Health-Care Costs: The Sky Isn't the Limit

New York has never been known for its fragrance, but few periods were as pungent as the late 1800s. Prior to the automobile, over 100,000 horses provided transportation on the city's streets. That meant a lot of manure -- 2.5 million pounds of it a day.

As Stephen Davies of the Institute of Economic Affairs wrote:

In 1898 the first international urban-planning conference convened in New York. It was abandoned after three days, instead of the scheduled ten, because none of the delegates could see any solution to the growing crisis posed by urban horses and their output.

The problem did indeed seem intractable ... Writing in the Times of London in 1894, one writer estimated that in 50 years every street in London would be buried under nine feet of manure.

That never happened, thank heavens. More importantly, it stood no chance of ever happening in the first place. Forecasting that something unsustainable will go on forever, at current growth rates, unchecked, isn't forecasting at all; it's merely drawing a straight line. The writer's warning was a load of crap, if you will.

Yet, we still fall for the same blind extrapolations that lead to silly conclusions. Consider this prediction from a recent report by the Annals of Family Medicine:

If health insurance premiums and national wages continue to grow at recent rates and the US health system makes no major structural changes, the average cost of a family health insurance premium will equal 50% of the household income by the year 2021, and surpass the average household income by the year 2033.

There are no certainties in the economy, but it can get awfully close. So let me state clearly: It's nearly certain that this won't happen.

The most important word in AFM's warning is "if." True, if insurance premiums rise at previous rates, and if income growth stagnates, and if there are no changes to the health-care system, the average family will eventually face spending every penny they make and more on health insurance.  

Far more likely, though, is something like this: Medical care will eventually get so expensive that people use less of it. Prices will then fall, or at least growth will slow. And that's bound to occur well before most Americans face spending more than 100% of their income on medical care.

Or maybe it goes like this: Medical care eventually gets so expensive and there's so much money to be made in the industry that hospitals and clinics suddenly outnumber Starbucks on street corners. A surge of supply will cause prices to fall, or at least growth to slow.

Or maybe it's some combination in between. Or perhaps it's something else we can't even think of, akin to automobiles replacing horses. AFM briefly cites this possibility -- "the health care system is complex and adaptive," it writes -- but doesn't seem to appreciate the strong likelihood of those forces rendering its forecast meaningless.

What's important is that markets change when things get out of whack. When gas prices were unbearable in 2008, calls came in that oil would soon spike to $250 a barrel. Instead, it collapsed. Why? Because prices were already unbearable. The global economy could not afford $250 oil, and thus wouldn't support prices anywhere close to that level. Same with medical care.

AFM's concern over rising medical costs shouldn't be belittled, of course. According to the Kaiser Family Foundation, health care costs have grown an average of 2.4 percentage points faster than gross domestic product since the 1970s. In 1980, 9.1% of GDP went to health care. Today it's more than 17%. That growth has been painful, and it has fundamentally changed how Americans access health care.

But one thing is mathematically certain: It won't go on forever. Nothing can grow faster than the overall economy indefinitely. Rapid growth in any industry must obey Stein's Law: If something can't go on forever, it won't.

And there are already signs of spiking growth in medical prices reaching a limit. "The rates of health spending growth in 2009 and 2010 marked the two slowest rates in the 51-year history of the National Health Expenditure Accounts," the health policy journal Health Affairs wrote recently. Among the explanations cited: "[T]he burden of increased cost sharing led people to forgo care or seek less expensive treatment options."

That's exactly the kind of behavior you see when rapid price increases are about to ebb. And it's exactly the kind of behavioral change that makes extrapolating trends over several decades (small-f) foolish. Indeed, in recent months the "medical care" component of the Consumer Price Index has grown at a nearly identical rate as overall inflation -- one of only a few times that's occurred in the last four decades.

The sky, it turns out, isn't the limit for health care costs.

For more on the recession's impact on the economy, check out my latest ebook, 50 Years in the Making: The Great Recession and Its Aftermath, for your iPad or Kindle, on Amazon or Barnes & Noble. It's short, packed with information, and costs less than a buck.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On March 20, 2012, at 5:05 PM, mdk0611 wrote:

    While medical costs are unlikely to exceed family income, I would not be as sanguine as you are:

    1. At least some states (New Jersey for sure) regulate the number of hospitals. Unless they see the beds will be full, they don't give the permit. Competition is limited by intent.

    2. We face a shortage of primary care physicians in the near future. Again, competition will be limited.

    3. For some medical conditions you can't simply use less. What could have happened was an increase in people playing the uninsured roulette, praying they would not need care and pay the outrageous rates charged to the uninsured. That won't happen given the Affordable Care Act, but I just don't see the act making care more affordable.

    4. As far as I can tell, there are no new incentives in Medicare or Medicaid for people to "use less".

    5. Despite some lip service from the President, there seems to be no movement towards malpractice reform that might (but not in a major way) reduce costs.

    Obviously there is a ceiling, but I see a whole lot of pain before we hit it.

  • Report this Comment On March 20, 2012, at 5:38 PM, JeanDavid wrote:

    I was surprised to see the cited article. But I think what will happen is in between, and that is not good either.

    Prices will continue to rise until most of the 99% will not be able to afford health insurance, so they will do without. This may reduce the number of hospital-induced death from infection, incorrect medications, improper diet, and so on. The number of doctors willing to work for Medicare pay scales will drop, but this will raise prices. There will be fewer doctors and fewer hospitals because there will be less money for them. Less medications will be dispensed because people will do without. Supply and demand will work as they almost always do. There will be less health care practiced, but at prices that only the 1% will be able to afford. When people must decide between housing, food, and health care, health care loses out. And I agree that they will not drop their health care when it gets to 100% of family income. It will be before that.

    I do not believe that health care can can be paid for with supply and demand economics any more than public transportation can be paid that way. But both are need to be paid for somehow. Without health care, epidemics of transmittable diseases will become more frequent and more severe. Without public transportation, air pollution and the resulting environmentally-caused diseases and climate change will kill us all. It is the poor who will suffer first, but the rich are not exempt.

  • Report this Comment On March 20, 2012, at 6:17 PM, mclaugph wrote:

    Agree that it won't increase indefinitely, but using less health care can be a riskier proposition than using less gasoline. Another poster wrote that "when people must decide between housing, food, and health care, health care loses out." I've seen this firsthand...and it can be fatal.

  • Report this Comment On March 20, 2012, at 6:24 PM, bbell46356 wrote:

    With disposable income of about $110,000 last year, my health costs including insurance premiums, deductibles and out of pocket costs were over $20,000. I'm pretty well off and reasonably healthy. What do sick people (or older people) without my income do? They are already above 20%.

    The premise that the free market will correct the problem would be fine - except the health care industry operates in anything but a free market. The "Affordable Health Legislation" taxes innovators to a degree to drive them out of the US so what chance is there of reducing costs through innovation?

  • Report this Comment On March 20, 2012, at 6:30 PM, Gyre07 wrote:

    I think health cost prices should be regulated by the government. It's obvious that the industry won't regulate itself, so government intervention is the logical alternative.

  • Report this Comment On March 20, 2012, at 6:30 PM, DJDynamicNC wrote:

    If my options are "spend well over 100% of my income through borrowing money, selling assets, robbing banks, whatever it takes" or "die," I'll probably take option 1.

    If I could save 5,000$ on a procedure by going to a different hospital 5 minutes further away when having a heart attack... I probably won't think to comparison shop.

    Health care is not a "market" than lends itself well to free market principles, at least as it currently stands.

  • Report this Comment On March 20, 2012, at 7:14 PM, wan2bretired wrote:

    gyre07

    The government already sets reimbursements, which insurance companies follow. Physicians would get penalized my medicare if they charged any patient less than medicare. They have fixed levels of reimbursements for xrays that were set over a decade ago, when equipment costs were higher and efficiencies were lower e.g. patients per hour. Look at the cost of LASIX eye surgery... costs are driven down to make it affordable, it is not reimbursed by insurances. Fixing a pay scale, like medicare, insures that their is an absolute bottom to pricing. State governments, and the federal government restrict competition, and do not promote it. Some argue that colleges would be cheaper if there were no federal student loans!

  • Report this Comment On March 20, 2012, at 7:22 PM, xetn wrote:

    When something is perceived as "free", people will use more of it. That is the problem with government health programs. When the government estimated the cost of Medicare in the 60's it was determined to reach a maximum of about $12 billion per year. The recent cost exceeded $530Billion (2010).

    Just wait til ObamaCare fully kicks in.

  • Report this Comment On March 20, 2012, at 7:47 PM, CaptainWidget wrote:

    I agree, if and ONLY if, the market is allowed to function. The free market for medical care is gasping it's last dying breaths. The Supreme Court review on Obamacare will be the last nail in the coffin for free market health care.

    It is, ALREADY cheaper to not take on insurance in the US for a relatively healthy relatively young person. I've saved probably $5000 in the last few years by dropping my health insurance and fulfilling my few medical needs at quick care clinics staffed by PA's and NP's. If Obamacare has it's way, these clinics and myself will get taxed extra for trying to opt out of the ridiculous government system.

  • Report this Comment On March 20, 2012, at 8:07 PM, aarondean wrote:

    The first red flag to this article is that the writer assumes that free market principles apply and the every corner will now have a clinic ie supply meeting demand. This is incredibly naive given the anti-market Marxist that we currently have running the white thus the Department of Health and Human Services. Obamacare did NOTHING to help the supply of healthcare, only to explode the demand for it. This is the same problem we have with College tuition (which Occupy Wallstreeters expect to replace hard work with a Liberal Arts degree - good luck with that). Other than threat of imprisonment, what incentive do I have to be a doctor? Work had for 10 years with lousy conditions and miserable pay and respect only to come out the other side with lousy conditions and miserable pay? Gee whiz thanks Obama, now I can go to the emergency room every time I get a hang-nail. Anyone who votes for a Marxist needs to give up their citizenship.

  • Report this Comment On March 20, 2012, at 8:27 PM, JeanDavid wrote:

    "With disposable income of about $110,000 last year, my health costs including insurance premiums, deductibles and out of pocket costs were over $20,000. I'm pretty well off and reasonably healthy. What do sick people (or older people) without my income do?"

    I make less than half that. What I do is have no long-term health insurance. An agent for a company offering that called me today to sell me some. After I answered a few questions, she said her company would not write me insurance at any price. A few years ago, I filled in a postcard for an insurance company for that, and the premium was so high (the monthly premium might have been acceptable if it were an annual premium, but not monthly).

    When AARP wanted to sell me insurance supplement to Medicare, I got to page 3 of their questionnaire, and the question on that page was, "Have you been admitted to a hospital in the last 12 months. I checked YES, and the instructions were to not bother returning the form. So although I feel fine, just slightly weaker because of an incident 4 months ago. But that will keep me from getting that insurance for another 8 months, assuming I do not need an hospital admission in the interval. But from when AARP denied me insurance, I studied their proposed policy, and the premiums were high enough as to eat up all the benefits. So for me, it is not worth buying it anyway, just to avoid paying co-pays along the way. Co-pays are the least of my medical expenses. Would you believe $225 for a flu shot in the hospital? My internist would do it for $15, and my local drug store would do it for free.

    Nominally, I am insured. It is just that I am seriously under insured. When my doctor refers me to a specialist, I have to go through 3 to5 before I find one that will take my insurance. I once had to go to a hospital about 30 miles from here for a procedure even though there is one 2 miles from here and another about 10 miles away. There is another one 10 minutes away by car.

    When I had my heart attack, I went to the closest one. It was on a Sunday and I sure was not going to wait until Monday to shop around for the best price.

  • Report this Comment On March 20, 2012, at 9:47 PM, DoctorLewis4 wrote:

    Go into any ER in the country. Notice how crowded it is. Notice that most are using the ER as a Doctor's office. The free market has not been able to fix this or other more egregious maladies in our heath care system. Sometimes we need stronger medicine.

  • Report this Comment On March 20, 2012, at 9:55 PM, CaptainWidget wrote:

    <<Go into any ER in the country. Notice how crowded it is. Notice that most are using the ER as a Doctor's office. The free market has not been able to fix this or other more egregious maladies in our heath care system. Sometimes we need stronger medicine.>>

    That is solely because of the EMTLA act.

    Government mandates free emergency room care. Emergency room visitors rise. It's not that shocking.

    The free market does have a simple fix for this problem. Show up to the ER with a cold and no insurance? GTFO. Big government is the creator of this problem masquerading as it's own cure.

  • Report this Comment On March 20, 2012, at 10:09 PM, dennyinusa wrote:

    In 1986, Congress passed and President Reagan signed the Emergency Medical Treatment and Active Labor law, sometimes referred to as the "Patient Anti-Dumping Act" which requires hospitals to admit all who arrive at the emergency room and treat them without regard for their ability to pay. The purpose of the Act was to ensure that acutely ill patients who are uninsured or underinsured receive appropriate emergency care and to prevent hospitals from refusing to treat certain populations of patients who present to the emergency department. In essence, we had federally mandated national health care signed into law under a Republican administration. What we did not have is a rational way to pay for the mandated health care. Those who seek to repeal the federally mandated insurance requirements in the health-care law should also seek to repeal EMTALA, a deeply immoral proposition if I ever heard one. To make someone provide a service without compensation, how could the champion of the free market sign such a bill? If the Republican Party is serious about decreasing government control of health care, they should start by introducing a bill that would repeal the law signed by President Reagan that mandates free health care for all who seek it. That law, the EMTALA, was the largest expansion of government mandated health care since Medicare. Remember George Bush stating that all Americans had access to health care? That all they had to do was present to their local emergency department? That is EMTALA. If we are going to mandate that hospitals treat and stabilize patients with emergency medical conditions, we should mandate that individuals purchase insurance to pay for that care. If we don't, then we truly have a health care system where the few pay for the many. The government has been mandating health care coverage for more than 25 years -- only now President Obama wants those who utilize the system to pay for it.

  • Report this Comment On March 20, 2012, at 10:40 PM, seattle1115 wrote:

    @xetn: "When something is perceived as "free", people will use more of it."

    This is an excellent example of the way that slavish devotion to an economic theory can lead smart people to propose ridiculous notions. No one is going to get an extra colonoscopy - much less an extra round of chemotherapy - simply because they perceive it as "free." This is true no matter what von Mises may have suggested.

    The fact is, as mentioned by other commenters upthread, the market for health care doesn't function at all like the market for widgets. Demand is terribly inelastic, bargaining position is always hideously unequal, and information is held almost exclusively by one and only one party to the transaction. It's an almost perfect example of multiple market failures stacked one atop another.

    For some good news on this topic, go to http://www.economist.com/node/13496367.

  • Report this Comment On March 20, 2012, at 10:49 PM, KKoleto wrote:

    I don't see any pause in the rise in costs either. Advanced techniques cost more in training, equipment and devices. But I'm still thankful for that---the back surgeries I recently had would have had me "off-line" for many months 15 years ago. The new procedures they used and devices they "implanted" into my spine got me a ticket home in three days.

    I think these advances will continue with only 1 concern: the amount that Medicare allowed for the sugeon will certainly limit research in advancing procedures. Doctor shortage anyone?

  • Report this Comment On March 20, 2012, at 11:14 PM, TMFMorgan wrote:

    Thanks for the comments folks. Some great points made.

    I agree that health care demand is inelastic. But it's not so inelastic that most Americans will eventually spend more than 100% of their income on it. Nothing can grow faster than the overall economy forever. That's just arithmetic. (But it's no doubt true that what happens in between can be wretched for millions.)

    Further, as the article shows, costs cooling and people foregoing treatments is not a prediction or a forecast. That's actually happening now.

    -Morgan

  • Report this Comment On March 20, 2012, at 11:26 PM, devoish wrote:

    Dear freemarketeers,

    Which country best exemplifies your vision of a functioning free market heatlh care?

    "Far more likely, though, is something like this: Medical care will eventually get so expensive that people use less of it. Prices will then fall, or at least growth will slow. And that's bound to occur well before most Americans face spending more than 100% of their income on medical care.

    Or maybe it goes like this: Medical care eventually gets so expensive and there's so much money to be made in the industry that hospitals and clinics suddenly outnumber Starbucks on street corners. A surge of supply will cause prices to fall, or at least growth to slow." - Morgan

    Maybe a person could look around at the time from 1950 to 2000 and observe a third possibility that is not quite possibility number 1 above.

    Maybe it goes like this; Maybe medical care gets so expensive that people use less of it. Then prices do not fall, because there are real expenses in delivering healthcare so healthcare becomes a service whose costs increase faster than healthcare consumer incomes and instead of more healthcare to fill a need, there is less healthcare consumed each year as fewer consumers can afford it. Eventually there are not enough consumers for hospital beds and instead of a surge in new beds there is a decline in old beds to match the decline in consumers, and existing hospital beds are retired.

    Maybe the theory should match the observation, not hope the observation someday matches the theory.

    For instance, perhaps a person would observe a third party that is neither healthcare provider or healthcare consumer inserting themselves between the provider and consumer by promising to pay the cost of healthcare for any who need a lot of it by spreading the cost among those who do not, but fear they might.

    A person might even imagine a possibility that this third party could discover they could earn more money by selling the promise of healthcare but not actually funding that care.

    There are many possibilities to imagine besides just a simple consumer/provider free market possibility.

    Look at the cost of LASIX eye surgery... costs are driven down to make it affordable, it is not reimbursed by insurances. Fixing a pay scale, like medicare, insures that their is an absolute bottom to pricing. State governments, and the federal government restrict competition, and do not promote it. Some argue that colleges would be cheaper if there were no federal student loans! - want2beretired

    Disregarding farsighted prescription glasses, and non prescription reading glasses, and sunglasses, 30% of the US population uses prescription glasses or contact lenses to correct nearsightedness. That is 100,000,000 people ( http://www.glassescrafter.com/information/percentage-populat... ). About 700,000 lasik surgeries are performed annually in the US ( http://www.angieslist.com/articles/lasik-success-rates-are-h... ).

    If "free markets" can only make lasik affordable to less than 1% of the population, you have discovered the problem with free markets that government exists to correct.

    Congratulations.

    Best wishes,

    Steven

  • Report this Comment On March 20, 2012, at 11:49 PM, TMFMorgan wrote:

    It is interesting to ask how regulations and laws impact the ability of health-care supply to expand -- I'm going to look into that more.

    <<Maybe the theory should match the observation, not hope the observation someday matches the theory.>>

    Touche! Again, cooling costs isn't a theory. It's what's happening now.

  • Report this Comment On March 21, 2012, at 1:02 AM, jlmccreery wrote:

    The fact of the matter is that most OECD countries have some form of national, single-payer health care plus private insurance options. They also have better life expectancies and lower infant and childhood mortality, at costs around half what US citizens pay per capita. It's time to wake up from market fundamentalist dreams and look at the world around us.

  • Report this Comment On March 21, 2012, at 1:25 AM, kyleleeh wrote:

    <<Disregarding farsighted prescription glasses, and non prescription reading glasses, and sunglasses, 30% of the US population uses prescription glasses or contact lenses to correct nearsightedness. That is 100,000,000 people ( http://www.glassescrafter.com/information/percentage-populat... )>>

    This article you posted says 30% of Americans are near sighted, and 60% are far sighted...so only 10% of Americans can see? I don't ever remember more then 1/4 of the people in any class or workplace I've been in using glasses or contacts. This reminded me of an article from a psychiatric journal that I read claiming that 40% of Americans had mental illness that went untreated in the last 12 months.

    Mark Twain said it best :

    " There are lies, damned lies, and worst of all statistics"

    This is doubly true when statistics on an industry are compiled by that same industry...ever read Exon's research on global warming?

  • Report this Comment On March 21, 2012, at 7:37 AM, JeanDavid wrote:

    About crowded emergency rooms. I have gone to the emergency room several times. Not because I cannot afford a visit to a doctor's office.

    My (former) doctor is a member of a medical group with about half a dozen doctors, a nutritionist, and a few specialists. But sometimes it takes a week or two to get an appointment. Sometimes that is OK, but sometimes it is something that, while I would not call it an emergency, is something that will not wait. His standing instructions were to go to the emergency room. As an example, one time I got a staph infection. He prescribed an antibiotic to take and referred me to a surgeon. I had to go to that surgeon because my insurance would let me go only to the one the doctor referred me to, and that one was the only one in the plan. He had office hours once a week and I just missed that one. He was fully booked for the next week, so I could see him two weeks later. The antibiotic was ineffective, and I developed a fever, and my joints started aching. So I went to the E.R. and waited several hours. When a doctor finally saw me, he said I should continue taking the ineffective antibiotic. He would not prescribe a different one. He said I should have the infection drained, but would not do it. They did charge me $40 for this. I was not admitted.

    Another incident was a friend had a very young daughter who ate some pineapple. She loved the stuff. It turned out she was allergic to the stuff and she started to choke. They went to the E.R. and the hospital would not attend to her. Her parents then drove her to the next hospital's E.R., normally about 15 minutes away. When he said she could not breathe, they admitted her immediately and gave her a shot of something or other to help her breathe. Luckily, he worked at that hospital, so he got faster service. But he said all hospitals had to admit people who could not breathe and that he could have sued the first hospital for a lot had his daughter died. Big consolation: getting money in return for a dead daughter.

    Our health care sucks in this country even though we pay more for it than other nations do for better care. We do not really have a health care system, we have an illness profit system.

  • Report this Comment On March 21, 2012, at 7:59 AM, devoish wrote:

    kyleleeh,

    First, thanks for reading the links, they were all I could find in a reasonably short period of time. If you have better, please share, because I did not like using "Angies List" for the second source, or an industry group for the first.

    I think your concerns about the data are valid.

    Obviously, the numbers would have to be pretty different from what was posted to consider the "free market" distribution of lasik a success.

    When considering the validity of the articles data, please consider the possibility that many people who are far/near sighted enough to benefit from glasses might be able to see well enough to adapt without glasses. I know in my case that I noticed myself becoming nearsighted for three years before i broke down and got my first set of glasses. My younger brother took longer.

    Farsightedness is a common symptom of aging eyes and may not be something you see in the workplace as often as the retirement home.

    Even with those considerations, I agree with you that the articles numbers do not add up to what I see around me, but as I said, I did not find better sources.

    "It is interesting to ask how regulations and laws impact the ability of health-care supply to expand -- I'm going to look into that more.

    <<Maybe the theory should match the observation, not hope the observation someday matches the theory.>>

    Touche! Again, cooling costs isn't a theory. It's what's happening now". - Morgan

    So is closing hospitals, at least during the years before the slowdown in spending growth you reference.

    I was not arguing against the evidence of "cooling costs" of the last two years. I was arguing that the evidence of the previous ten years does not support the argument rising costs lead to an increased supply. During the previous ten years, costs increased and supply decreased.

    "Or maybe it goes like this: Medical care eventually gets so expensive and there's so much money to be made in the industry that hospitals and clinics suddenly outnumber Starbucks on street corners. A surge of supply will cause prices to fall, or at least growth to slow." - Morgan

    It would be interesting to learn that supply does not necessarily match itself to demand, despite economic theories that suggest if there is demand for a product or service, markets automatically respond with supply.

    Perhaps sometimes it does, and sometimes it does not.

    http://www.larouchepub.com/eiw/public/2009/2009_10-19/2009_1...

    Best wishes,

    Steven

  • Report this Comment On March 21, 2012, at 8:45 AM, mholman64 wrote:

    I believe healthcare costs will continue to rise for at least the intermediate future (5-8 years). The reasons costs will rise are these: 1) we have an obesity epidemic that begin about 1980, 2) obesity in the form of belly fat leads to type 2 diabetes, 3) we have a diabetes epidemic with the CDC predicting that by 2050 one out of three Americans with have diabetes, and 4) diabetes is an expensive disease with diabetics costing about 2.3X as much as non-diabetics. Until we can contain obesity and the related chronic diseases, we cannot contain healthcare costs.

  • Report this Comment On March 21, 2012, at 11:21 AM, BMFPitt wrote:

    That's kind of the point of making those extrapolations. You do it to point out that the current path is not possibly sustainable. And short of some kind of miracle like cheap nano-bots replacing a big chunk of modern medicine, the only feasible path forward is to make huge cuts to the spending we are currently doing due to our insane Rube Goldberg healthcare system.

  • Report this Comment On March 21, 2012, at 12:03 PM, CluckChicken wrote:

    "Further, as the article shows, costs cooling and people foregoing treatments is not a prediction or a forecast. That's actually happening now."

    Like the pace of the costs this too can not last. A person will only hold off treatment for so long and as many studies have shown holding off on medical treatment early means that it will only be less effective and far more expensive later. We may be just putting off costs today for much greater ones a few years from now.

  • Report this Comment On March 21, 2012, at 4:59 PM, hbofbyu wrote:

    It's simple.

    Health care costs rise because they can.

  • Report this Comment On March 21, 2012, at 5:10 PM, hbofbyu wrote:

    Explained a little further.

    Money spent on pet care has risen just as fast as the price of of health care over the past 10-15 years (unbelievable as it seems).

    Not because of lawyers, not because of insurance companies and not because of government intervention.

    The use of more advanced (and more expensive) technology has obligated us to spend our excess cash. Just like the dying man opens his wallet to the snake oil salesman. If we believe it will help us or save us, we will pay for it until it starts cutting into our food, housing and transporation money.

  • Report this Comment On March 21, 2012, at 6:10 PM, wolfman225 wrote:

    I'm probably going to get slammed for this (it's ok, I can take it) but has anyone considered the possibility that the existence of health insurance could, in itself, be a factor in the exponential rise in healthcare costs? Hear me out.

    It was posited up-thread that when something is perceived as "free", people will use more of it. I agree that healthcare isn't quite the same as another commodity; however, the point isn't totally invalid. While perceiving healthcare as free won't automatically lead to people using more of the expensive procedures, it could and does lead to people over-utilizing and burdening the system. The example of someone bringing their child into the ER with nothing more serious that a cough or cold. Or the weekend athlete taking up a cot being "treated" for a minor sprain (wrap it, ice it, and take aspirin or ibuprofen for the pain).

    The reason for these actions is the disconnect between the provider and the consumer; between the perceived cost to the patient and the actual cost of providing the service. Health insurance, in an attempt to make care more affordable and available has caused many to lack an appropriate appreciation of just how much expensive it is to provide the care they seek. Government-mandated coverages (both state and federal) have greatly aggravated the problem (would you believe that elective cosmetic surgeries, ED drugs, fertility treatments and abortions are deemed "medically necessary" and that insurance companies are required to provide coverage?).

    The point of all this is simply that the root of the problem is two-fold. You have government mandating that politically popular procedures be covered under insurance, and you have providers who are told that, thanks to insurance, payment is guaranteed. Can anyone tell me where the incentive to ever control the rise in costs is going to come from? I can't see it.

    As long as the end users are sheltered from the true costs of their health care, and as long as the providers are guaranteed payment through insurance, there won't be much downward pressure on costs. And, as costs rise, the typical response of government will be to mandate that even more procedures be covered by insurance.

    This will ultimately end in one of two ways, I think. 1) We will end up with a de-facto two tier medical system where there is one level for the masses, open to all, and another level of care available to those who are able to pay. or 2) A top down government-run monopoly with prices dictated by a central authority which also decides what procedures are appropriate and which will be allowed. The very rich will also be able to side-step this system, regardless of the promise of "equal treatment for all".

    I have no idea which way the scales are going to settle. But I agree with previous posters who have said it's going to get a lot uglier before it gets better.

  • Report this Comment On March 21, 2012, at 6:43 PM, hbofbyu wrote:

    Wolfman,

    Absolutely. There are many facets to health care costs but insurance is the linch pin.

    I lived without health insurace for 10 years in my 20s. I saved more than $20,000 by doing that.

    I paid for all my stiches, antibiotics vaccines and tetanus shots in cash. All the doctors I worked with accepted cash at half the price (at least). Doctors love cash.

  • Report this Comment On March 21, 2012, at 8:31 PM, umh wrote:

    Not to diminish the many good comments above, but I have watched someone take the very expensive insurance option so they wouldn't have to pay as much when they went to the dentist twice a year. I wouldn't have a problem with their doing so except it influences the options offered by companies. I will also say that they also enjoyed getting a big tax refund every year.

  • Report this Comment On March 21, 2012, at 8:52 PM, Loxly wrote:

    Liability insurance is also part of this root cause. A younger Doctor, at a clinic I used, was unable to hold down prices due to the cost of this insurance. His solution was to join the Navy as a Captain.

    I don't know how he's doing now but I'm fairly certain he's avoiding any malpractice suits.

    I'd really like to see limits on liability suits, regardless if they're health care related or not.

  • Report this Comment On March 21, 2012, at 9:56 PM, seattle1115 wrote:

    @hbofbyu: "I lived without health insurace for 10 years in my 20s. I saved more than $20,000 by doing that."

    Congratulations. You weren't one of the millions of 20-somethings who suffer a catastrophic injury or illness. Had you been, you would have (a) destroyed your own financial life, perhaps for the rest of your life, and (b) imposed the cost of your care (beyond the value of your own financial worth) on the rest of us. Thanks for gambling with our money!

  • Report this Comment On March 21, 2012, at 10:41 PM, boyguisad88 wrote:

    This article is highly flawed as it compares healthcare cost to commodities like energy or food controlled by supply and demand. Unfortunately, when one is sick specially those terminally ill, one neither has the option to shop around or put off the shopping. We need to revamp the healthcare and more importanly, stop treating it as a business or for profit service and/or commodity. It is unfortunate but unless we solve this problem now and really make changes, I'm afraid sky is the limit when it comes to premiums and cost of healthcare.

  • Report this Comment On March 22, 2012, at 12:01 AM, TMFMorgan wrote:

    thanks for the comments.

    <<This article is highly flawed as it compares healthcare cost to commodities like energy or food controlled by supply and demand. Unfortunately, when one is sick specially those terminally ill, one neither has the option to shop around or put off the shopping>>

    I agree that health care demand is highly inelastic. But that only goes to a point. In 2008 people said oil demand couldn't go down because people had to go to work, had to drive to the grocery store, etc. In the end they found a way to drive less. Far less.

    And again, saying that people will forego medical treatment or chose not to undergo procedures entirely isn't a prediction or a forecast. It's today's reality.

  • Report this Comment On March 22, 2012, at 10:30 AM, outoffocus wrote:

    Great article! Same goes for college tuition, bond prices, gas prices, social security liabilities, etc. It kills me when people state that certain prices will rise indefinitely. They just don't make mathematical sense.

  • Report this Comment On March 22, 2012, at 11:26 AM, ETFsRule wrote:

    kyleleeh wrote:

    "This article you posted says 30% of Americans are near sighted, and 60% are far sighted...so only 10% of Americans can see?"

    Being nearsighted or farsighted isn't the same as being blind.

    The numbers from that article seem consistant with most scientific research on the subject. For example:

    http://en.wikipedia.org/wiki/Myopia#Epidemiology (follow the citations if you are really interested)

    and:

    http://www.infocusonline.org/WORLDWIDE%20DISTRIBUTION%20OF%2...

  • Report this Comment On March 22, 2012, at 12:01 PM, CluckChicken wrote:

    " In 2008 people said oil demand couldn't go down because people had to go to work, had to drive to the grocery store, etc. In the end they found a way to drive less. Far less."

    This still doesn't work as a good comparison. Lets say I own an SUV my mpg sucks, I can trade in my SUV for a car and improve my mpg significantly, I changed the core issue generating the costs. With that overly simple example I have now cut my fuel usage significantly. Now lets say I am diabetic and I am good about my diet and activities, I am still going to have my upkeep expenses and the only way to reduce those expenses puts my life at risk. Unless we come up with some way of transferring the “soul” of a person to some other body we can not change the core item that develops our health costs. There are also the issues of one treatment may work for me but not for you and the costs can be significantly different and we have no choice but to use the more expensive option because we really do not have one.

    We need a fundamental change in the system, there is no simple fix of just use less or go without or shop around.

  • Report this Comment On March 22, 2012, at 6:09 PM, whereaminow wrote:

    You guys do know that the government limits how many hospitals can be in an area and how close one hospital can be to another right?

    Or did you guys spout off at the mouth again without knowing what you are talking about?

    Guessing the latter.

    From my blog on Health Care, which is about as far from a free market and as close to centrally planned as you can get, let me copy and paste my friend and Fool, rfaramir's comment:

    "Why did he choose this hospital? Oh, he had no other choice within a reasonable driving distance (government licenses hospitals to keep them far apart).

    Was he able to choose his doctor? No, the local monopoly provider had so minimized the supply that whoever was on call was simply who he got, no questions askable.

    Was he free to question the price? No. No bargaining, no paying cash, no choice. "Here's the bill."

    Was the price a free market price? No. He pays his premium and a deductable, and insurance pays the rest. Without a direct relationship between the customer-who-pays and the producer-who-charges, the pricing is not efficient. The doctor serves the client, but is paid by the insurance company, so conflicts of interest arise. There is no incentive to provide the "right amount" of health care, the amount that the 'customer' desires to receive given the amount of money he is willing to part with, since there is a breach (the third party payer) between the receiving of care and the paying for it.

    Did he feel like a customer? No. He wasn't hiring the care providers, so he and his wife were not in control. She got the care that the insurance company and the doctor negotiated were 'acceptable' (to them) for someone in his wife's condition. If "the customer is always right" doesn't apply, you are very likely NOT in a free market situation." - rfaramir

    http://caps.fool.com/Blogs/the-shadow-gallery/715258

    Heck of a lot smarter than the nonsense on this board.

    Morgan, for God's sakes do some homework. The competition for hospital services can only bring down the price if the government allows competition. Right now, they don't. Nor does it appear that will change any time soon.

    David in Liberty

  • Report this Comment On March 22, 2012, at 6:56 PM, devoish wrote:

    "From my blog on Health Care, which is about as far from a free market and as close to centrally planned as you can get, let me copy and paste my friend and Fool, rfaramir's comment:" - David in Liberty

    Where is your successful healthcare system that it is as close to free market and as far from centrally planned as possible?

    Best wishes,

    Steven

  • Report this Comment On March 22, 2012, at 9:33 PM, whereaminow wrote:

    Steven,

    The best health care system would be one that focuses on prevention, rather than treatment. You can find it at Primal Con, where people take responsibility for their own health. They eat real food, not the government subsidized food pyramid of the USDA.

    But the proof is in the pudding. I don't know what you look like, but I know the men and women at Primal Con are ripped to shreds in their 50s and 60s, don't need to take frequent trips to the hospital, and don't waste our money abusing a part corporatist/part socialist medical system.

    And that includes my 60 year old, amputee father.

    You want to focus on care, but you have no freaking clue what even causes most modern diseases. Nor does our medical establishment.

    You want free market health care? It's out there. Follow the Primal/Paleo/Ancestral Health Diet. Eat animals direct from your farmer (grass fed beef, free range chicken, etc). Stay away from the processed foods, especially white flour and sugars. Stop taking medical advice from people who treat problems without understanding the cause (just like the Keynesians LOL).

    That's my advice to you. I live free market health care. You want to see it? Come hang out with me at the beach. I'll show you how a "free marketeer" really lives. I don't go to the hospital. I don't treat health problems with prescription meds. I stopped eating garbage and started eating real food.

    But hey, keep trying to convince yourself that stealing from me to give prescription pills to people who shove processed food in their mouths until they are so unfit they can't even squat is "morally superior." I'm sure it will work out great.

    David in Liberty

  • Report this Comment On March 22, 2012, at 10:55 PM, PoundMutt wrote:

    According to a recent account it may not be long before THERE IS NO ANTI-BIOTIC that will kill ANY infection in humans!!!???

    Millions will die of infections that an anti-biotic regimen used to cure.

  • Report this Comment On March 22, 2012, at 11:07 PM, devoish wrote:

    Sounds great David,

    That's working in America for you, then?

    Best wishes,

    Steven

  • Report this Comment On March 23, 2012, at 12:27 AM, CaptainWidget wrote:

    <<Where is your successful healthcare system that it is as close to free market and as far from centrally planned as possible?>>

    Gotta agree with David. Free market healthcare exists inside of the free market. If you want to know which "nation" that entails, you're missing the point. Nations want to nationalize. That's the function of nations. Nationlized healthcare is universally bad. Each individual mandate creates individual problems, but needless to say, it never works.

    Free market healthcare exists anywhere you go, and it doesn't need the boundaries of borders. David has mentioned it, and I can back him up. I haven't been to a doctor in years. I don't need it. I eat well, I exercise, I educate myself by reading health journals and learning preventative care. I learned soft tissue manipulation and physical therapy so I can fix my own maladies.

    When/If I do need healthcare beyond my own ability to supply it, I simply use the cash mechanism to find what I want at a price I'm willing to pay. Sometimes that means going to other countries to get medical treatments, sometimes it means working out a deal with my doctor. Sometimes it means waiting until a special comes up. But, ultimately....cash is my healthcare system.

  • Report this Comment On March 23, 2012, at 2:39 AM, whereaminow wrote:

    I'm thinking Steven is very out of shape, takes prescription pills, eats a ton of grains (cuz the government tells him too), still has high cholesterol (cuz unlike the government told him, animal fat does not cause cholesterol. it's the sugars), has never run barefoot (at least since he was a kid) because his orthopedic told him he'd get hurt, counts calories (when regulating insulin is the real key, but hey steven does what the Establishment says to do) and eats a lot of low fat microwave food that leaves him unsatisfied (because it's loaded with sodium and lacks the protein building blocks that animal fat delivers).

    That's just a wild guess.

    The government is leading the poor guy on a path to heart disease and diabetes while convincing him that he's lowering his risk.

    The irony of the government food pyramid in the hands of government worshipers asking government to regulate health care is one of the most enjoyable things I've discovered.

    David in Liberty

  • Report this Comment On March 23, 2012, at 7:04 AM, devoish wrote:

    If Mark Scissons took a check from the public school system to bring primalcon to high schools kids, his program would be neither more right, or more wrong than it is now.

    You'll get it someday.

    Best wishes,

    Steven

  • Report this Comment On March 23, 2012, at 8:18 AM, ETFsRule wrote:

    "PoundMutt wrote:

    According to a recent account it may not be long before THERE IS NO ANTI-BIOTIC that will kill ANY infection in humans!!!???

    Millions will die of infections that an anti-biotic regimen used to cure."

    Source?

  • Report this Comment On March 23, 2012, at 9:40 AM, whereaminow wrote:

    You're right, Steven. People behave well with or without rules. So why do we have a monopoly coercive entity enforcing so many pointless ones? And pushing terrible medical advice?

    "Fundamentally people behave in a social and rather compassionate and "good" way rather than aggressively, even without specified rules. That is the result of a study from the Institute for Science of Complex Systems at the MedUni Vienna under the leadership of Stefan Thurner and Michael Szell. They analysed the behaviour of more than 400,000 participants of the “Virtual Life” game “Pardus” on the Internet. The findings are that only two percent of all actions are aggressive, even though the game would make it easy for war-like attacks with spaceships, for example."

    http://www.physorg.com/news/2012-01-people-socially.html

    David in Liberty

  • Report this Comment On March 23, 2012, at 12:36 PM, salvete007 wrote:

    You think healthcare costs are high now. It will be higher if people think they are entitled to free healthcare.

    Currently higher education is subsidized by the government and it's costs outpace the rise in healthcare 10:6 and cost of living 10:3.2 from 1978-2008.

    see - http://www.freakonomics.com/2011/10/27/cost-of-college-on-th...

  • Report this Comment On March 23, 2012, at 1:12 PM, jrj90620 wrote:

    Sure is tough dealing with these ripoff healthcare doctors and hospitals,when you choose not to buy overpriced insurance, and just want to pay reasonable amounts.What we need is LESS insurance for minor care and more for catastrophic care.That would reduce the overuse of healthcare,lowering demand and reducing the amount of ripoff.Incentives for better lifestyles,promoted by employers and govts, would be helpful.

  • Report this Comment On March 23, 2012, at 2:30 PM, Davemuse wrote:

    I think Morgan's thesis is on the right track, in that costs that are too much to bear will be avoided. For individuals, they will buy less insurance and/or do without a lot of health care, and die sooner. For the government, it will provide less medical care paid for by government, and most of those people who end up without enough health care will and also die sooner. This is the scenario Tea Party and arch-conservatives contemplate enacting if they gain control of government. A similar scenario is playing out with millions of Americans losing their health insurance coverage, and they probably do not have the financial resources to secure serious medical care, and may well die sooner. Other Americans are being forced to work with high deductible insurance policies, which will make most of them disinclined to use doctors and hospitals until it is too late, and they will die much earlier than would have been the case with timely and competent health care.

    Of course, we could try to reform the health care system so that there are cost-effective clinics where most people could afford to go, even without insurance, helping people avoid waiting too long to get treatment. A single-payer system like that in Canada could eliminate the costly role of insurance companies (and in that way interfere with free enterprise). And since hospitals and clinics are near-monopolies in many parts of the U.S., price controls could be imposed (which really interferes with the freedom of doctors and hospitals to charge what they want, even though they are part of monopolies or oligopolies). These are, I believe, the key elements of our health care system that will clash with each other as our nation is forced to reduce expenditures in health care to something affordable and sustainable. But these reforms appear to be unacceptable to a large portion of the American population (except for Massachusetts), making the earlier scenarios rather more likely.

  • Report this Comment On March 23, 2012, at 3:14 PM, ftkl1234 wrote:

    On NPR's Tech Nat'n program, Dr Eric topol gave an overview of how digital tech is impacting the medical field. With the development and use of personal digital monitor devices, he predicts it will put an end to the often inaccurate diagnoses and costly often futile testing and bring down the cost of medicine in the US. His book "The Creative Destruction of Medicine" goes into detail. Check it out, see what you think.

  • Report this Comment On March 23, 2012, at 4:11 PM, infopackrat wrote:

    This article makes the same errors many make when discussing health care, when in many respects, health care is unique.

    If oil prices go up, you can adjust by driving less, thereby reducing demand.Demand is based on how much the customer WANTS it. But you can't just "decide" to not get sick. While there are many elective actions one can take with regard to medical care, the most expensive part of medicine involve situations one does not choose to be in, i.e. demand is not a function of customer desire.

    The urgency of medical need often forces a "fix now, worry about payment later" approach. Indeed, people would be in an uproar if someone died while the accountants were figuring out if they had sufficient funds for treatment, especially if they came in as a "J. Doe" patient. Even knowing at the get-go that a patient doesn't have the funds, hospitals still have a moral (and legal ) obligation to provide at least some treatment.

    There are three possible outcomes to such a situation: 1) The medical provider goes bankrupt after too many "pro bono" treatments. 2) The medical provider gets reimbursed by the government, which in turn raises taxes to reimburse itself. 3) Poor, sick people become "debt slaves" like in the third-world countries, where the poor take on loans that both they and their lord know they'll never be able to pay back, passing on their debt to their children and giving them no hope of ever becoming economically independent.

    The poop problem in New York was not solved by mandating who was going to pay for pooper-scoopers. It was only solved when transportation evolved to render the issue moot. The medical issue will only be solved if we act to develop less costly treatments, not by arguing over who pays the bill.

  • Report this Comment On March 24, 2012, at 1:47 PM, 123spot wrote:

    I am an emergency physician. I will be closely watching the Supreme Court arguments regarding the Affordable Care Act. For my patients' sakes this law must stand. Every person in this country does have the right (under EMTALA, a law that was written because poor women were being re-routed to distant charity hospitals while in active labor) and should have no compunction about seeking emergency care.

    The ACA, by mandating insurance (EMTALA is an unfunded mandate, the ACA funds it) will allow more patients with minor or early or chronic or preventive health needs to be seen in "medical homes". Medical homes are primary care clinics where continuity of care can be provided to people near where they live.

    The idea is to provide people like JeanDavid above with timely help rather than a run around. Emergency departments exist to provide specialized care for life or limb threatening and acutely painful injuries and illnesses. We all may need that at any time and it is in all of our interests to make sure they are not overwhelmed with non- emergencies.

    With regard to the " free will lead to unnecessary care increase" argument, I tend to agree with the notion and think that some sliding scale co-pay should apply to every visit.

    While I support the ACA, I also think that the HSA (health savings account, an idea from the opposite side of the aisle) is an excellent option for insured patients. The HSA (I have one and recently had to tap it) allows individuals to make a tax free contribution to a savings account that allows tax free withdrawals for medical bills like co-pays and deductibles. It grows tax free with tax free interest, so mostly I pay those expenses out of pocket when I can. I save money by seeking only reasonable care. It's a great incentive.

    One late night in the ER (we tried to modernize that to ED, then erectile dysfunction commercials undermined us : ), I had to leave two trauma patients for a moment to see a fiftyish year old woman whose complaint was " sore throat for two weeks". She was very well dressed for 2 am. Exasperatedly I asked " Why have you not seen your doctor during office hours for this?."

    She began to cry and asked "Aren't you going to help me?." Ashamed at my bias, I apologized, comforted, then examined and treated her. After she had been discharged and the night had calmed a little, one of my nurses came over to me and inquired about Ms X. She told me that the woman worked three jobs to support her single parent family and had come over to her house that day to borrow clothes so she " would look nice at the doctors".

    I went into my call room and cried like a baby. We can all do better for people like this. Spot

  • Report this Comment On March 24, 2012, at 2:33 PM, Darwood11 wrote:

    Health care costs will not increase until 100% of the economy is absorbed. That is for certain.

    However, at what point will this curve deflect and by what means?

    I know young people who are pursuing careers as pharmacists. I have cautioned them that the current rosy picture may not continue forever. In other words, I agree with Morgan.

    What is frequently overlooked is "long term" planning. Something will change the trajectory. I don't know precisely what it is. Perhaps a combination of change in government funding, price pressure, insurance premiums, etc. Or perhaps simple financial decision for individuals which I call "beans versus medicine." Do you want to eat or take drugs? It is going to be a choice.

    However, I'd like politicians and government planners to get more proactive on the spending side, instead of sitting with their heads in the sand and pretending the market will eventually take care of it, or that we can tax our way out of this situation.

    For example, politicians have been spouting about "energy independence" for nearly 40 years by my personal experience. Nothing substantial has been done about it by government for most of that time. I see health care costs to be exactly the same. Yes, we have reached the point as a society where we can keep people alive for a long, long time. But so what? And at what cost, and to whom? And at what benefit? I suspect that as a society we are very close to learning what that cost is, and what the limits are.

  • Report this Comment On March 24, 2012, at 8:47 PM, UFOFred wrote:

    Regarding HSA (Health Savings Account) --

    I cannot get one of those, instead I have an FSA (Flexible Spending Account) that should be called INFLEXIBLE. I sign up in early Dec, fixing the amount to be withheld from my pay. I then cannot change this amount until the next year.

    If I allocate too much, it's use or lose. If too little then not all my expenses will be covered. Politicians like to build traps into these programs.

    Last summer, I broke a tooth. I should have gotten it crowned (at ~$1000) but instead had my dentist patch it for $150. It broke again in Nov. I got the crown in early Jan.

    Because I wanted to save via the FSA and because of the inflexible rules, I ended up spending an extra $200 on that tooth.

    I'd rather have an HSA plan but it is not available to me.

  • Report this Comment On March 25, 2012, at 9:43 AM, ETFsRule wrote:

    UFOFred:

    I'm in the same boat - I have the option to use an FSA, but I don't, because it's a terrible program.

    Eventually they going to fix the stupid "use it or lose it" rule, so that you can either withdraw the money, or roll it over to the next year.

    http://www.savemyflexplan.org/media_press/3-11-11_cashout.ht...

    http://www.lifehealthpro.com/2011/07/22/health-reform-ii-law...

  • Report this Comment On March 25, 2012, at 9:56 AM, wolfman225 wrote:

    I love the idea of HSA"s. What would make them perfect (aside from being available everywhere) would be for them to not only lose the "use it or lose it" but also to allow for the funds to be used as an enhancement to existing retirement accounts. For example: the use of the funds would be restricted to medical expenses and co-pays until age 72(+/-), at which point they would be available for whatever need exists.

    This would be a very attractive selling point for seniors looking to buttress their retirement savings and also for young peopled who don't see the need to "waste" their money on health insurance. If they are told the money will still be there for their use later in life, I think they'd be much more inclined to participate in healthcare decisions.

  • Report this Comment On March 29, 2012, at 5:30 PM, rfaramir wrote:

    "Medical care will eventually get so expensive that people use less of it. Prices will then fall"

    That only happens when the consumer is paying for it. When was the last time you paid for your own health care? Last I even heard of it happening was when Rush Limbaugh had a heart attack in Hawaii (last year?). He was falsely criticized for taking advantage of the socialist healthcare system, but he corrected that by telling how he paid for every bit of it himself. (And that the people treating him were great.)

    "What's important is that markets change when things get out of whack"

    No, FREE markets change and adapt to changing supply and demand, from the whims of fad to natural disasters. There is no free market in health care. If we had been saddled with Hillarycare, making private payments to doctors would be outright illegal now. (Likely applies to Obamacare, too, but I'm not certain.) Doctors are in short supply (raising their salaries) due to licensing and less than half the accrediting schools that we used to have since the doctors' union got government approval to shut down so many.

    wolfman225 asks: "has anyone considered the possibility that the existence of health insurance could, in itself, be a factor in the exponential rise in healthcare costs?"

    Not health insurance per se, since insurance for many things has been around for a long time, and we don't have, say, skyrocketing car insurance premiums. The problem is government mandated 'coverage' for things that are not insurable events. Like mandating free oil changes and gasoline, so many of these things are under the control of the insured, making them uninsurable, but if covered anyway, are a distortion of the market.

    In this way, yes, health insurance-as-we-know-it gives a form of the "tradedy of the commons", a known failure of socialism. This is where 'other' people pay for your care, so you have no motivation to restrict your consumption of it.

    outoffocus in on the right track: "Same goes for college tuition, bond prices, gas prices, social security liabilities, etc."

    The market for each of these is highly distorted by government intervention. Subsidies for education, money supply inflation for bonds and gasoline, and direct promises to constituents that cannot be fulfilled (politicians promising to give more than the people are willing to be taxed for) for social security.

    "I love the idea of HSA's."

    Whole Foods has a program for their employees that lets them spend their healthcare money however they want. Or save it. Those are the keys. Freedom to try alternative health providers (e.g., acupuncture) encourages competition, and paying for it yourself, with the option to save for a rainier day (less-healthy old age) encourages thrift.

    For the free market solution, read the one-page "A Four-Set Health-Care Solution" by Hans-Hermann Hoppe:

    http://mises.org/freemarket_detail.aspx?control=279

  • Report this Comment On March 30, 2012, at 7:58 PM, stopthemalarkey wrote:

    "rfaramir"

    We have already tried all those suggestions from the Mises organization, decades and decades ago. So we know first hand "A Four-Set Health Care Solution" in not the answer. We need to redesign and reformulate our heath care system from top to bottom. We should begin by studing the health care systems of the other industrialized nations of the world. Let's find exactly why the other systems work more efficiently and why they deliver health care for half the cost of health care in the U.S.

  • Report this Comment On April 01, 2012, at 9:31 AM, TopAustrianFool wrote:

    "Forecasting that something unsustainable will go on forever, at current growth rates, unchecked, isn't forecasting at all; it's merely drawing a straight line. "

    This only applies if you leave the problem alone and allow the Free Market to solve the problem.

    If you keep reforming and adding new regulations, then the statement above is true. The horse and buggy crap in the streets of NY dissapear, not thanks to a govt program or reform. But to the teh Free Market bringing you the Automobile.

    Regulation would have just delayed it.

    This applies to Global Warming, Healthcare and everything else. If you let the Free Market work and stop over-regulating and legislating for monopolies, the Free Market will fix it.

  • Report this Comment On April 01, 2012, at 9:32 AM, TopAustrianFool wrote:

    @stopthemalarkey,

    "We should begin by studing the health care systems of the other industrialized nations of the world. Let's find exactly why the other systems work more efficiently and why they deliver health care for half the cost of health care in the U.S."

    Your premise is incorrect, that healthcare everywhere else works better.

    It doesn't.

  • Report this Comment On April 02, 2012, at 4:51 PM, 123spot wrote:

    Dear Wolfman, I got an update from my HSA stating the rule is that I must use payments from it for medical costs until I am 65. Thereafter I can withdraw from it like an IRA (taxed as income, etc.) for any income needs. Hope that helps. Spot

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