Healthcare costs continue to rise

Bloomberg published an opinion piece showing that healthcare costs as a percentage of the US economy has continued to grow over the last half century. The author presents different pieces of evidence that identify rising prices as the main culprit, and not increased utilization of healthcare services: prices for healthcare services have risen faster than overall prices, and a recent study suggests that Americans actually use fewer of, but pay more for, specific healthcare services than people in some other developed countries. The author also points out that people have been paying for the increases in prices, either at the expense of raises (until about 2007), or through government taxes.

The author calls for consolidating government purchasing power to drive down healthcare prices. As appealing as that might sound, a rigid structure may curtail some opportunities for innovation and cost-savings. A better approach would be a scheme like reference pricing with widely disseminated information about cost and quality, where patients who want care at a specific institution can pay the difference if they so desire. Undergirding that approach is having enough competing providers, so the government would also have a role to play in preventing too much consolidation.