Sunday, November 1, 2009

Its the Cost Stupid (Health Care Cost)

There are many objectionable issues with the various health care proposals floating around between the White House and Congress. However, none of them have as a central tenet, the REDUCTION of health care costs. Most would agree that health care costs seem too high. Health care costs are not what your deductible is; are not what your insurance costs, or even what you pay for COBRA between jobs. Health care costs are things like the costs of: x-rays, doctor check-ups, MRI's, emergency room visits, lab tests and surgical procedures.

The way to lower the costs of anything is simple if you return to the basics of economics:

Supply and Demand
Reducing demand by improving health outcomes needs to be the focus of "genuine" reform. Policy also needs to focus on increasing the supply of medical services, which reduces cost. Of course, regulatory elements increase the cost of providing services. We expect well-regulated health care (i.e. safedrugs, licensed doctors, safe hospital practices), but ineffective regulation and litigation increases the burden of providing health care services. Increased burden raises the price point that suppliers are willing to provide a service.
An important way to reduce "ineffective regulation" is to reform malpractice laws and framework. Patients deserve to be protected. But, our health care system should not be "held-up" by less than scrupulous lawyers and over zealous juries. Responding to these cases, reduces the supply of health care services, increases costs due to insurance and settlement costs, and, signficantly increases the use of defensive medicine to protect from possible lawsuits. Real "cost" reform cannot occur without better malpractice policy.

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