kennethholland.com

-By Glenn Holland

I don’t see this discussed much, but with all the opinions and plans flying around, I feel compelled to mention something.

In all of human history, there is only one thing that makes the price of something go down (supply and demand being constant) and that is competition.

There are plenty of providers out there - doctors, diagnostics, labs, outpatient centers, hospitals… You’d think with those numbers there would be healthy competition.

There are also a lot of insurance companies. Yet, they are already highly regulated in what plans they can offer and where they can offer them.

What is broken is that the end user, or consumer, has no price ’skin in the game’. I’ve (involuntarily) availed myself to a host of medical services, some quite expensive. I have NEVER cared about how much the actual cost of the service or product was.

Why? Because we have become accustomed to lavish insurance that supplies us fantastic care - all for an easy payroll deduction and a $15 co-payment. Whether it’s company-provided insurance or government Medicare, Medicaid and all the state programs, we just don’t care how much something actually costs.

I’m scheduled for a CT scan soon. I’ve had many of them. I have no idea how much they cost nor do I have any idea if the facility to which I go is cheaper or more expensive than the 3 or 4 other places that have a CT machine within 15 minutes of where I live. I DON’T CARE BECAUSE I DON’T PAY FOR IT! Directly, that is.

What would happen if the price really did matter to me? Well, where do you shop for groceries? Or oil changes? Or even electricity? You don’t have comprehensive insurance on all those things, do you? No. You pay for them and that means you find the best product/service for the least amount of money.

That’s what needs to happen. Government needs to get out of the health business and insurance needs to be deregulated so companies, co-ops, whatever can have the freedom to design policies that reward the discriminating healthcare consumer.

Once the consumer cares about price, they will go to the lower-priced provider. That means providers will have to be price-competitive, which means the price will go down even more.

“But Glenn, the insurance companies are raking in the dough! They need oversight so they don’t make so much money on the backs of sick Americans!” Well, if that’s true, more government regulation ain’t gonna fix it. More competition will. Do you think Dell Computer has fantastic margins on PC sales? No. Their margins are wafer-thin because computers is the most competitive product in the world. I paid $1500 for a PC 15 years ago. I can get a PC which is hundreds of times more powerful now for a third of the cost.

The company that can freely design, market and sell an insurance plan that rewards consumers for low-cost consumption of medical services is going to be the company that is the next big success story. But companies aren’t allowed to do that right now. This isn’t about rewarding people for being healthy - that has no effect on the cost of medical services. In fact, heavy smokers are cheaper to insure in the long run because they die younger and quicker. It’s the pricing of what is consumed that affects the total cost of healthcare.

Competition is the only answer.