What can we do to get healthcare costs down?

Austan Goolsbee • FEBRUARY 18, 2014

Austan Goolsbee of the University of Chicago explains how economists think about healthcare and health reform. Professional economists, he says, are primarily concerned with the budgetary facts of healthcare, and the central concern (and point of contention) is over the meteoric rise in healthcare spending as a percentage of GDP since the 1960s. Economists are trying to figure out what that means, says Goolsbee, including whether it is a good thing or a bad thing. Healthcare operates in a "bizarro" world, according to Goolsbee, because there are information asymmetries in nearly all of the relationships (e.g., patient-insurer, doctor-patient, etc.). Healthcare economists have proposed an entire range of radical reforms, from a full out-of-pocket payment system to a single-payer, government-run system. There are at least seven distinct worldviews on health reform, argues Goolsbee, yet Washington D.C. works on a model of blended solutions and compromise. Such an environment can work for budget making, but probably will not work for health reform.

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