Reply To: 'Healthcare' and the free market


The reason demand is driven up with insurance is because the costs are spread out among a pool of buyers. Imagine going to a restaurant with 15 people. Prices range from 7-18 dollars and everyone agrees to split the total bill evenly. Now, say someone is there who if they were alone would buy the $10 burger or maybe just the $7 sandwich because the $14 shrimp plate is not worth it to them. But when the costs are pooled, then the to cost to the individual of getting more food is significantly smaller. The cost of going from a burger to a shrimp plate would only be adding about 26 cents to that individuals bill (and 26 cents to everyone else’s as well)…. Everyone has that same incentive to receive something because the costs are born mostly by others so more meals would be bought in the $12-18 than would normally occur.

The same is in healthcare. Not only does the physician have an incentive to prescribe an antibiotic for sinus infection that doesn’t even make the infxn go away quicker because he is reimbursed based on #of visits and #of prescriptions written rather than how good the pt. thinks the Dr. is at making him well, but also the pt. has the incentive to go get the prescription filled without considering the side effects, the actual cost of the product, etc because the cost is being paid mostly by his insurance company (and those who pay the insurance company in monthly premiums). He pays the same premium regardless (and with maximum deductible laws, he can’t choose to go with a high deductible/low premium plan to avoid costs he doesn’t benefit from).