It's the second and third vacation homes of the insurance/hospital administrators, equipment/drug suppliers, and doctors/surgeons you are paying for, not the hospital itself. The hospital itself is often getting massive tax breaks and other funding.
The problem is US health care is for-profit and the "American way" is that there is absolutely no limit on that profit, so they charge whatever they want.
"They charge whatever they want" is only the first half of the American way. The second half is that because its "whatever they want" someone else can cruise on up and "want" to charge $10 less and take all of the business.
The broken part is that they charge whatever they want and then stop anyone else from being able to charge less. If you do the first half, but not the second, its very much not the American way.
But the entry cost is prohibitive and create an oligopoly. So, no, they wont charge 10$ less. They can handle a limited number of patients and have an increasing potential market with median age increasing. It is basic offer, supply and demand. If it was only offer and demand, then yea, they could charge less, but they have an hard limit on the number of bed they can fit versus building+workers cost.
Where these exist (most states) you'll have a hard time opening a new facility whose purpose to charge less than the incumbents. (In theory they'd have to charge more to make up for the business you take away so you'll be raising prices.)
Thanks for pointing that out. CONs are a fascinating rabbit hole of government regulation. They try to lower prices by doing exactly the opposite of the actions that usually lower prices. Only a regulator could think that restricting competition would force prices down.
Also consider car dealerships where there is all sorts of special regulation, and even prevention of manufacturers selling direct to the public. (See litigation against Tesla for more details.)
Heck in California (I don't know about other states) the sales tax is paid based on the purchaser address, not the address where the sale takes place like for other goods.
Or how foreigners aren't allowed to own more than 50% of an airline.
For a land of free business, there is an awful lot of protectionism going on.
Much of the health care system isn't for-profit, but that doesn't stop money from getting spent. When I lived in Chicago, the local hospital was Northwestern Memorial, which is a non-profit hospital attached to a non-profit university. But the university owns literally 5-6 city blocks of prime Chicago real estate (tax free, of course). It's interesting to note that between 1972 and 1994, there was no new construction on the Northwestern Memorial campus. Then in 1999, two huge new buildings went up, then a women's hospital in 2007, a new children's hospital in 2012, and a new outpatient facility is slated to open in next year. These are each $350-500 million high-rise buildings. And these aren't utilitarian buildings of the kind that were pervasive in the 1970's. They're nicer than most F500 headquarters.
Comments
It's the second and third vacation homes of the insurance/hospital administrators, equipment/drug suppliers, and doctors/surgeons you are paying for, not the hospital itself. The hospital itself is often getting massive tax breaks and other funding.
The problem is US health care is for-profit and the "American way" is that there is absolutely no limit on that profit, so they charge whatever they want.
"They charge whatever they want" is only the first half of the American way. The second half is that because its "whatever they want" someone else can cruise on up and "want" to charge $10 less and take all of the business.
The broken part is that they charge whatever they want and then stop anyone else from being able to charge less. If you do the first half, but not the second, its very much not the American way.
But the entry cost is prohibitive and create an oligopoly. So, no, they wont charge 10$ less. They can handle a limited number of patients and have an increasing potential market with median age increasing. It is basic offer, supply and demand. If it was only offer and demand, then yea, they could charge less, but they have an hard limit on the number of bed they can fit versus building+workers cost.
Who is stopping anyone from charging less?
http://en.wikipedia.org/wiki/Certificate_of_need
http://www.ncsl.org/issues-research/health/con-certificate-o...
Where these exist (most states) you'll have a hard time opening a new facility whose purpose to charge less than the incumbents. (In theory they'd have to charge more to make up for the business you take away so you'll be raising prices.)
Thanks for pointing that out. CONs are a fascinating rabbit hole of government regulation. They try to lower prices by doing exactly the opposite of the actions that usually lower prices. Only a regulator could think that restricting competition would force prices down.
Also consider car dealerships where there is all sorts of special regulation, and even prevention of manufacturers selling direct to the public. (See litigation against Tesla for more details.)
Heck in California (I don't know about other states) the sales tax is paid based on the purchaser address, not the address where the sale takes place like for other goods.
Or how foreigners aren't allowed to own more than 50% of an airline.
For a land of free business, there is an awful lot of protectionism going on.
Much of the health care system isn't for-profit, but that doesn't stop money from getting spent. When I lived in Chicago, the local hospital was Northwestern Memorial, which is a non-profit hospital attached to a non-profit university. But the university owns literally 5-6 city blocks of prime Chicago real estate (tax free, of course). It's interesting to note that between 1972 and 1994, there was no new construction on the Northwestern Memorial campus. Then in 1999, two huge new buildings went up, then a women's hospital in 2007, a new children's hospital in 2012, and a new outpatient facility is slated to open in next year. These are each $350-500 million high-rise buildings. And these aren't utilitarian buildings of the kind that were pervasive in the 1970's. They're nicer than most F500 headquarters.