Just a Brief Discussion of the Economic Causes of Health Care Costs

The biggest generator of rising costs in health care is that, unlike other services, people do not pay for it directly, they use a third party that does not know the value of the service to the recipient or the provider, and must assume that all people are the same based on a some other criteria, the economic value to the payor of the service it did not receive nor did it request or experience delivery of. Thus the decision of price is made not based upon quality or the other myriad individual circumstances which might raise or lower the value of the services performed. Therefore, it is impossible for the market to properly set the price. The consumer is encouraged to over access the system do to hidden costs (a process known as moral hazard) and the provider is encouraged to do the most he can to justify the services rendered to ensure his costs are covered. This includes the costs of administrative staff who deal solely with the recovery of the cost of services from the third party payor, who pays others to determine what those services are worth, and to dispute the costs at times. The provider then has to wait several month to recoup his costs. All of these people have absolutely nothing to do with the delivery of health care, only with shifting money from one place to another. Like any bureaucracy, they siphon money from the system, removing it from the actual delivery of the service, driving up the price, despite not knowing the actual economic value.
And that, Constitutional arguments aside, emotional arguments disregarded as retarded (it was too tempting to rhyme that) is why centralized systems of health care drive up costs. The true solution is competition and realization that health insurance should be for emergencies, not oil changes.