NCPA - National Center for Policy Analysis

MEDICINE CAN BE CONSUMER-CENTRIC

July 31, 2006

America's health care system is made up of a patchwork of public and private payers, which many Americans find complex and confusing.  The issue is further distorted by claims that American health care is in crisis.  However, there is no crisis of "care."  Rather, the United States has a crisis of "cost," say Gregory Dattilo and Dave Racer in their new book, "Your Health Matters: What You Need to Know about U.S. Health Care."   

Health care is expensive, they say, because it is a scarce resource.  Virtually all goods and services in our economy are rationed through prices, but health care is different from other areas of the economy in three important ways:

  • The sick and injured cannot do without medical care.
  • Those in need of care have an unlimited demand for it, especially if someone else is paying the bill.
  • Few people pay their own health care bills directly; most are paid by third-party insurers or government.

Before 1940, health insurance was almost unheard of and patients paid most of their medical bills directly out of pocket.  Today, slightly more than 10 percent of medical bills are paid directly, and many people consider health insurance coverage to be synonymous with health care.

Additionally, government intervention in the health care market has greatly boosted demand and distorted incentives.  Because of the tax subsidy for employer-sponsored health coverage enacted more than 50 years ago, obtaining health coverage through one's employer has become the norm.  In 1965, the government created Medicare for the elderly and Medicaid for the poor.  Once covered by health insurance, enrollees acquired a sense of entitlement to whatever care they wanted, the authors say.

Source: Devon Herrick, "Medicine Can Be Consumer-Centric," Heartland Institute, August 1, 2006; based upon: Gregory Dattilo and Dave Racer, "Your Health Matters: What You Need to Know about U.S. Health Care," Alethos Press, 2006.

 

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