Economist Scott Grannis recently published an excellent discussion of the problem with healthcare in the United States entitled "The big problem with healthcare? It's not a market."
He provides a graph showing that consumers now pay only 12% of total healthcare costs theselves -- the rest is paid for by insurance companies or the government. As his graph shows, this percentage has declined dramatically and consistently since the 1960s, when consumers paid for over 45% themselves.
Mr. Grannis concludes: "It stands to reason that when people don't pay the bill for the services they receive, they are very unlikely to take price into consideration when making a healthcare decision. Why shop around if everything is paid for by someone else?" We agree with him, and his ultimate point that the problem with healthcare in the United States is the steady removal of the beneficial forces of free enterprise and individual choice.
We have made this point in the past, and pointed out that if this is indeed the problem with healthcare, the solution is more freedom, not less. We would advise interested readers to go back to our 2009 article entitled "The healthcare black hole," where we linked to an article written by the late Milt Friedman published in 2001 entitled "How to cure health care."
In that article, Dr. Friedman goes through the history of how we got to the system we have today (which Scott Grannis also explains in his piece), and provides excellent support for his conclusion that "the high cost and inequitable character of our medical system are the direct result of our steady movement towards reliance on third-party payment."
Americans are the beneficiaries of the tremendous positive power of free enterprise in so many areas of their lives. It is unfortunate that they have been increasingly denied access to those beneficial forces in the critically important field of medical care.
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