Part of the problem is the inelasticity that Blackadar mentioned, although some of this may be a perception issue, especially in the case of a system where some entity is supposed to be providing for your healthcare (whether it be an insurance company or the government).
<prepare for statements that will enrage>
The reality is, it may be that the market really isn’t elastic. It may be that if you don’t have money, and you get certain illnesses, you die, where as a richer person gets treatment and lives. Tiny Tim doesn’t get his leg fixed, and dies next Christmas.
When healthcare is paid for directly by the consumer, rather than through some intermediary, then this is a viable option for the consumer to choose. They can choose to simply go quietly into the night, rather than burdening their family with immense healthcare costs.
The effect of this is then reduced demand, which will then produce reduced prices, which will then in turn make the services more accessible to more people, until the system reaches an equilibrium.
This is, truly, the only way to actually control costs. Now, there are various mechanisms by which such a decision can be made, but ultimately that’s what it comes down to… At some point, the cost of the treatment must be weighed against the benefit to whoever is paying, and it must be acceptable to simply decide that in certain situations people will die.
If put directly into the hands of consumers, then you will most directly realize these changes, although you will be setting up a system where the rich have a better chance of living (although, in reality, this is how it is in every system in the world anyway… but more on that in a bit). While this is disconcerting on some level, there is also the added benefit that the rich folks don’t make up much of the population, and as such, their impact on the overall price of care would likely be minimal. Charging 100,000 for a heart transplant wouldn’t work, because even though Richy Rich can afford it, he only needs one heart. The service, in order to support itself, would need to appeal to a large enough section of the market to create the necessary demand, which would mean it would need to bring the price down to something accessible by the masses. Of course, if you’re below the poverty line, then you would likely be hosed unless some additional saftey net were put in place.
The second option would be to have the government do this cost/benefit analysis. This would mean the government decides that some treatments are simply not covered, and if you need them, that’s too bad. This ends up being similar to the previous option, although the decision about who dies isn’t based on income. However, I believe you would need to introduce the added restriction of outlawing private purchasing of healthcare, because otherwise you have this additional variable introduced, where the price determined by the system will constantly get pushed up a little bit by the rich folks buying healthcare at higher costs, while having the government providing support that prevents the bottom falling out of the demand side… so the end result, I suspect, would be that costs would still increase faster than inflation, albeit slower than they are going now. (although this would also require fairly draconian views of what ends up be supported… the government would have to let lots of folks die of illnesses which could in fact be treated)
Finally, you have the private insurance system, which makes the same decisions about letting folks die. But at the same time suffers from the same kind of problems that the government system does. Namely, that cost/benefits analysis gets reduced to a set of rules which are inherently inefficient and inadequate for determining whether treatment should be pursued. I think this ends up being part of the big problem with both this and the government system… that an effective C/B can’t be performed using some universal rule set, as every situation is different. Once you take the analysis out of the hands of the consumer themselves, you lose the ability to analyze the situation’s nuances. This gets translated directly into inefficiency, which then bloats the cost of the service. This cost increase then gets compounded over time, and you have the clusterfuck we see today.
So… that’s some stuff. Don’t see how the system is going to be fixed though, since folks aren’t going to want to have folks dying from easilly treated illnesses just because it costs a lot.
This means that, eventually, the system is just going to collapse, and the system will likely revert to option 1 anyway. You’ll probably also lose most of the other social infrastructure support too though, so it’ll end up being way harder on the lower classes.
