When the patient (or buyer, represented by the demand curve) pays a flat rate, the quantity he demands can increase without limit because he pays the same amount no matter what he demands.
Likewise, the pharmaceutical companies (or sellers, represented by the supply curve) can charge any price without concerning the buyer with that detail, they can charge practically any amount, and will happily do so.
The only reason the buyers and sellers can trade at all in this system is because the insurance company steps in to pay the difference. This means the insurance companies are the only ones with any incentive to control costs, but as long as they can keep raising premiums, their incentive is not that large.
They also get a lot of the criticism because the rising insurance premiums are the only effect the buyers see. But that effect is so far removed by the broken system from their own consumption choices, that they fail to see the connection.
A good real world example of this happened when a friend of mine was about to lose insurance for her son, so she actually asked how much his prescription acne medication costs. The answer was $900, which was even a shock to the pharmacist! Such an over-inflated price for a trivial medication can only happen when none of the actors on the buying side (patient, doctor, pharmacist, etc.) are paying any attention to the actual cost at all.
The solution is easy. Instead of a flat co-pay, patients should pay a percentage of the cost of health care. Even if it were a small percentage like 10% or even less, the consumer would be directly exposed to the actual costs of medications. It is not likely that anyone would be willing to pay $90 for an acne medication, and most people would be discussing alternate medications with their doctors in order to save a few bucks.
No comments:
Post a Comment