Monday, April 03, 2006

The $10,000 Sponge Bath

Reading up on lefty health care ideas at TPM Café, I came across the statistic that two nights in the hospital in the US can cost upwards of $10,000. A couple of nights in a hospital costs five figures? (And Canadians, remember that's it's probably "costing" somewhere in that ballpark up there as well - it's just not coming right out of your pocket). To me, that’s pretty overwhelming evidence of an EXTREMELY inefficient market. There’s no way two nights in a hospital undergoing some relatively routine tests “should” cost anything close to that amount, given how cheaply we can get so many other important products and services (like food). More often than not, I’m amazed at how little things cost in the modern economy. Think of how much goes into making a car (the number of parts, the distances traveled, the ingenuity and skill in putting it all together) – they're an absolute steal if you really think about it. In my opinion there’s a much higher objective level of embodied value in that car than in a short hospital stay (I’m not saying it’s actually more valuable, just that it takes a lot more resources to build a car). The fact that health care is so incredibly expensive must have something to do with both the absence of competition and the high (artificial) barriers to entry. There really must be a way to drive those costs down over time - there's just no incentive to do so under the current system. With that in mind, if we want to develop a health care system that will actually become more efficient over time, that system needs to embrace some of the principles that have driven down costs to unthinkable levels in various industries subject to free markets.


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