Healthcare Nightmare: Controlling the Cost of Cost Control

www.capmag.com/article.asp?ID=4276

This article discusses the current and potential problems of the US Medicare system. As we all know, the cost of today’s healthcare is rapidly increasing. Two major factors are contributing to this, first one being new technology and advancement in medical research and development and secondly the retirement of the baby boom generation. With such a high demand and price for healthcare, the private insurance companies in the states simply cannot pay for everyone’s medical needs. In an attempt to balance things out, insurance companies have created higher deductibles with restrictions. Unfortunately their strategy is not a long-term solution. Just when it seems like things cannot get any worse, the government tries to intervene by creating regulations which only created more problems. Heavy government regulations were applied through all the hospitals and inconvenient issues arose. For example, government has the final say whether hospitals are allowed to purchase new equipments. This article claims that the government regulations are over 130,000 pages. No one is going to go through all that, let alone follow it. So what kind of effects would this government regulation have on hospitals and the US healthcare? In an attempt to make medical service more affordable, the government sadly did the opposite. For example, Duke University hospital had to employ more people in their billing department than both their doctors and nurses combined. As a result, they had to increase their cost of service and medicine in order to cover for that cost. The suggested solutions for these problems are to invest in Health Saving Accounts, eliminate administration fees, educate families to set their medical priorities and lower tax to compensate for higher deductible.

Chapter 3- Government intervention, Natural Monopoly

This is an unfortunate case, where there is such a sudden high demand for medical services at the same time the prices are at an unrealistic level. This article strongly criticizes the government’s failed attempt to control or regulate the prices in the US healthcare system. In fact, due to government regulations, the healthcare service prices actually increased in order to pay off their excise cost in the billing department. It makes little sense for government intervention in this market when you consider the fact that this is a private healthcare system and it is not a natural monopoly since competitors won’t reduce efficiency of healthcare services. This is a perfect example of why government should not intervene in a natural monopoly. In a market that is not a natural monopoly, competition is the best solution to fix unrealistic high prices.

In my opinion, one of the ways to fix this high demand and high price problem is to increase competition. With increased competition, there will be less shortage of healthcare service, therefore the market would be able to match the high demand. With more competition in the market, prices would likely drop, since competitors want to attract more customers. Also without government regulations, hospitals would be able to function more efficiently. Insurance companies would also be able to relax on their restrictions as well, and would probably be able to reduce their premium.