NCPA - National Center for Policy Analysis


March 11, 2009

America's health care system has become one of the most expensive in the world.  On a per person basis, the United States spends more on health care than any other country, says Andrew Mickey, Chief Investment Strategist with Q1 Publishing.

In "Health Care Entrepreneurs: The Changing Nature of Providers," Devon Herrick, a senior fellow with the National Center for Policy Analysis explains why:

  • 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.
  • When someone else pays, the incentive to "shop around" for the best price, service, quality, etc. simply isn't there.
  • 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.

If consumers were allowed to shop around for medical care, the whole system would look completely different, says Herrick.  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. 

Since 1992 health care costs have risen dramatically -- they've grown twice as fast as inflation.  However, cosmetic surgery is the exception.  Why?  Because it isn't paid for by government health plans and insurance policies, says Herrick.  It's completely optional.  Consumers pay out of their own pockets.  As a result, most shop around to find the best value and cosmetic surgeons have to compete on price, service, quality, etc.

Source: Andrew Mickey, "Companies that can help boost health care efficiency will benefit greatly,", March 10, 2009.

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