why healthcare is expensive
I was just re-playing my latest conversation with a Wall Street friend of mine (I trust you all know of whom I speak) and he remarked how poorly medicine has managed to adapt and use new technologies for greater efficiency and productivity. I certainly agree that as an industry, medicine has lagged far behind many sectors in improving, but tonight, while I was cutting celery, I had a couple of thoughts, which I wanted to write down before they were drowned out by the usual flotsam and jetsam of my mind.
First, medicine is not transportable. One of the reason why some industries (such as manufacturing) has become more efficient (same input of money, more output of goods) is that they've been able to change the location of production. Originally, it was from the high paying northeast to the south, but as we've all heard by now, it's Mexico and Costa Rica and China and India. For better or worse, medicine is unable to be provided anywhere else than where it is needed.
Second, medicine is responding to the value that society puts on it. Let's say that you are having a heart attack. You go to the emergency room, but the doctor says that you won't get the best medicine unless you have $100K. Unethical? Absolutely, which is why healthcare has always been discussed as a right by the majority of doctors. But in a free market system, how much is your health worth? If you were in that situation, would you pay it? I certainly would. Which is why drug companies can continue to raise prices, because most people value health above almost all other things. So in brutal terms, even if you pay $100K, your health is probably worth more to you than that. So, it seems contrary to the Republican free marketeers, injecting more free market principles into medicine will only exacerbate the current escalation in prices.
Third, medicine is responding to the trend of demand sensitive pricing. It seems that somewhere between the Puritans and today, capitalism has changed. It used to be that you produced a good (say cheese) and you went to the market and sold it for what it cost you to make (raw materials and labor) plus your profit. As Adam Smith taught us, you had to keep your profit margins reasonable, or someone else would undersell you. But nowadays, there's seems to be no connection between the costs charged and the cost of production. You charge what you can get away with. Whether it's Matt LeBlanc stating that anyone who doesn't go for as much as he can get to be stupid or the price of a gallon of milk above $4, there's no relation of what things cost to make and what they're sold at. So medicine is following suit--it used to be that there was some thought as to what the costs were of provide medicine, but now, especially in for profit institutions, it is just what people will pay. And as I've noted before, most people value health highly and are thus willing to spend a lot to keep it.
Any thoughts on these ramblings?
First, medicine is not transportable. One of the reason why some industries (such as manufacturing) has become more efficient (same input of money, more output of goods) is that they've been able to change the location of production. Originally, it was from the high paying northeast to the south, but as we've all heard by now, it's Mexico and Costa Rica and China and India. For better or worse, medicine is unable to be provided anywhere else than where it is needed.
Second, medicine is responding to the value that society puts on it. Let's say that you are having a heart attack. You go to the emergency room, but the doctor says that you won't get the best medicine unless you have $100K. Unethical? Absolutely, which is why healthcare has always been discussed as a right by the majority of doctors. But in a free market system, how much is your health worth? If you were in that situation, would you pay it? I certainly would. Which is why drug companies can continue to raise prices, because most people value health above almost all other things. So in brutal terms, even if you pay $100K, your health is probably worth more to you than that. So, it seems contrary to the Republican free marketeers, injecting more free market principles into medicine will only exacerbate the current escalation in prices.
Third, medicine is responding to the trend of demand sensitive pricing. It seems that somewhere between the Puritans and today, capitalism has changed. It used to be that you produced a good (say cheese) and you went to the market and sold it for what it cost you to make (raw materials and labor) plus your profit. As Adam Smith taught us, you had to keep your profit margins reasonable, or someone else would undersell you. But nowadays, there's seems to be no connection between the costs charged and the cost of production. You charge what you can get away with. Whether it's Matt LeBlanc stating that anyone who doesn't go for as much as he can get to be stupid or the price of a gallon of milk above $4, there's no relation of what things cost to make and what they're sold at. So medicine is following suit--it used to be that there was some thought as to what the costs were of provide medicine, but now, especially in for profit institutions, it is just what people will pay. And as I've noted before, most people value health highly and are thus willing to spend a lot to keep it.
Any thoughts on these ramblings?
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