Issue Causing Prices to Increase in Medical Industry
Issue Causing Prices to Increase in Medical Industry published by The 1st Amender
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Posted on 2019-02-06
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There is no question. The sheer amount of regulations imposed on the medical industry is enough to drive any local business owner insane. You can see it for yourself. Thousands of laws and pages on the books for all sectors of the medical industry. This has been created through many different decades of legislation. Each law being considered to be a public benefit. Something that could potentially help the medical industry as a whole. Yet when you see the medical industry, one of the most highly regulated markets, seems to be getting more expensive as time goes by.
While I can tell people about the medical industry regulations, being that there are so many on the books, it doesn't do me any good to list them out. The simple amount of time required to go through all of it is monumental for a single blogger like myself. Though I can point out an interesting theory which was presented to by Milton Friedman, of which could be the answer as to "why" prices have increased in the medical industry.
Okay. I don't mean to bog you down with all this economic nonsense by a prize-winning economist. I will try to break it down and make it simple to understand. The theory goes as follows. Generally speaking, when you take your own money and spend it on yourself -- effectively you try to look for the highest possible value. Not only that, you also try to spend as little money as possible. Meaning you attempt to use the concept of "thrift". You try not to waste your money. It's your money! You also want the biggest bang for your buck. Now, when you take someone elses money and spend it on yourself, it is very often that you don't really economize on it. You do seek the highest value though. Basically your intent is to spend as much as possible, losing the concept of "thrift". You do want to get some bang for your buck. All of that makes sense. (Example: Boss says you can take the company card out and go get something to eat with no limit to your spending)
Now lets say if you are spending your money on someone else. To put it simply, you are very careful and try to keep your costs down. You also don't spend as much time thinking about what you are getting for the other person, as you would for yourself. Now when you spend someone elses money on someone else, imagine like a government agency, or distributive welfare funds. Basically you do not try to get the best value for your buck because it is not your buck. You also don't exactly economize either. Because again, it's not really your money.
Okay now, what does this have to do with the medical industry? Well, everything actually! Right now what you have in the medical industry is insurance companies. Through a series of extensive regulations have brought up the cost of medical. When the cost of medical continued to rise in price due to regulations on the industry, the idea of creating a private insurance company became a pretty good idea. People pay less money for the regulated service, and the practitioner is able to maintain the expensive and regulated business practice. Win-win! However, as regulations continued to rise coming from both states and federal legislation, the paperwork keeps piling up. The regulations make costs go up and then the prices of the service get more expensive.
This makes it impossible for a regular person to be able to pay for medical care. And, with the latest trends of "requiring" health insurance (or receive less money on your tax return), has only served to make things worse. Insurance industry isn't even the culprit for making things more expensive. Because most insurance companies have closed down due to the immense amount of regulations they have to keep up with. It stopped being a sustainable business model.
Now, going back to the Milton Friedman chart above. Right now you have doctors who seek to perform testing and care for their patient, of which the patient doesn't pay. The insurance company pays. So the patient doesn't care about the costs associated if the insurance covers it. And the doctor doesn't care either, because it is someone elses money! This means that the medical industry, how things work, all land in the box labeled "Someone Elses Money Being Spent on Someone Else." They effectively don't seek the highest economy, and they don't seek the best value. Ouch. The servicer and the client relationship effectively is severed and this is only serving to drive costs even higher.
You want my answer on what to do to fix it? Deregulate the over-regulated system. I wish I could tell you which ones, I am not a lawyer, I would probably begin by stopping anti-competitive practices preventing new healthcare businesses from forming.
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