t rise when consumers are spending their own […]
[…] you shouldn’t be surprised to learn that those are areas – such as cosmetic surgery (or even abortion) – where costs are restrained and quality keeps rising. Rate this:Share […]
[…] in the few areas where out-of-pocket expenditures dominate, such as cosmetic surgery and abortion, we find that prices are stable or even […]
[…] I’ve previously noted that the same thing applies with abortion, where prices have been remarkably stable for decades. Regardless of one’s views on the […]
[…] I’ve previously noted that the same thing applies with abortion, where prices have been remarkably stable for decades. Regardless of one’s views on the […]
[…] I’ve previously noted that the same thing applies with abortion, where prices have been remarkably stable for decades. Regardless of one’s views on the […]
[…] I’ve previously noted that the same thing applies with abortion, where prices have been remarkably stable for decades. Regardless of one’s views on the […]
[…] falling in one of the few areas of the healthcare system where consumers spend their own money. And I’ve previously noted that the same thing applies with abortion, where prices have been remarkably stable for decades. Regardless of one’s views on the […]
[…] falling in one of the few areas of the healthcare system where consumers spend their own money. And I’ve previously noted that the same thing applies with abortion, where prices have been remarkably stable for decades. Regardless of one’s views on the […]
[…] falling in one of the few areas of the healthcare system where consumers spend their own money. And I’ve previously noted that the same thing applies with abortion, where prices have been remarkably stable for decades. Regardless of one’s views on the […]
[…] falling in one of the few areas of the healthcare system where consumers spend their own money. And I’ve previously noted that the same thing applies with abortion, where prices have been remarkably stable for decades. Regardless of one’s views on the […]
[…] operate in very rare cases, such as cosmetic surgery, laser eye surgery, and (for better or worse) abortion. The rest of the sector was heavily distorted by government intervention. Obamacare simply makes a […]
Very good article. Insightful and entertaining as always! Keep up the good work!
[…] operate in very rare cases, such as cosmetic surgery, laser eye surgery, and (for better or worse) abortion. The rest of the sector was heavily distorted by government intervention. Obamacare simply makes a […]
[…] operate in very rare cases, such as cosmetic surgery, laser eye surgery, and (for better or worse) abortion. The rest of the sector was heavily distorted by government intervention. Obamacare simply makes a […]
When one considers that there is often a general lack of competition among abortion providers due to fewer practitioners than demand would warrant (for a variety of reasons), then that the price has stayed level in inflationary dollars implies that in more competitive areas in medicine allowing greater market forces would reduce prices after inflation.