I know it’s a mistake to read anything in the mainstream press almost always, but this article that purports to discuss why health care costs rise so much in comparison to inflation only half-touches on two partial reasons and doesn’t actually discuss the root causes at all.
The first and main reason that health care costs spike skyward every year is that insurance is itself inflationary. No, I am not saying eliminate insurance but just like a loan for a house or student loans, the more money available in a market the more prices rise. This is one of the few completely correct areas of economics IMO and this is what has happened in the health care market and will continue to happen absent some other huge force counteracting this tendency.
That the insurers and hospitals have adversarial relations probably does more to promote that than if they were all one entity (no, I am not advocating that hospitals and insurers merge — also a terrible solution). By the way, inflation doesn’t just mean raising prices in the medical context, it means unnecessary tests, procedures, surgeries and all of that too.
This is not like car insurance (though that is inflationary too in some markets) because medical care is more obligatory — more akin to an oil change (not insured) or having brake pads replaced. Imagine how much an oil change would cost if insurance were mandated by law for this common need, and everywhere available to perform the procedure accepted insurance, and it was illegal to do it yourself. (Back of the envelope calcs suggest an oil change would cost somewhere around $1,000 in that environment.)
Ok, already tired of the car metaphors.
The second huge omission of the article is that doctors in America and Canada are hugely overpaid (and overtrained) compared to the rest of the world.
The third cause is that human labor — which the health care depends on in spades — gets more expensive relatively in relation to what can be automated. Meaning over time that the labor share of cost rises as compared to say the cost of a scalpel.
There are other causes of rising costs — I am not implying only three. But how can an article like this miss the greatest cause (that to be fair most others also miss) which is that the more money in a market, the more something will cost? So easy but completely outside of the comprehension of the “educated.”