Why Is Health Care Expensive? It's the Prices, Stupid.

At least that's the thesis here, in this concise analysis by Matthew Yglesias in Slate, who argues that the real reason health care is so expensive in the U.S. is laughably clear: prices are high.

That sounds almost tautological at first, but it's genuinely not. And you can see it in a variety of ways. One is the comparison of Medicare to private health insurance. Medicare is a very expensive government program, but it's actually cheaper than private health insurance. Liberals sometimes point to administrative efficiencies and lack of advertising and executive compensation as the reason for this, but the main reason is simply that the prices are lower. Medicare is a bulk purchaser of health care services, and offers providers an offer they can't refuse—perform medicine relatively cheaply, or get locked out of the Medicare client base.

Similarly, if you compare U.S. health care spending to health care spending in foreign countries you see that again the main issue is just paying higher prices for the same services. It's not that Americans are unusually sick or that Americans use an unusually large amount of health care, it's that foreign countries engage in more nationwide price-setting to ensure low per unit prices for health care services.

I'd love to hear as crisp an argument on alternative reasons why health care costs are so exorbitant here. Also, how will global payments, the system we are fast adopting, truly help? Anyone?

This program aired on February 17, 2012. The audio for this program is not available.

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Rachel Zimmerman Reporter
Rachel Zimmerman previously reported on health and the intersection of health and business for WBUR. She is working on a memoir about rebuilding her family after her husband’s suicide. 



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