I just listened to the latest podcast from econtalk and it was pretty good. Arnold Kling talks about what is driving the costs in healthcare. By his reckoning, it is primarily due to many more procedures being available these days and because we are very insulated from the actual costs out of pocket, we use too many of them. He talks about various procedures being more cost effective than others and the fact that we have very little incentive to separate the high benefit procedures from the low benefit ones. He, along with many other economists, see the current problem with our health system as being an incentive problem as opposed to a healthcare one. Going to a single payer system would magnify the incentive problem and bureaucrats would make decisions on what procedures to offer in order to keep the costs under control. Kling offers a different alternative, make people bear more of their actual medical bills. In 1960, people paid .50 out of pocket for every dollar they spent on healthcare. Today it is down to about .15 out of every dollar. Doing this would eventually result in lower costs, higher wages, and possibly make more people take care of themselves. Give it a listen, it’s an interesting piece.
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