Has He Not Heard the News?

I didn’t what this piece from A. Gary Shilling at Bloomberg to go by unremarked upon. More than anything else it’s a good example of how weak most writing about our health care system is. Here’s his explanation for why our system is so expensive:

Medical costs are understandably high since the system is designed to be the most expensive possible for four distinct reasons. First, with the constantly improving but increasingly expensive modern technology, the best is none too good when your life or mine is at stake. Also, few patients have the knowledge to decide whether a recommended procedure will be medically much-less cost-effective. The medical delivery system encourages a gulf between the providers who supposedly know what’s needed and their patients who don’t.

Second, patients are quite insensitive to costs since their employers or governments pay most health care bills. And those who are privately insured want to get their money’s worth from their premiums, especially since Obamacare does not allow insurers to set premiums on a health risk basis.

Third, the pay-for-service system encourages medical providers to over-service. After my dermatologist burned off the pre-cancerous growths on my face, he wanted me back in two weeks to be sure, but also to bill another office visit.

Finally, domestic training programs and facilities for medical personnel are inadequate. As a result, many MD residents and nurses come from abroad, while medical schools of dubious quality in the Caribbean train U.S.-born physicians.

and here’s his prescription for fixing it:

To control costs on the demand side, use the appeal of money. The importance of their health to most Americans means they will spend proportionally more on medical services than other goods and services, but they’ll think twice if it’s money they otherwise can keep. Increasing deductibles and co-payments are moving in that direction. In 1999, employees on average paid $1,500, or 22%, of $6,700 in family health coverage premiums, according to the Kaiser Family Foundation. The total rose to $26,600 in 2019, but employees’ share has climbed to $6,000, or 29%.

Medical savings accounts also make patients more aware of costs. Companies give employees a set amount of money and they can keep what they don’t spend on health care.

Let’s talk about his prescription first. AFAICT the connection between the reasons our system is expensive is pretty tenuous. For example, how does it address the cost problems if any introduced by foreign-trained professionals? And is he completely unaware how much of the demand in our health care system is provider-induced?

And the pilot programs that have been tried along those lines have not been successful: people economize on necessary as well as unnecessary care.

My opinion of the reasons for why our system is so expensive is:

1. It’s about what you would expect from a system in which 60% of the total is paid from taxes and the same people determine prices, the need for treatment, and the course of treatment.
2. People aren’t exposed to prices and don’t have incentives to economize.
3. We are a very large country and the point at which decreasing costs to scale was reached was at a much smaller population.
4. Everything our government does is more expensive than anywhere else in the world.