Charles Wheelen is a respected journalist, author and lecturer. He is currently a lecturer in public policy at the University of Chicago, but he is most famous for his best selling book “Naked Economics: Undressing the Dismal Science.” In his blog, he cites the top ten reasons why health care costs are increasing. While the ten are broad generalizations and do not offer solutions to fix the healthcare system, they do represent the economics field’s conventional wisdom on the subject. Highlighting a few of the ten:
- Medical care is a luxury good: As the average income in a country increases, the percent of GDP dedicated to medical care will also increase.
- We don’t pay for what we consume: Since most medical costs are paid for by either private or public (read government) insurance, patients have no incentives to shop on price.
- Baumol’s disease: See my post on this phenomenon.
- Demographics: As the baby boomers continue to age, total spending on healthcare will increase.
- The uninsured: Those without insurance go to the emergency room when the have problems, which is usually a significantly more expensive option seeing a physician promptly in an outpatient facility.