Friday, February 17, 2012

Are We Seeing a Healthcare Cost Bubble?

Jeffrey Sachs' "Entitlements Hysteria" discusses the rising healthcare cost obsession common among politicians as well as the "punditariat". Their beliefs remind me of the folks who thought housing prices would always rise. Haven't we had enough reason to learn it's folly to bet on prices always rising? It makes no difference whether it's housing or healthcare, just because it rose over some past years doesn't mean it necessarily will over all the years to come.

Past price increases beyond inflation don't guarantee future price increases beyond inflation any more than past performance guarantees future earnings. In fact, if we do implement a public option or a single payer system with price negotiation, we could very well see a drop in prices! So why do so many people seem to be so convinced healthcare prices couldn't possibly stop skyrocketing? After all, everything else that goes up out of step with the rest of the economy eventually stops rising faster and usually falls back down.

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