Despite the popularity of conspiracy theories involving “big pharma” and “the health care industrial complex,” the causes of health care inflation are actually pretty mundane. The Committee for Economic Development, a DC think tank, has produced a report that does a good job of boiling them down:
First, there is cost-unconscious demand … we have created a system in which most people have little personal interest in making the most cost-effective health care choices.
Second, expenditures are increased by the extensive deployment of new medical technologies that benefit people’s lives … People want them, doctors want to provide them.
Third, there has been a large increase in the prevalence of chronic disease and our ability (and expenditure) to treat it.
Fourth, most health care delivery is local, and there are local insurer, hospital or system monopolies.
The CED goes on to point out that these factors are exacerbated by the perverse incentives created by ill-considered tax policies:
In particular, the exclusion of employer contributions for employee health care and insurance, without limit, from the taxable incomes of employees.
And, contrary to the nonsense promulgated by the socialized medicine crowd, health care inflation is not a peculiarly American problem. It is a global phenomenon that bedevils every type of health care delivery model, including single-payer and other government-run systems.
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