Take a minute to read this analysis of health care spending by Michael F. Cannon of the Cato Institute.

Thirty years ago, an enormous and well–respected study (the RAND Health Insurance Experiment) randomly assigned thousands of people with all sorts of health problems to different health plans with varying coinsurance levels. Unsurprisingly, researchers found that the less patients had to pay out–of–pocket, the more medical care they consumed. Patients who paid nothing out–of–pocket — for whom healthcare was effectively “free” — consumed 43 percent more than those with a deductible of a few thousand dollars.

More surprising was that, overall, the additional care produced no better health outcomes. A lot of the added expenditures were simply wasted on low– and zero–value care.

America’s dysfunctional healthcare system seems to be conducting a similar experiment over time. Back in 1965, patients paid, on average, 44 percent of their medical care out–of–pocket. Since then, that share has fallen to 14 percent. In other words, for every dollar of healthcare a patient receives, on average the patient pays only 14 cents from their own wallet.

The results have been predictable. Patients demand more low–value medical care, they file more health insurance claims, and year after year, health insurance premiums rise faster than family incomes.

The problems with the health care industry in America are largely caused by intrusion into the free market and by a foolishly designed “insurance” system.

Increasingly numerous and onerous government dictates, both federal and state, have artificially driven up costs much like similarly well intentioned mandatory automobile insurance, fuel economy, and safety equipment regulations drive up the cost of owning and operating a car.  The government, of course, doesn’t realize that they are causing many of the problems and believe that (hold your laughter) they can solve the problems they created with more government.

Health insurance as we know it is the other major problem.  What we have isn’t insurance.  Insurance protects you against the unexpected, like your house burning down or a car accident.  Our health “insurance” covers far too many procedures and treatments, many of them decidedly not unexpected, and obfuscates the true cost of the service from the consumers.  It’s no wonder that patients are notoriously poor consumers.  They probably spend more time pondering the taste-to-cost ratio of the various candy bars in the local 7-11 than they do which medical procedures are worth the money and which doctors provide the best value.  “Insurance pays for it,” they’ll tell you.

Also, check out a run down of how some presidential candidates feel about health care at Degree of Madness.

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This entry was posted by Brian on Saturday, July 7th, 2007 at 3:07 pm and is filed under Health Care. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Please note the copyright policy.