Economists Say Third-Party Payment Key to Increases in Medical Cost | MediBlog

 

Notice the two graphs that I included below:

The first shows the gradual decline of patient-dollars (out-of-pocket expenses) as a percentage of total healthcare expenditures from 1960 – 2006. The second graph shows aggregate healthcare spending as a % of GDP starting to more rapidly increase from about 1968 (6%) to the absurdly high levels it is now (17%). 

My interpretation of these inverse related graphs is that as patient-consumers lose their ability to influence prices with their own dollars (falling % of out-of-pockets) it leads to an inflationary spiral of the kind we have witnessed over the past 40+ years.

Show me an area in healthcare where people spend their own money to purchase care (or most of it) and I’ll show you a market where prices are stable or falling and care is affordable.

third-party-2portion_of_GDP_spent_on_healthcare-full

 

“Government payers have an even worse cost-containment record than privately provided medical care.” Since 1970, “the costs of Medicaid have risen 35 percent more, and the costs of Medicare have risen 34 percent more, per patient, than the combined costs of all health care in America apart from these two flagship government-run programs.

”More spending on prevention will not necessarily lower costs, they state. “The most effective preventive measures may include changes to one’s lifestyle or diet, occupational and educational decisions, and other choices far outside the realm of medical intervention.

”Many features of the Patient Protection and Affordable Care Act PPACA or “ObamaCare” will aggravate the problem of moral hazard and thus tend to push prices higher. On the other hand, PPACA, by pushing Americans toward higher-deductible insurance plans, could mitigate some of the moral hazard.

“The expansion of higher-deductible insurance did not receive much attention initially, but could be one of PPACA’s more important effects.” they observe.

via Economists Say Third-Party Payment Key to Increases in Medical Cost | MediBlog.