I found the comment below an interesting summation of the problems that all the posters above have mentioned. It was from a healthcare blog:
There are only three inputs in aggregate healthcare costs: unit cost, utilization, and administration.
1. Unit costs for most codes are already lower than market price. Notice that primary care is collapsing for this reason. So while there may be some unit prices that come down, others, if left to good old supply and demand without the Medicare price fixers, would go UP. If they don't, vendors will attrit away.
2. Utilization will not go down unless we remove MORAL HAZARD...it is just too easy to spend someone else's money. HSAs have been shown to decrease utilization and lower costs largely through reduction in MORAL HAZARD.
3. Administration costs won't go down unless the claims process is eliminated in large part. We spent over $2 trillion on healthcare last year, and the average claim was for $77. Studies show that 30% of the healthcare dollar is spent on administration...and most of that is in network claims adjudication, re-pricing, and contracting.
If buyers and sellers knew the prices ahead of the transaction, and, with higher deductibles (94% of families won't reach a $5000 deductible in any given plan year),and most transactions were between the buyer and the seller without reference to a third party for pricing, administrative costs could drop to the 5%-6% range.
This requires transparency, free market competition, and the end of the network model of pricing...which, while artificially decreasing some unit prices, has dramatically increased administrative costs. In addition, network pricing has removed all incentive except volume from the vendor side of the equation, and this does not lead to efforts to improve quality, service, convenience, or value.
The very best thing we could do for healthcare is to eliminate networks and move to markets for pricing.
