Friday, September 12, 2014

One Chart to Explain Our Broken Health Care System

In my blog Obama Doubles Down on a Broken System,  I suggest that we have high medical cost inflation because everyone in the medical business is using other people's money.  Also, increasing government spending is the biggest driver of medical cost inflation because the government is completely insensitive to prices (but people are).   I said the following:
"Insurance money feels a lot like "free money" to both patients and medical businesses. Hospitals and doctors can literally never spend enough to insure the survival of everyone. It's no wonder medical cost inflation is pricing medical services out of reach! Eventually patients are priced out of the insurance market and can no longer afford coverage or medical services at all. This is where we are today.

So, most can agree that the system is broke because market and normal cost forces are not in play. I've made the argument in my blog that high deductible policies coupled with health savings plans put some consumer "skin in the game." You can understand this when you consider that the ultimate market pricing system would be medical care services are paid only by cash!"
Thailand has a cash-market medical business (not yet dominated by health insurance company spending or government spending) and their medical costs are from 5 to 10 times cheaper than the same services in the US.

Well, here's evidence of the trend that only worsens in the years ahead since the US government spending in the medical service market goes ever higher. See the following chart from David Stockman's Contra Corner:

Only lower government spending in the medical market and more consumer "skin in the game" (out of pocket spending) via high deductible policies and HSAs will reverse price inflation trends.  ObamaCare has and will further increase government spending and therefore increase prices.  We face a vicious (and upward) cost spiral with ObamaCare -- proving that everything said to promote the law is flawed and/or lies.

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