Having spent a large amount of time around the health care industry, I have seen many things that I do not necessarily agree with. Some of that has to do with the economics of the field, some of that has to do with the care itself. This article will focus on the former, where health care enjoys some perks that many other industries simply would not be able to get away with. Here are the top 5 issues that I take with the pricing structure for current medical costs:

1) Discriminant Pricing: This is a concept that many businesses would love to be able to pull off. Modern economics dictates that for a given good/service, the optimal pricing structure is where overall supply meets overall demand. However, for any given individual, the value of a good/service is vastly different compared to that of another individual. Most businesses would love to be able to charge more to Group A (people that value their output more) and less to Group B (people that value the output at a lower – but still profitable – rate). However, arbitrage kills this in most markets. Some people will be able to purchase the product at the Group B rate and then resell it at a higher rate (but lower than the business is charging) to Group A members. However, this does not work for medical costs because a non-professional cannot resell an appendectomy in a secondary market. As such, medical professionals can charge one rate to a group of people that can afford/are willing to pay it, then another rate to those with lesser means.

2) The Upsell: Sometimes, going to the doctor shares many qualities with visiting a mechanic. Any time that one visits a medical facility, they must be prepared to be subjected to a myriad of tests that may only be loosely related to their original complaint. Now, part of this is because of the current tort situation where a doctor may be liable for any possible ailments that they might miss. But a lot of this is due to the fact that these tests are relatively simple for the provident and can be billed with large mark-ups on the back end. Negative test results cost the same amount as positive ones.

3) Hidden costs: Very few industries can keep their prices secret, only to (seemingly) arbitrarily assign a value after the fact and demand full payment. Well, many industries could try, but it would result in being laughed at by their customers. But the nature of health care allows for this to take place. One reason is that we accept that all cases are different. Removing one man’s prostrate may be a different procedure that removing another person’s prostrate depending on a number of secondary factors. However, that does not mean that there can’t be some kind of baseline set up for these costs with variances added in for different people. And these baselines do exist – but good luck finding out their values if you are not a system insider. Another reason that we accept hidden costs is because, in most cases, these costs go directly to the insurance company and we barely bat an eye once we have taken care of the deductible. We tend to forget that these costs eventually get passed down to us in the form of higher premiums.

4) Constant Increases: Inflation is an economic norm (and necessity for any growing population). Overall inflation for the American economy has been about nine fold since 1950. That is, having a dollar in 1950 had about the same purchasing power as having nine dollars does now. With some exceptions, prices for most products have stayed within this overall inflation to some degree. For example, the average cost of a small car in 1950 was $ 1500. That translates to roughly $ 14,000 today, which is not out of line with many makes and models. By comparison, health care costs have risen by tenfold in just the past twenty years. Again, this is somewhat masked to individual consumers because they the full weight of the costs do not fall directly on them. While some defenders of the current economic model will point out that 2009 was the lowest health care cost increase in recent memory, it should be noted that it still increased…during a year in which nearly every other industry saw prices fall due to a struggling economy.

5) Massive Profiteering: At the end of the day, this is driven by greed. Greed by doctors, greed by administrators, greed by drug companies, greed by insurance companies, greed by health tech firms, greed by domestic medical institutions, etc, etc, etc. If you are not in one of those groups and you are against any kind of health care reform, then you have had the wool pulled over your eyes. Nobody is saying that these groups cannot make a profit and everybody come out making a nice living. However, when one industry (especially one that makes its money off the suffering and ailments of its citizens) threatens to put a choke-hold on the national economy as a whole, steps need to be taken to ensure that does not happen. Unfortunately, misinformation and fear tactics have proven quite successful in fooling much of the populace into thinking that the current system is sustainable…which is a pity.