HEALTH CARE ENTREPRENEURS

February 27, 2009

It's no secret the U.S. health care system has some room for improvement.  On a per person basis, the United States spends more on health care than any other country.  However, it doesn't even rank in the top 20, depending on who's doing the ranking, says Andrew Mickey, Chief Investment Strategist, Q1 Publishing.

The latest research from Devon M. Herrick, a health economist with the National Center for Policy Analysis (NCPA) explains why.  In "Health Care Entrepreneurs: The Changing Nature of Providers," Herrick illustrates one of the real problems facing health care:

  • On average, consumers spend less and less out of their own pockets for health care.
  • Health insurance and government programs have grown so large they end up footing the bill for almost 90 percent of all health care costs.

That's a good thing to many political leaders, but it has stunted the efficiency of the health care industry.  You see, when someone else is paying, the incentive to shop around for the best price, service, quality, etc. simply isn't there.  According to Herrick, "When patients do not pay their own bills, they do not act like typical consumers because they care little about the cost of the care they receive."

Consumers go where the government or their health insurer tells them to go so they won't be stuck with the bill. It's a mess of a system.  Either you go to this doctor because he's in the network or this hospital because they have a prearranged deal with your insurance company.

Under this system, consumers only have two choices.  You go where you're insurer tells you or you choose where you want to go and foot the bill yourself.  The latter option is impractically expensive for most families.  So there's no real choice at all.

If consumers were allowed to shop around for medical care, the whole system would look completely different.  Hospitals and doctors would be forced to compete against each other.  They would have to provide a good price, good service, and the best value to attract customers, says Herrick.

Source: Andrew Mickey, "The Real Obama Bull Market," Q1 Publishing, February 27, 2009.

For text:

http://www.q1publishing.com/dispatch/current/index.php?&content_id=207

For NCPA study:

http://www.ncpa.org/pub/st318  

 

Browse more articles on Health Issues