An Economic Approach: Health Care in the U.S.

Health​ ​care​ ​has​ ​always​ ​been​ ​a​ ​problem​ ​in​ ​the​ ​US​ ​because​ ​of​ ​its​ ​high​ ​cost.​ ​The​ ​US​ ​spends​ ​17-18%​ ​of​ ​its GDP​ ​on​ ​healthcare,​ ​which​ ​is​ ​almost​ ​double​ ​of​ ​what​ ​most​ ​other​ ​developed​ ​countries​ ​spend​ ​on​ ​healthcare.​ ​While some​ ​argue​ ​that​ ​the​ ​high​ ​cost​ ​is​ ​not​ ​a​ ​problem​ ​because​ ​it​ ​is​ ​the​ ​result​ ​of​ ​better​ ​treatments​ ​and​ ​technologies​ ​in​ ​the​ ​US, the​ ​real​ ​reason​ ​behind​ ​the​ ​high​ ​cost​ ​is​ ​the​ ​lack​ ​of​ ​government​ ​regulations​ ​in​ ​healthcare.

People​ ​have​ ​tried​ ​to​ ​explain​ ​why​ ​Americans​ ​spend​ ​so​ ​much​ ​on​ ​healthcare​ ​in​ ​the​ ​US,​ ​and​ ​explanations include​ ​that​ ​Americans​ ​visit​ ​the​ ​hospital​ ​more​ ​often,​ ​Americans​ ​are​ ​unhealthier,​ ​and​ ​there​ ​is​ ​better​ ​treatment​ ​in​ ​the US.​ ​However,​ ​these​ ​factors​ ​only​ ​contribute​ ​a​ ​small​ ​amount​ ​to​ ​the​ ​total​ ​cost​ ​of​ ​health​ ​care.​ ​Studies​ ​have​ ​shown​ ​that compared​ ​to​ ​some​ ​people​ ​in​ ​European​ ​countries,​ ​Americans​ ​spend​ ​less​ ​time​ ​in​ ​hospitals,​ ​more​ ​Americans​ ​are​ ​obese but​ ​there​ ​are​ ​less​ ​smokers​ ​and​ ​drinkers,​ ​and​ ​there​ ​is​ ​no​ ​overall​ ​visible​ ​improvement​ ​in​ ​the​ ​quality​ ​of​ ​healthcare when​ ​comparing​ ​diseases​ ​like​ ​cancer​ ​or​ ​comparing​ ​life​ ​expectancies.​ ​The​ ​main​ ​problem​ ​comes​ ​down​ ​to​ ​highly inflated​ ​prices​ ​for​ ​treatments​ ​in​ ​the​ ​US​ ​due​ ​to​ ​the​ ​absence​ ​of​ ​government​ ​regulations.​ ​Hospitals​ ​often​ ​put​ ​their​ ​own interest​ ​before​ ​the​ ​interest​ ​of​ ​their​ ​patients​ ​by​ ​putting​ ​patients​ ​on​ ​the​ ​most​ ​expensive​ ​or​ ​unnecessary​ ​treatments​ ​in order​ ​earn​ ​greater​ ​profits.

In​ ​addition,​ ​hospitals​ ​are​ ​allowed​ ​to​ ​decide​ ​their​ ​own​ ​prices.​ ​Consequently,​ ​hospitals​ ​in​ ​different​ ​states​ ​and even​ ​different​ ​locations​ ​within​ ​the​ ​same​ ​state​ ​can​ ​charge​ ​very​ ​different​ ​prices​ ​for​ ​the​ ​same​ ​treatment.​ ​To​ ​make​ ​it worse,​ ​patients​ ​have​ ​no​ ​way​ ​of​ ​finding​ ​out​ ​the​ ​cost​ ​of​ ​a​ ​treatment​ ​until​ ​they​ ​get​ ​their​ ​hospital​ ​bill.​ ​Unlike​ ​other markets​ ​in​ ​the​ ​economy,​ ​hospitals​ ​do​ ​not​ ​show​ ​patients​ ​the​ ​price​ ​of​ ​the​ ​treatments​ ​they​ ​are​ ​getting.​ ​As​ ​a​ ​result, economic​ ​forces​ ​that​ ​regulate​ ​the​ ​prices​ ​in​ ​other​ ​markets​ ​do​ ​not​ ​apply​ ​for​ ​hospitals.​ ​Patients​ ​are​ ​not​ ​able​ ​to​ ​make well-informed​ ​decisions​ ​about​ ​which​ ​hospital​ ​to​ ​go​ ​to​ ​and​ ​what​ ​treatments​ ​to​ ​get,​ ​and​ ​there​ ​is​ ​no​ ​competition​ ​among hospitals.​ ​Usually,​ ​these​ ​forces​ ​play​ ​an​ ​important​ ​role​ ​in​ ​driving​ ​the​ ​price​ ​of​ ​any​ ​market​ ​towards​ ​equilibrium,​ ​but​ ​the masking​ ​of​ ​prices​ ​prevent​ ​them​ ​from​ ​working​ ​so​ ​prices​ ​remain​ ​unreasonably​ ​high.

Hospitals​ ​are​ ​not​ ​the​ ​only​ ​ones​ ​at​ ​fault​ ​for​ ​high​ ​hospital​ ​bills;​ ​health​ ​insurance​ ​companies​ ​add​ ​to​ ​the problem.​ ​The​ ​job​ ​of​ ​health​ ​insurance​ ​companies​ ​is​ ​to​ ​lower​ ​the​ ​cost​ ​of​ ​healthcare.​ ​However,​ ​this​ ​creates​ ​an​ ​incentive for​ ​hospitals​ ​to​ ​raise​ ​their​ ​prices​ ​in​ ​order​ ​to​ ​not​ ​lose​ ​profit,​ ​so​ ​the​ ​prices​ ​of​ ​treatments​ ​inflate​ ​even​ ​more.​ ​Insurance​ ​is often​ ​expensive​ ​or​ ​denied​ ​to​ ​those​ ​with​ ​pre-existing​ ​medical​ ​conditions,​ ​so​ ​tens​ ​of​ ​millions​ ​of​ ​people​ ​not​ ​covered​ ​by insurance.​ ​Those​ ​people​ ​have​ ​to​ ​pay​ ​the​ ​full​ ​inflated​ ​prices​ ​when​ ​they​ ​are​ ​the​ ​ones​ ​who​ ​need​ ​a​ ​discount​ ​the​ ​most.

In​ ​order​ ​to​ ​lower​ ​the​ ​cost​ ​of​ ​healthcare,​ ​I​ ​believe​ ​the​ ​government​ ​should​ ​impose​ ​regulations​ ​that​ ​allow patients​ ​to​ ​make​ ​well-informed​ ​decisions​ ​on​ ​what​ ​treatments​ ​they​ ​should​ ​get​ ​and​ ​create​ ​ceiling​ ​prices​ ​for​ ​certain treatments.​ ​Regulations​ ​that​ ​force​ ​hospitals​ ​to​ ​be​ ​transparent​ ​about​ ​all​ ​the​ ​available​ ​choices​ ​and​ ​the​ ​cost​ ​of​ ​each treatment​ ​will​ ​allow​ ​people​ ​to​ ​make​ ​better​ ​decisions​ ​based​ ​on​ ​what​ ​is​ ​best​ ​for​ ​them.​ ​Competition​ ​and​ ​market​ ​forces will​ ​drive​ ​prices​ ​toward​ ​equilibrium.​ ​For​ ​treatments​ ​without​ ​substitutes,​ ​and​ ​are​ ​therefore​ ​inelastic​ ​to​ ​demand,​ ​there should​ ​be​ ​a​ ​price​ ​ceiling​ ​so​ ​hospitals​ ​are​ ​not​ ​able​ ​to​ ​charge​ ​whatever​ ​they​ ​want,​ ​and​ ​people​ ​who​ ​need​ ​the​ ​treatments have​ ​access​ ​to​ ​them.​ ​The​ ​main​ ​forces​ ​preventing​ ​the​ ​necessary​ ​government​ ​regulations​ ​from​ ​happening​ ​are​ ​lobbyists hired​ ​by​ ​insurance​ ​companies.​ ​These​ ​lobbyists​ ​stop​ ​health​ ​reforms​ ​so​ ​hospitals​ ​can​ ​continue​ ​to​ ​charge​ ​high​ ​prices and​ ​insurance​ ​companies​ ​can​ ​continue​ ​to​ ​earn​ ​profit​ ​through​ ​high​ ​premiums​ ​to​ ​bring​ ​the​ ​prices​ ​down.​ ​To​ ​get​ ​the regulations​ ​we​ ​need,​ ​more​ ​people​ ​need​ ​to​ ​be​ ​aware​ ​of​ ​what​ ​is​ ​necessary​ ​so​ ​they​ ​can​ ​push​ ​for​ ​better​ ​regulations​ ​in healthcare​ ​that​ ​will​ ​tackle​ ​the​ ​problem​ ​of​ ​inflated​ ​prices​ ​in​ ​the​ ​first​ ​place​ ​instead​ ​of​ ​pushing​ ​for​ ​better​ ​government healthcare​ ​policies​ ​that​ ​will​ ​provide​ ​more​ ​benefits​ ​and​ ​coverages.

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