Holman Jenkins has a reaction piece to Steve Brill’s Time article on the high cost of healthcare. As you might expect, he disagrees with Mr. Brill’s underlying viewpoint:
Your time might be better spent reading Duke University’s Clark Havighurst in a brilliant 2002 article that describes the regulatory, legal and tax subsidies that deprive consumers of both the incentive and opportunity to demand value from medical providers. Americans end up with a “Hobson’s choice: either coverage for ‘Cadillac’ care or no health coverage at all.”
“The market failure most responsible for economic inefficiency in the health-care sector is not consumers’ ignorance about the quality of care,” Mr. Havighurst writes, “but rather their ignorance of the cost of care, which ensures that neither the choices they make in the marketplace nor the opinions they express in the political process reveal their true preferences.”
You might turn next to an equally fabulous 2001 article by Berkeley economist James C. Robinson, who shows how the “pernicious” doctrine that health care is different—that consumers must shut up, do as they’re told and be prepared to write a blank check—is used to “justify every inefficiency, idiosyncrasy, and interest-serving institution in the health care industry.”
Hospitals, insurers and other institutions involved in health care may battle over available dollars, but they also share an interest in increasing the nation’s resources being diverted into health care—which is exactly what happens when costs are hidden from those who pay them.
I think there are several prospective explanations for high hospitals costs and for the high cost of healthcare, generally. These include that physicians want to maintain their incomes at a certain level or increase them and change their behavior to accomplish those goals (“target income hypothesis”), there is uncertainty among physicians about the most effective course of treatment which results in more approaches being tried (“professional uncertainty hypothesis”), or the outcome one might expect when either or both of those factors are combined with a hierarchical bureaucracy.