Roberts: Health care doesn't grow on trees

What is health care? At its core, it's the provision of medical services to diagnose, treat and prevent illness or injury. Seems straightforward enough, right? But in reality, it's a tangled web of patients, providers, insurers and policymakers. Among all this complexity, there's an idea floating around that health care can somehow be "free." It can't. Health care always costs something, and someone must pay. The costs stem from the use of valuable resources like highly trained professionals (e.g., surgeons), cutting-edge technology (e.g., MRI machines) and physical infrastructure (e.g., hospital buildings). Ignoring this truth sets up unrealistic expectations and distracts from the real reasons health care is so expensive.

We often vent our frustration at health insurance companies, but focusing only on them misses the mark. Sure, insurers are part of the system and part of the problem, but they're not the root cause of high health care costs. The real drivers are buried deeper, like the outsized monopoly power of certain players in the health care industrial complex.

Take the American Medical Association, for example. For years, they've worked to control the supply of physicians in the U.S. by influencing medical education, certification standards and lobbying efforts. Some say these measures protect quality, but economists have long understood that monopoly power leads to worse quality, and a large body of evidence supports this prediction in health care. Another argument for these barriers is the claim that they address missing information: How will we know if a doctor is high quality without them? Private markets provide information in similar contexts all the time — restaurant reviews and automobile history records come to mind. Health care reviews are already broadly available. And in the case of barriers in the medical field, there's clearly a conflict of interest: The supplier of physicians (i.e., the AMA) is also determining the quality controls!

How do these barriers lead to higher costs? Consider the example of skin cancer screenings. We require physicians to spend years in medical school for a broad education in medicine. Could someone train eight hours a day for six months specifically to identify and remove problematic moles? Who would be better trained for that specific task? Neither was trained for "free" but who was trained at a lower cost to society? I'm not saying we don't need physicians who are broadly trained in medical school. We just want their talents allocated as usefully as possible. Limiting patient options to only the most highly trained specialists for basic procedures is akin to limiting midnight snacks to caviar. Such limits are ridiculous!

Then there's the consolidation of hospital networks. Over the past few decades, hospital mergers have surged. Such mergers and acquisitions accelerated particularly quickly after the passage of the Affordable Care Act. These are often sold to the public as efficiency moves, but they've mostly led to reduced competition and higher prices. In areas dominated by a single hospital network, prices skyrocket with little resistance. Research consistently shows that these consolidations don't just raise costs — they often fail to improve quality. These outcomes align perfectly with the predictions of economists regarding monopolies. Do individual bad actors ("wolves") play a role in these bad outcomes? Absolutely. But wolves always lurk and it's the responsibility of good citizens to promote institutions that convert the greed of wolves into benefits for society.

Where does health insurance fit into all this? On one hand, it makes health care accessible for many people who couldn't otherwise afford it by grouping revenues and costs across large groups of people. Insurers also put downward pressure on costs by providing patients a stronger negotiating position. But insurance comes with many problems. One big issue is moral hazard: When people don't directly feel the cost of their care, they're more likely to use services they don't really need. That extra demand drives up prices. Insurers also often enjoy market power and large profits as their average costs decrease when they gain market share. Some policy advocates desire a public health insurance option or a complete government takeover of health care because they claim that the market for health care has failed. That is essentially true, but the cause of that market failure primarily stems from the stranglehold that provider special interests have over the health care industry — a stranglehold that is supported by government regulation. Any policy changes that do not go to the heart of monopolistic control among providers will fail to improve the health care industry.

If we really want health care to be more accessible and affordable to patients, we need to stop getting distracted by the symptoms and start focusing on the causes. That means challenging the policies and practices that keep health care costs high. Loosening restrictions on the supply of health care, pushing for greater transparency in hospital pricing and preventing anticompetitive mergers would all help. Another quite simple policy change would allow immigrants who are physicians to practice more easily in the U.S. by loosening residency and visa requirements.

We also need to confront the cultural myth that health care can be "free." Universal access to health care may be a noble goal but calling it "free" is misleading. Someone always pays, whether directly, through taxes, lower wages or some other mechanism. Pretending otherwise sets people up for disappointment, and when expectations crash into reality, the fallout can be severe. Let's not kid ourselves. If we lead people to believe in unicorns like "free" health care, we shouldn't be surprised if some take dramatic actions out of frustration and disillusionment. Actions, by the way, that will ultimately increase the cost of health care.

Gavin Roberts is an associate professor of economics and chair of the Economics Department at Weber State University. He is a recipient of the Gordon Tullock Prize from the Public Choice Society and regularly shares his research locally, nationally and internationally.