A better alternative to rising healthcare costs
By Agnes Tang
web posted November 7, 2016
Healthcare costs are once again on the rise, as many insurance companies are announcing increased premiums for the year of 2017. Many people groan over this, but they don't know the real cause of increased healthcare costs year after year. The truth is that the insurance that is supposed to help with medical costs is actually the reason for medical costs rising. Health insurance introduces a third party payer into the equation that disrupts the natural balance of supply and demand that would exist in a free market. To state it as Anton Batey did in the title of his article—"the health-insurance market is not free."
In a free market, the forces of supply and demand would govern prices and quantity. Once the equilibrium price is attained, the quantity demanded of healthcare goods and services would equal the quantity supplied of such. Just as consumers look for the best quality and prices in any other good or service, consumers would look for the best quality and prices in healthcare. This would provide the incentives for healthcare producers to improve quality and efficiency and thus reduce prices as much as possible, since there would actually be competition within the healthcare market. Reduced producer costs and consumer prices would reduce healthcare costs overall, freeing up money for other goods and services.
However, this is clearly not how the healthcare market operates currently. Patients don't pay their doctors directly, but instead pay monthly premiums to their insurance companies. Since out-of-pocket expenses for a doctor's visit or medications are little to none, healthcare seems almost free and thus quantity demanded increases. But in order to meet the quantity demanded, the price of healthcare must increase, and this difference in price is paid by health insurance companies, though the money used here is ultimately coming from the patients themselves. Once price increases, quantity supplied will also increase. The increased demand and supply then makes the quantity and overall spending of healthcare increase.
Furthermore, patients don't even know the actual value of medical goods and services since they do not pay for them directly. They are out of touch with the actual price and thus the quality of the healthcare they receive. Because patients don't often search for the highest-quality healthcare with the best prices, since prices are so low already, healthcare producers—doctors and medical staff and researchers—don't have the incentive to improve the efficiency of healthcare services. And if efficiency is ever actually improved, those cuts in costs for producers rarely translate as lower prices for patients, since payments are not made directly from patient to doctor.
Instead of health insurance coverage for nearly all medical services, a better alternative might be health insurance coverage just for emergencies, in such cases as serious illness or accidents and injuries. This would provide a peace-of-mind and financial support in emergencies, while also taking advantage of the benefits of a free healthcare-market, with its equilibrium prices and incentives for quality and efficiency. Moreover, if patients see their health and wellbeing as not their insurance's responsibility but actually their own, they may consider the opportunity costs of using healthcare too high (such as time and worry over getting sick) and choose rather to implement healthier lifestyles and preventive care in order to lower or eliminate future medical costs, as well as reap the benefits of better health.
Recently, my family has had to find a new health insurance, and throughout our search, we discovered medical cost sharing, which is not insurance but similar in that there are monthly payments and deductibles. However, the monthly payments go directly to someone in need of medical financial support. We chose a higher-deductible, lower-monthly-payment plan so that all routine check-ups and tests are self-pay, but anything more expensive or emergencies would be covered by the "insurance." In this way, we directly pay for doctor's visits and any medications we may need, and we feel responsible for our own health and wellbeing. 
This is Agnes Tang's first contribution to Enter Stage Right. She is a junior in high school. © 2016 Agnes Tang