Almost every healthcare system in the world is a lesson in how not to do it. The pricing-based model fails miserably in the United States. The rationing model works almost as badly in the UK. Both fail in the core task of ensuring that the right healthcare goes to the right people.
Price systems should provide clear information to consumers and producers, helping both make sounder decisions. They can help make hard decision about what care is worth giving, but only if the prices accurately reflect the costs. But that doesn’t happen in American healthcare.
Every service and each drug has many prices, depending on who is providing and who is paying. Almost none of the prices bear any clear relation to costs. The New York Times reported earlier this month that the price of a dose of codeine ranges from $1 to $20 in San Francisco. Hospitals routinely send much higher bills to uninsured patients than to people with insurance. The uninsured have less ability to pay, but they have no clout pre-treatment and less clout than insurance companies in the inevitable post-bill negotiations.
The price chaos in American medicine is much less economically sound than the haggling in a Middle Eastern souk, where the negotiations are largely ritualistic and the final agreed prices are basically fair. The final prices paid for American healthcare are so arbitrary that patients, insurers or would-be reformers cannot tell which services offer poor value for money.
Inept pricing is not the only reason why the United States dedicates almost 20 percent of GDP to healthcare, according to the World Bank, far more than any other developed nation – while experiencing worse basic health outcomes, in aggregate. But it certainly makes everything worse.