Health Care Financing: Allied Health

Private vs Public Spending

  • US health spending: government programs (Medicare/Medicaid/VA) are roughly similar in size to other countries with government systems, but private spending is dominant in the US.

  • Public vs private mix matters: private insurance drives most of the bills in the US; government programs provide leverage to lower prices via volume.

Price Setting and Bargaining Power

  • In the US, private insurers negotiate prices with hospitals/physicians separately; uninsured individuals have little bargaining power.

  • Government programs (Medicare/Medicaid) can demand lower prices due to pulling a large customer base; providers risk losing a large share of patients if they refuse.

  • Example: uninsured patients are charged much more for the same ER visit; one study found uninsured ER prices ~4× Medicare prices, illustrating the pricing gap. Uninsured ER price≈4×Medicare ER price\text{Uninsured ER price} \approx 4 \times \text{Medicare ER price}

How Other Countries Control Prices

  • In many countries, the government or a single payer sets prices for checks, MRIs, prescriptions, etc.

  • With centralized pricing, providers/hospitals/drug companies typically cannot refuse access to the market of public patients.

  • This centralized bargaining reduces prices compared to a fragmented private market.

Why Free Market Struggles in Health Care

  • Health care is often accessed under duress (emergency, a loved one, not fully informed).

  • Consumers rarely have the bargaining power or information to drive prices down; private-market pressure is weaker.

  • Result: the market fails to contain costs as effectively as in other sectors.

Single-Payer Considerations

  • Pros: centralized bargaining could push prices down and simplify administration.

  • Cons: could reduce pay to doctors/hospitals, risking closures or service reductions; political economy matters for price setting.

  • Not necessarily an all-or-nothing choice; intermediate models can exist.

Interim Medicare-for-All Plan (Bernie Sanders)

  • Proposal to expand Medicare to cover vision; open to nearly everyone; kids automatically enrolled.

  • Most adults would be able to buy in.

  • This step could start recognizing that government can do cheaper, more efficient health care, even if not a full single-payer overnight.

Core Takeaway

  • The irony: health care is so expensive partly because of the political power of private providers under the current system.

  • A government-led pricing/coverage approach can reduce costs, but design and implementation matter to avoid unintended consequences.