The Health Care Industry

[Steve Perry]

>Doug writes:
>Years ago, skeptics said that HMOs would probably result only in a 
>brief capping of costs, and it looks like they were right. U.S. 
>medical inflation fell to just 0.6-0.7 percentage points above 
>general inflation in 1996 and 1997, but in 1998 and 1999 the gap has 
>picked up to the 1.5-point range, or about twice overall inflation. 
>Part of the reason is no doubt that managed care entities have huge 
>administrative expenses. Also, many of them initially priced their 
>services too low - like the notorious Oxford in the NYC area - in an 
>effort to build credibility and market share. Now they're raising 
>prices and cutting services (the equivalent of a price increase 
>according to the CPI accountants).

------

Back when the HMO juggernaut was really starting to roll ca. '92/'93,
it seemed obvious to me that its central claim to efficiency and 
cost-control was wholly disingenuous. It simply added another layer
of administration devoted to cutting costs, and it was perfectly
evident where the cost-savings were going to be realized: at the
expense of the player in the system with the least power, which
is the patient.

I appreciated Jim's, Tom's, and gcf's responses to my original question,
and I hope others will answer it too before it gets lost in the 
momentum of the thread: 

*Why* have costs spiralled upward so dramatically in the past 20
years?