Inflated Health Care Costs: The Curse of Cross-Subsidies w/John H. Cochrane | Perspectives on Policy
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- Опубліковано 28 вер 2020
- Cross-subsidies exist when the government allows companies to overcharge one set of consumers in order to subsidize others. Cross-subsidies require the government to enforce monopolies to stifle new competition that would otherwise offer lower prices. Innovation suffers and prices rise as a result. A more effective way to lower health care prices is to tax and spend on budget using market prices.
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Additional resources:
Read “The Curse of the Cross-Subsidies,” by John H. Cochrane. Available here: www.hoover.org/research/curse....
Read “The Tax-and-Spend Health-Care Solution,” by John Cochrane. Available here: www.wsj.com/articles/the-tax-....
Read “Cross-Subsidies,” by John H. Cochrane. Available here: johnhcochrane.blogspot.com/20....
Read “Cross-Subsidies and Monopolization, Explained,” by John H. Cochrane. Available here: johnhcochrane.blogspot.com/20....
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He is right! but a unregulated health care system also has some issues. But i am also willing to try what he says.
I dont think theres such a thing as an unregulated anything. So unregulated market really means whatever we have in other businesses like cars, cellphones, vetrinary care, etc etc.
Appreciate the video John.
Some questions and reflections:
- Compare US health care with NZ, AUS, Aus (price and quality).
- When you say ‘efficiency’ and indicate market forces (competition) - why do I think ‘do more with less’ - and possible patients suffer?
- anne Wojcicki stated: ‘US healthcare system is the monetization of you being unwell’. What a great line! I am a healthy person and my premium tracks north 3x inflation.
- how consistently profitable are private insurers and health care providers in the US. They make boat loads of money - regardless of any political policy.
I'm a bit surprised that Mr. Cochrane doesn't address some of the obvious problems, and that he used land line phones as his illustration. Health care appears to be a difficult fit for the standard market competition ideal. The less critical issue is that consumers have an extraordinarily difficult time comparing the actual effectiveness of various providers and treatments - even exceptionally well-educated, full time professional doctors have a hard time saying "treatment X will me more cost effective for you than treatment Y at these prices." Thus, the purchasing decisions of the end consumers will be inefficient. But more importantly, we can go back to high school level, intro econ at it's most straightforward: supply vs. demand. When the question is "how much are you willing to spend to save your child's life?" or "how much are you willing to pay to save your own life?" there simply is no upper limit. The bedrock function of every market falls apart. As for land line telephone service, it required extensive physical wires to be run, and avoiding having 3 or 4 sets of wires everywhere was a pretty good reason to grant local monopolies. (Also, the classic system of regulated utilities proved itself to be an overall good system, but that's a longer discussion.) I am certain that Mr. Cochrane has thought about these issues, and likely has very interesting ways of addressing them, I think the overall piece would have been more effective had he shored up the foundation by addressing them directly.
Seems like a fair comment.
The "customers are too unsophisticated to shop around" argument always proves wrong. Individuals make mistakes, but crowds do not. Over time, businesses who provide bad service get bad reviews. It doesn't take a savvy customer to know that 5 stars is better than 2 stars. Very few people know how their auto mobile works. And yet people everywhere seem to have no trouble repairing their car. Moreover, it's dubious at best to claim that regulations improve the ability of patients to judge the effectiveness of health care treatment.
Also, intro to economics absolutely does not say that the value of human life is infinite. It's quite the opposite. You can measure how much value someone places on their own life by seeing what risks they are willing to take. No person places an infinite value on their life. If that were the case, no one would never eat a donut or step inside a car. Instead, they would sacrifice all pleasures in order to maximize longevity. That's not what we observe.
I think your comment can be summarized as follows. Right now, we don't want a world where person X cannot afford treatment Y because of income, while person Z can because that person has more wealth/income. That's a fair criticism, but ultimately I think it still hits a wall. Right now, to keep up such a policy, we are essentially running a huge debt so the burden falls on our children who must face the dilemma listed above. At some point, we must accept this basic dilemma by either going full government control(with lots of lines and rationing) or mostly private where some of the poor/elderly will not get the best care.
I agree with you about health care having distinct differences from other markets, which make it not function the way many other markets do. One thing I think you may be missing is that demand is not merely the average amount an individual is *willing* to pay across a given time, but also what they are *able* to pay. While willingness might be infinite, ability never is, which means there will always be an upper limit on demand. You do raise the point that demand is not very sensitive to price for critical services, but that doesn't mean there is no market equilibrium.
Let’s start with complete price transparency.
100% I wanted to pay cash, they told me wait until I get the bill. Turns out it was a non-issue with a price tag upwards to 1000.
Why does he look like a young Ron Paul?
So why is it way cheaper to pay cash?
Because there is lower management and insurance costs. The same reason that concierge healthcare, where they accept no insurance at all, are the cheapest form of healthcare.
Or - it's _not_ a market where supply and demand can work: the end customers have no choice but to pay; the middle-men - insurance companies - make more money the less efficient the market is; the retailers/direct suppliers - hospitals - have to spend a fortune tracking costs; successive governments have failed to regulate mergers and acquisitions in a market where choice is massively limited by geographical distribution.
Supply and demand works in every market. You can see it with Lasik surgery. Prices have fallen dramatically. What is different? People pay out of their own pocket. That alone disproves your point. Insurance is inefficient because of government policy. Most people have insurance through an employer because of tax policy which says health insurance isn't taxable income. That encourages employers to compensate employees with insurance instead of wages. The result is employees don't see the direct cost of health care, so they end up overconsuming and they don't shop for prices. This keeps prices higher and quality lower than it would be in a competitive market where consumers pay the direct cost.
Just here for meet the gaffer
Healthcare is not a telephone. Healthcare is not supposed to be a money making venture. Healthcare is a labor of love for your fellow man. The small community supported hospital was keeping its fellow citizens well and out of peril, saving lives and curing diseases. A country cannot function with a sick population. Therefore the labor of love serves to make our country stronger. In tandem, Preventative care and lifelong goals that promote a healthy life style is a civic duty of every citizen. Now, take this idea, apply to education, labor of love. Should doctors and teachers have more wealth and affluence than the rest of us? Yep x3. Administrators should be done away with. That would make healthcare and education affordable for the citizen who is willing to work.
We need socialized Healthcare.
You want to provide an argument for that claim?
No!
Because nothing screams efficiency like more government bureaucracy.
Looks like you didn’t learn anything from the video
@@zackerycooper1206 half the world is the argument. Healthcare costs are on average lower in much of the rest of the developed world, its mostly due to the fact that the government has more negotiatiating power than smaller insurance companies. In addition preventive care reduces costs over emergency care so treating a cold vs treating pneumonia.. not the best example but one is more expensive. Also many of these countries mandate paid leave so people dont have to choose between there jobs or there health. I could go on but I dont want to write an essay.. also I am expecting claims of death panels and the one or two times some person in England had to come to the US because they didn't allow a procedure.. wait times.. doctor pay.. all the typical counterarguments to public health insurance.
Also yes I have socialized (technically subsidized) medicine through tricare.