The economics of health care reform

Health care costs in the United States have been rising faster than most other goods and services for more than 20 years. The fundamental reason for this rise in cost is unbridled demand for health care services. Demand is high because those who receive the benefits (patients) pay a relatively small portion of the cost of their health insurance. The bulk of health insurance costs are paid by employers or the government for the majority of Americans. To control these rising costs, the demand for health care must be brought under control. This would be best accomplished by a system which requires each individual or family to pay for their own health insurance. This type of payment system would force consumers to become price sensitive and educated on different health insurance plan options. Controlling the demand for health care is the simplest way to control its cost, because in a competitive, consumer-driven market, providers would have to offer cost-effective health care. With this type of market-driven system, appropriate price and utilization levels for health care would be reached within the context of future economic growth and living standards.