Hotshot blogger Mathew Yglesias makes an interesting observation in this post. Over the last few years, he points out, Apple computers have rapidly improved in quality and decreased in price. However, health care premiums have risen “and it doesn’t seem like we’re getting more useful services in exchange.” Yglesias’ observation begs the question: what is different about healthcare that makes it so?
The key difference between healthcare and products like Apple computers is massive government intervention. For example, since World War II the federal government has given a special tax exemption to employer-provided health insurance. This has resulted in a third-party payer system where consumers do not directly pay medical bills, and instead employers and insurers foot the bill. Without knowledge of prices, consumers over-consume healthcare and prices rise. This is like choosing between the iPod Touch or an iPod shuffle without knowing their price difference ($350). Demand for the iPod Touch would rise and so would its price. However, this point seems to be lost on Yglesias who wants to increase the mess of government regulations, funny taxes and subsidies that drive up the cost of healthcare and reduce our access to quality care.