Why does Health Care Costs Rise anyway?

The president’s signature health care law takes effect Jan. 1, but enrollment for participants begins Oct. 1 – Tuesday. “Obamacare,” as it is now called by both sides, has as its goal the lowering of health care costs, even though a host of experts and many studies predict it will do the opposite.

The debate over health care got me wondering in recent days: Why does health care cost so much in the first place? And why are costs out of control? For instance, in 1970, health care costs were roughly the same as the consumer price index (CPI), a measurement of how much things cost. Today, the CPI is five times its 1970 levels while health care costs are nearly 19 times their 1970 costs, on average.

But why? Hint: Government intervention. Libertarian author Vijay Boyapati, writing at the libertarian website Mises.org, argues there are four major causes of rising health care costs, and in each one the government is to blame:

1.The employer-based health care model. Employers began offering health insurance in the 1940s due to government incentives. The problem? Consumers became less likely to discriminate on cost because they aren’t actually paying for much of the services. In turn, health care providers become less competitive, raise fees, and the free market suffers. Health insurance companies charge more because we never see the price.

2.Requiring licenses to practice medicine. This one caught me off guard, but Boyapati argues that “many medical procedures and decisions about prescriptions could be handled by nurses or medical technicians rather than doctors, whose labor is more expensive.”

3.Obesity. The rise in health care costs has paralleled the usage of high fructose corn syrup, which is cheaper than sugar. Of course, corn growth is subsidized by the government. Calories from corn syrup are less healthy than those from sugar. Corn syrup made unhealthy foods even cheaper.

4.Pharmaceutical patents. Boyapati references one drug that cost $10,000 initially but dropped to a price of $712 when a generic drug was offered. The “actual cost of bringing drugs to market is substantially lower than the estimates produced by the pharmaceutical industry — a group with a vested interest in lobbying for strong patent protections,” he says.

If this topic interests you, click on the link above and read the full column. Of course, Off The Grid News has written dozens of stories about Obamacare the past few years, and we will continue covering stories about the federal government and the health care industry that other outlets ignore.

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