These days, a lot of people are worried about their rising healthcare costs. In the Netherlands, this had been one of the most important factors in introducing a collectivist and obligatory basic insurance policy in 2006. Only a few years later, in the United States, the federal government implemented a similar scheme. At least, that was the original plan. The scheme, which Americans know as ‘Obamacare’ caused an uproar, both politically and economically, over rising costs, and whatever the case may be, people are in agreement that something is very wrong with healthcare markets, and especially that something must be done to lower prices.
One of the problems with health care costs and prices is that they are not at all transparent. In other words, if we go to a doctor, we are unable to see the total costs of the treatment that we receive, or the full prices charged to the insurance company. We often pay a little bit up front, but the insurance company pays the rest. Meanwhile, recent research from the Center for Impoving Health Care in Colorado (CIVHC) has shown that there are vastly different prices for the same simple treatments at different hospitals. For instance, the simple procedure of a colonoscopy can range in price from $400 to $2,800, depending on where it is conducted. (Similar differences in prices can be observed in the Netherlands as well.)
When purchasing most goods or services, such as food in a restaurant, a new car, or a vacation, people are able to search online and elsewhere for customer reviews and prices. It is a way in which we can conduct our own survey to determine what is worth the cost. When it comes to medical treatments, however, it is generally not possible to find out how much a treatment really costs, and the consumer is left without valuable information as to which treatments are most cost effective.
This post was published at Ludwig von Mises Institute on Monday, September 22, 2014.