That's not really true, though. Prices are set by the intersection of supply and demand. Oil demand is relatively inelastic, for instance, but the price is quite reasonable because there is tremendous competition in supply.
Prices are high in healthcare in part due to inelastic demand, but much moreso due to supply constriction. For just one, particularly egregious example of this:
If you want to open a new hospital in many states in the US, you need to acquire this "Certificate of Need". Who approves this certificate? Other hospitals in the area. It's as though Google required the permission of Yahoo to form a new search engine.
If I didn't know how much I had to pay for gas until two months after I left the pump, my gas would cost $25/gallon, and I would count myself lucky that I'm buying it from a station that has a reputation for not swindling me.
That is, of course, after my 'gas insurer' comped the station anywhere between $0 and $25, that number being determined by the astrological position, and retrograde state of the planets.
While this is true and it's difficult to open a new hospital in the US, it strikes me as unlikely that this could be blamed for the high cost of care. In fact, US hospitals have been merging and this seems to be a trend that is continuing to this day.[0]
I entirely agree that hospitals are part of the problem, but I think that casting this as a supply and demand issue is oversimplifying the issue. People who need health care very often cannot choose to "shop around" for their provider, the increase in mergers make it less likely there are any competitors in their area. Agreements between hospitals and insurance companies often place other health care providers "outside network", thus artificially increasing their costs. In the same way consumers do not choose their hospital, they also frequently cannot choose their insurance provider; often the health insurance comes along with their employment.
In my opinion, the tangled co-dependency between hospitals, insurance companies, pharmaceutical companies and all of the lesser industries that depend on them are all factors in the rising costs. Every step of the way along the chain, profit is maximized at the expense of the patient. We will need large scale change in order to address the issue and I don't think it will be easy.
I hope that some kind of "medicare for all" system will start moving things in the right direction. In my opinion, this system is failing everyone except the very wealthy.
> While this is true and it's difficult to open a new hospital in the US, it strikes me as unlikely that this could be blamed for the high cost of care. In fact, US hospitals have been merging and this seems to be a trend that is continuing to this day.[0]
You're citing this as a case against supply restriction...but I think it makes the opposite point. Hospitals are consolidating because it increases their pricing power. However, that only works because it's so hard to create new hospitals. If it were easier for new entrants to enter the market, consolidation amongst existing providers wouldn't have the power that it seems to.
> I entirely agree that hospitals are part of the problem, but I think that casting this as a supply and demand issue is oversimplifying the issue. People who need health care very often cannot choose to "shop around" for their provider, the increase in mergers make it less likely there are any competitors in their area. Agreements between hospitals and insurance companies often place other health care providers "outside network", thus artificially increasing their costs. In the same way consumers do not choose their hospital, they also frequently cannot choose their insurance provider; often the health insurance comes along with their employment.
Ya, this is certainly a problem as well. I suppose I would consider it to be within the umbrella of "supply and demand" though.
Prices are high in healthcare in part due to inelastic demand, but much moreso due to supply constriction. For just one, particularly egregious example of this:
https://en.wikipedia.org/wiki/Certificate_of_need
If you want to open a new hospital in many states in the US, you need to acquire this "Certificate of Need". Who approves this certificate? Other hospitals in the area. It's as though Google required the permission of Yahoo to form a new search engine.