The Economic Problems of Medical Care in the U.S.

What should be done to resolve the economic woes of medical care in our country. Unfortunately just repealing Obamacare will not do it. This misguided experiment added insult to injury but the problem is far more fundamental.

Obamacare sought to provide universal medical insurance coverage which completely misses the point of our problem. The development of the concept of insurance as a way of controlling potential risk of economic catastrophe was a great invention (of Genoese merchants in the 14th century) but it is a terrible way of paying for everyday expenses or even untoward events of manageable cost. What sense does it possibly make to purchase an item or service by giving your money to an intermediary who then deducts an administrative cost and profit and then pays your bill at the same time restricting your choice. 

But that's not the worst of it. When you're looking to purchase something you look at the price and if it's more than you can afford you let it go or look for some cheaper acceptable substitute. If you think it's something you need or really want you at least shop around. Sellers on the other hand want the best price they can get, but so do their competitors. So the best way for them to prosper is to figure out a way to offer you what you want at a price you want to pay at least as well as does their competition. . 

Paying by insurance messes that whole system up. Since the insurance company is paying the bill the sky is the limit. Maybe you're not trying to game the system but if something is sitting there on the shelf and you think you might be able to use it, what the heck, it's not costing you anything. If you think about it that deal also works pretty well for the sellers. So in that arrangement the insurance company has to be the bad guy and do the restricting. Of course the company can always raise its premiums but that can get ridiculous and of course they have competitors too. 

But, you tell me, you're not seeing the full picture. You point out that what I haven't considered is that it's your boss's problem since he's paying for the insurance. No,no,no. When you climb the ladder and look at things from his point of view you'll see that you're slaving away every day just as much for your benefits as for your salary. You're the one who's really paying for your medical insurance!

There's way more to this story but let's stop here for now. The bottom line is that we've developed a system of third party payment for medical goods and services that's tremendously inefficient and producing prices that are way too high. It's my educated guess that, depending on the item or service, medical prices are probably anywhere from 50% to 10 times what they would be in a market system in which people pay for things directly. And the high prices make things very difficult for anyone who really does have to pay out of pocket. Our problem is not too little insurance but too much. 

So yes Obamacare has made things worse by insurance coverage mandates but it's not the fundamental problem. Future installments will cover how we got into this insurance mess and the sad ongoing destruction of our country's medical care by the biggest and baddest insurance company of all, Medicare. Here's what I think is the fundamental problem. Progressive efforts to correct the bad results have made it worse.