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Why America's Medical System is Failing It: Part II

Posted on: 25-Jun-2007

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The economics behind why the healthcare market doesn’t work.
Healthcare presents a rare problem in economics for which, a market based system fails to work. One necessary ingredient for an efficient market is that the buyer and seller have equal access to and knowledge of the relevant information. This is fundamentally impossible in health care, because the buyer — the patient — has gone to the seller — the doctor — to discover what is wrong.
Thus, the doctor not only has the ability to fix the problem, the doctor also has far more information than the patient. This combined with the fact that the patient has a real problem affecting his or her quality of life means that the only real limiting factor to inflation of healthcare pricing is ability to pay. As a result, we are all very dependent on our doctors having the highest level of ethics in more ways than one.
Nevertheless, it means that price inflation is a real threat. America devotes 16% of its GDP to healthcare, versus Europe’s 10% — this is when Europeans are generally healthier than Americans. Moreover, the growth is astounding: back in 1980, Americans spent just over 7%. So the cost is escalating fast. The differences are not due to doctors charging more. Remember, doctors are only part of the healthcare infrastructure and they are generally poorer than they were in the past when less was charged.  
The largest sources of the problem with rising healthcare costs comes from other areas: the litigious nature of America, an insurance based infrastructure, the burden being shouldered by corporations, poor organization, and excessive regulation — to name more than a few. In the following parts, I will tackle each of these sources and show how they cause Americans to pay more and get less from their healthcare system.

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About weQuest:
weQuest's are written by G Dan Hutcheson, his career spans more than thirty years, in which he became a well-known as a visionary for helping companies make businesses out of technology. This includes hundreds of successful programs involving product development, positioning, and launch in Semiconductor, Technology, Medicine, Energy, Business, High Tech, Enviorntment, Electronics, healthcare and Business devisions.

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