Health care

There is a discussion that I never hear when people are discussing how to fix health care. Its a discussion based on economics.

If the price of something is always the balance between supply and demand, then the ever increasing costs of health care must mean that either we don't have enough supply of health care services available or the demand is too great.

If we add government health care for people who don't currently have health insurance then theoretically this should put even more demand on the existing health care facilities thereby driving the costs of health care up even faster. Of course then the government would put price controls in place just as it did for Medicare. This would then decrease the health care supply thereby creating shortages of service.

Why does current demand drive health costs up so fast? Why does the current demand exceed the supply? Its because people who are fortunate to have health insurance control a large supply of money for health care.

Let me give an example. Someone finds a lump. They have a doctor check it out and he determines its probably a cyst. It gives every impression of just being a cyst but the doctor can't guarantee its a cyst. If it is a cancerous tumor then its one of the worst. The doctor is sure its a cyst and says there is probably only a 2% chance it could be cancer. The doctor recommends not to worry about it. An MRI could give more confirmation but that's expensive and the lump is highly unlikely to be cancer. The patient who has health insurance decides they want to do the $3000 MRI. It doesn't cost them much. The health insurance will cover nearly all of it. If the patient had to pay the $3000 or a large part of it, they would probably not do it but when it seems nearly free why not be sure. That patient has just created a demand for an MRI because it seems to have no costs. The health insurance company is probably paying for an unnecessary service and that's how we get high health care costs. Too many dollars chasing too few supply.

I'm not saying I have a solution and I do want everyone covered by health care insurance, but any discussion of solutions needs to include a basic analysis of the economics.

At least we need to somehow increase the supply of health care services. We're not graduating enough doctors and nurses to meet the demand. We do need electronic records. We do need more competition to encourage efficiency. Hospitals are woefully bureaucratic. We need a 21st century redesign of how a medical institution should work.

Simply covering more people and not changing anything else will not make a healthy health care system. We will only make it worst.