… our system encourages overuse. And, as any ninth-grade economics student will confirm, an increase in demand forces prices higher.
That says it all, really!
What remains is to teach people that health care (or anything, for that matter) can be over used.
In economics, we consider a transaction as efficient if the benefit gained from it is greater than the opportunity cost of those involved. If you go to the doctor and pay $70, you are demonstrating that you value that visit, the doctor is demonstrating that she values the money (rather, what it buys) more than her next best opportunity. This is a mutually beneficial trade. If you pay $10, and someone else pays the remaining $60, the doctor is still gaining, and you are still gaining, but it becomes more difficult to say if it’s efficient. You value the visit more than $10, but are you really getting $70 worth?
We’ve all heard stories of Medicare patients going to the doctor just because they feel lonely. This is a sad state of affairs, and very costly. We could make everyone at least a little better off if we just gave Medicare beneficiaries a cash payment to use as they see fit; if the only change they make is that they use some of that money to hire a companion rather than using doctors as companions, total health care costs would go down, as those doctors would have more free time to treat other patients.