Monday, June 01, 2009

The Washington Post debunks one health-care myth, but promptly introduces another:

Here is the bottom line: Most health-care inflation is the result of new technologies.

This claim is false. Even a cursory look at historic prices for hi-tech products outside of health-care or defense markets shows that technology innovation drives costs down, not up. Every year PCs, TVs, phones, GPS systems, software and data services are getting more sophisticated AND cheaper. So far, even huge companies, the likes of Intel and Microsoft, had little success in raising prices. Almost everything on the Internet is free. Commoditization is rampant. Nowadays, people in poor developing countries can easily afford hi-tech gadgets, but people in the developed world can hardly afford hi-tech health-care. Outside of heavily regulated health-care and defense, the economic impact from new technologies has been deflationary, not inflationary.

All this gives me reasons to believe that health-care costs are driven by factors other than technological innovation. It's much more likely that the industry problems are structural  (e.g. dominant business models are based on high barriers to competition entry) and they cannot be solved by changing the amount of money or technology that flow in or out of the system.

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