Why Is Healthcare So Expensive?

Healthcare use and expenses are not controlled by the usual pesky supply and demand curves. If supply rises, price goes down; if supply falls, price goes up. If demand increases, price rises: if demand decreases, price does as well.

“Well” people purchase houses, clothes, food, automobile repairs, vacations and so on. The pesky supply and demand curves function; they even function in the insurance market of homes, cars or lives. Individuals can make an independent assessment of the cost and/or of repairs and the value of the policy.

Sick people do not think like “well” people. In the United States, a high price never suppresses healthcare demand. A sick person wants any technology that has even a remote chance of improving clinical outcome. He is not assessing relative risk and benefit in terms of side effects and certainly not in terms of dollars and cents.

In those countries with government run healthcare, supply and demand are controlled centrally. The costs are less. Governments do not think like sick people think!

Insurance companies fit into this conundrum because they shield individuals from cost. They fit into this conundrum because they cannot audit the bluebook.