We're currently stationed in a town too small for a military clinic and are using a civilian/non-gov't clinic and it is like heaven compared to what we are used to. So, no ER visits :-) Much longer hours at the clinic and the people treat us so much better. I'm going to be sad if the gov't takes over more of this country's health care. Bad things happen when the gov't is in charge. That has been my experience for the past 16+ years, FWIW.
Why Are Health Costs Rising?
March 15, 2007 | Author: Devon Herrick
Testimony for Submission to the
House Education & Labor Subcommittee on
Health, Employment, Labor and Pensions
Insurance Coverage for the Uninsured
Hearing held on March 15, 2007
Mr. Chairman and members of the Subcommittee, please accept my comments for the record regarding the March 15, 2007, hearing about providing health insurance for the uninsured. My comments focus specifically on the issue of health care prices. As was pointed out by many of the witnesses during the hearing, the price of health care is a significant issue to consider as the Subcommittee discusses health care reform.
Prices for medical services have been rising faster than prices of other goods and services for as long as anyone can remember. But the Subcommittee should consider that not all health care prices are rising. Although health care inflation is robust for those services paid by third-party insurance, prices are rising only moderately for services patients buy directly. For example, the real (inflation-adjusted) price of cosmetic surgery fell over the past decade - despite a huge increase in demand and considerable innovation.
Health Care Costs Rise When Others Pay. A primary reason why health care costs are soaring is that most of the time when people enter the medical marketplace, they are spending someone else's money. When patients pay their own medical bills, they are conservative consumers. Economic studies and common sense confirm that people are less likely to be prudent, careful shoppers if someone else is picking up the tab. Thus, the increase in spending has occurred because third parties - employers, insurance companies or government - pay almost all the bills.
The Extent of Third-Party Payment of Medical Bills. Although polls show that many people fear they will not be able to pay their medical bills from their own resources, the reality is that most people pay for only a small portion of their medical care:
For every $1 worth of hospital care consumed, the patient pays only about three cents out of pocket, on the average; 97 cents is paid by a third party.
For every $1 worth of physician services consumed, the patient pays less than 10 cents out of pocket, on the average.
For the health care system as a whole, every time patients consume $1 in services, they pay only 14 cents out of pocket.
Thus, from an economic point of view, the incentive for patients is to consume hospital services until they are worth only three cents on the dollar, on the average. The incentive is to consume physicians' services until they are worth only 10 cents on the dollar. And for the health care system as a whole, patients have an incentive to utilize everything modern medicine offers until the value to them is only 14 cents out of the last dollar spent.
Medical Inflation. Health care costs over the past 40 years have risen as the proportion of health care paid for by third parties has increased. Prior to the advent of Medicare and Medicaid in 1965, health care spending never exceeded 6 percent of gross domestic product. Today it is 16 percent. These two government programs unleashed a torrent of new spending and led to rising health care prices. For instance, a recent study by Amy Finkelstein of the Massachusetts Institute of Technology found that half the growth in health care expenditures was due to Medicare. There has also been an increase in tax-subsidized employer spending on health care. These two factors, rather than the cost of new technology and drugs, explain why health care costs outpace inflation.
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