Grim_Render:
Most Health Care Economists also point to that as one of the big reasons why the US system is so expensive. They call it an externality. Other countries using insurance-based UHCs have legislation to compensate for this.
And its reinforced by the fact that medical treatment has no price elasticity. You got no ability to refuse life-saving medical treatment if the cost is too high. And the fact that the system has high barriers to entry, it is very difficut to break into for new providers. Which means conglomerate behavior is more profitable than competitive.
It is not the only reason, though. Fragmentation is a big one as well. Medicare, Medicaid, VHA, insurance companies…the US has an enormous number of separate bureaucracies doing the same job. And a gatekeeper function much larger than other countries. And this leads to an enormous number of bureaucrats dealing with billing. I’ve heard that some US hospitals have one empolyee doing credit checks and billing for every bed they have!
There are smaller reasons as well…defensive medicine, higher salaries, tort…but they are not that big, even in total.
Lack of elasticity works both ways. The demand curve is almost vertical. Noone gets a flu shot every week just because its covered by insurance. Noone gets a hip replacement they don’t need. There is very little electivity to health care, its not exactly a normal good.