Dealing With Healthcare Cost Escalation

The cost of healthcare in this country has been increasing at a rate far faster than the rate of inflation. The latest government effort to deal with this problem has been the passage of the so-called Affordable Care Act (ACA). While the ACA did reduce the cost of healthcare for some, it did so mainly by shifting that cost to others. One of the main selling points touted by the proponents of the ACA is that it prohibits health insurers from denying coverage to anyone due to a preexisting condition. While this clearly benefits those with preexisting conditions, the added cost of taking care of those people is paid for by increasing everyone’s health insurance premiums. In any case, the very idea that insurance companies should be required to cover preexisting conditions is ludicrous, just as it would be to require companies that issue flood insurance to pay for the damage caused by preexisting floods.

Another provision of the ACA provides government (i.e., taxpayer-financed) subsidies for those who couldn’t otherwise afford health insurance. Bottom line: The ACA requires the healthy and the wealthy to subsidize the sick and the poor, which is clearly unfair unless you subscribe to the Marxist (“from each according to his ability, to each according to his needs”) model of resource allocation.

One provision of the ACA that I find particularly troubling is the requirement that everyone have health insurance, with a financial penalty imposed on those who don’t, another instance of heavy-handed government restricting people’s freedom of choice. The rationale for this provision is that without such a requirement when those without health insurance get sick (and presumably are unable to pay for hospitalization), they will seek treatment at the emergency rooms of hospitals, which is very costly and makes those emergency rooms less available for true emergencies. This argument is a classic example of a logical fallacy known as a false dichotomy, in that it fails to consider the possibility of a third alternative, namely, the elimination of the requirement that hospitals serve everyone regardless of their ability to pay. Those who choose not to have health insurance should be free to do so, with the understanding that if they get sick, they are on their own. Let’s have the government treat its citizens like adults, not children, with the ability to make decisions that affect their lives and the responsibility for dealing with the consequences of those decisions.

In order to deal with the problem of escalating healthcare cost, let’s begin by repealing the ACA. We need cost reduction, not cost shifting.

The free market is generally the most efficient system for allocating resources, so that should be our goal for healthcare. One factor causing the high cost of healthcare is the exorbitant prices that pharmaceutical companies charge for their drugs, particularly life-saving drugs for which there is no substitute. The reason that drug companies are able to charge multiple times the free market price for their drugs is the legal monopoly granted to them by virtue of their patents. This problem can be eliminated by changing the patent system so that patents no longer give the patent holders a monopoly, but still reward innovation, as discussed in my article Drug Overcharging: What Can Be Done About It?


Another cause of the high cost of healthcare is the exorbitant cost of hospitalization, as evidenced by the existence of medical tourism. One factor responsible for this high cost is that hospitals are legally required to provide emergency medical treatment to those who are unable to pay for it. These costs are passed on to those patients that are able to pay, either by their health insurance or out of pocket. This factor can be eliminated if, as recommended above, we end this legal requirement. I am aware of no other case where a service provider is legally required to provide service to those who are unable to pay for it; hospitals shouldn’t be an exception. If the recommendations made herein are adopted, healthcare should be affordable to most people without the government subsidies or the cost shifting of the ACA. For those without health insurance who get sick and are unable to pay for medical treatment, they can prevail upon their friends, family members, or private charities for help, or, as a last resort, check into a euthanasia clinic, as proposed in my article Dealing With Entitlement Cost Escalation, for a quick painless death.

Another factor responsible for the high cost of hospitalization is that those patients with health insurance — the vast majority — do not normally see the bill and so are unaware of the cost of their hospital stay. Thus, unlike the case with other types of service where the potential customers can select their service provider based on the price and quality of service so that the competition between service providers assures that the prices are kept within reason, this opportunity is absent in the case of patients. To remedy this situation, those with health insurance should demand that their health insurance company, which is able to select the hospitals and other healthcare facilities by price and quality of service that are to be in that company’s network of providers, diligently does so. In particular, the health insurance companies must demand that the hospitals that wish to join their network disclose to them the prices of all the services that they (the hospitals) provide. Only then will competition ensure that the cost of medical treatment is fairly priced.

Still another factor resulting in the rise in healthcare cost is the increasing sophistication and expense of high-tech medical devices, such as magnetic resonance imaging (MRI) scanners and CT scanners. However, there is added value associated with the use of these devices in the form of improved diagnostic and treatment capability. Furthermore, the cost of high-tech devices tends to decrease over time. Since the market for medical devices is small compared to, say, the market for consumer electronics, hospitals need to take care in purchasing medical equipment from suppliers to ensure that they are not being overcharged.

One practice that is reducing the cost of healthcare is the switch from paper medical records to their electronic equivalent. In addition to reducing cost, this change to electronic medical records has the collateral benefit of reducing medical error.

Just as the premiums for car insurance depend on the driver’s record of previous accidents and moving violations, health insurance premiums should be based on the medical history of the insured. Those with a history of health problems are more likely to have health problems in the future and should, therefore, be charged a higher premium than those with a history of good health.



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Stanley Korn

Stanley Korn


I write on a variety of subjects, mainly oriented toward solving problems and recommending improvements. My short stories include science fiction and fantasy.