What is causing health care costs to skyrocket?
To put it in practical terms, suppose we ran grocery stores the way we run our health insurance industry. If we structured the grocery market the way health insurance worked, you would pay a monthly premium to the supermarket. Once you paid the premium, you would have the right, for a $10 co-pay, to go to the supermarket and fill up your cart with whatever you wanted and take it out for free. You would ultimately end up overconsuming and the cost to the grocer would be much higher. So the premium the supermarket would have to charge for your groceries would have to be very high because it would have to reflect the fact that when you consume groceries you are not constrained at all. In terms of health care, the reason costs seem to be out of control is the incentive system we currently have in place, which gives consumers absolutely no incentive to economize on what they consume. As far as they see it, it’s a free good as soon as they walk into the doctor’s office. At the end of the day
