The act of shopping is often denigrated by the literati as shallow and self-indulgent. But shopping is at the very heart of why a free market works. It enforces discipline on suppliers because they buyers will be comparing their price and quality and feature set to their competitors.
In health care, we have all but ended the act of consumer shopping. Most of our medical expenses are paid by third parties, and we are just not very careful when spending other people's money. These third parties sometimes try to be diligent about what we pay, but it is a losing task and in doing so they end up irritating everyone.
You can find it on the Internet for $250 or less. But if Medicare is paying, a standard-issue brace for back patients costs more than $900.
In a report expected Wednesday, federal investigators say Medicare paid an average of $919 for back braces that cost suppliers $191 apiece, providing a window on how wasteful spending drives up health care costs.
“The program and its beneficiaries could have paid millions of dollars less if the Medicare reimbursement amount … more closely resembled the cost to suppliers,” says the report from the inspector general of the Health and Human Services Department. The Associated Press obtained a copy.
I discuss the phenomenon in health care more in this part 1 on a three part series I wrote at Forbes