Why Is American Health Care So Dysfunctional?

Eric Boehm, with help from Mark Cuban and others, shows how the supply of medicine and providers is artificially constrained.

Eric Boehm, by Lex Villena/Reason

My latest Reason Interview podcast is up. It’s with my colleague Eric Boehm, who is launching his own limited-run podcast series, Why We Can’t Have Nice Things, which is all about why health care is so expensive and scarce. Scroll down now to watch my interview with him, or to listen via Spotify, Apple, or SoundCloud. Also, scroll down even further to listen to the first episode of his show, which features a great interview with Shark Tank billionaire Mark Cuban talking about his Cost Plus Drugs company, a public benefits corporation that sells many pharmaceuticals for less than your copay through traditional insurance.

If you’re old enough to remember the fight over Obamacare—or HillaryCare, or (god bless you) Medicare—you know that health care is the domestic version of Vietnam, that bright and shining lie. Except it’s worse: Vietnam was famously a quagmire, but at least the United States could finally declare mission accomplished and pull out. And Vietnam could eventually start making its way among the nations of the world.

But like the poor, health care is always with us. We need it every day, it continues to get better as more drugs and treatments come online, and yet it costs more and more money (and always seems to outpace general inflation). The high prices are not all bad—back in the 1990s, when Bill Clinton first launched his health care overhaul, George Will used to shrug off the relatively high percentage of GDP Americans spent on health care as a sign of wealth. He wasn’t wrong in many respects. Wealthy people do to tend to buy more health care. And in many important ways, America remains the place that others come to for cutting-edge treatments. “Americans are usually the first to gain access to major new medical advances, advances often discovered at American universities and developed by American companies,” note Avik Roy and Gregg Girvan of the Foundation for Research on Equal Opportunity (FREOPP). Most new drugs are launched in the United States, partly because we allow drug makers to make larger profits and recoup more of their R&D costs.

But let’s get real. One of the main reasons health care costs so much in the United States is that it’s the worst kind of mermaid. It’s kinda free market-y but super-regulated by governments at so many different levels. The FDA has hardly gotten better than the way it was portrayed in The Dallas Buyers Club, meaning the agency could be killing more people than it saves; it can cost up to $5 billion and over a decade to bring a new drug to market. Why does the cost of almost everything else go down while the quality increases?

Everywhere you look, the supply of health care is massively constrained. The United States has 2.6 doctors per 1,000 people, a low number compared to other advanced economies. We’ve got many fewer hospital beds available compared to 1960, too. During all the arguments and fights over Obamacare, you almost never heard people talking about increasing the supply of anything—of practitioners, of drugs, of places to provide care. Yet increasing the supply of something is the easiest way to reduce its price!

Why We Can’t Have Nice Things looks at exactly that: How do we increase the supply of everything related to health care? That will bring down prices and jack up innovation and make it easier for people to seek out the care they need or want. The episode with Mark Cuban is all about making pharmaceuticals cheaper and easier to buy. Another episode looks at the sadly normalized tragedy of thousands of people dying every year while waiting for kidney transplants. An incredibly arcane set of laws and policies not only keep donors from being directly compensated (thereby decreasing supply), but government monopolies granted to organ-procurement companies means that many organs never make it to recipients. Eric also looks at how stupid rules limit the supply of FDA-approved drugs such as Adderall, meaning that perfectly law-abiding and responsible people go begging for the substances that allow them to function. That episode features our Reason colleague C.J. Ciaramella, who has written poignantly on this matter. “I'm the DEA's poster child for prescription stimulant abuse: a 30-something adult who needs a telehealth psychiatrist and can't remember what day the garbage truck comes,” writes C.J. Needless to say, telehealth rules that were loosened up during the Covid pandemic are tightening up again as all sorts of special interests start reasserting themselves.

During our interview, I mention an interaction I had with a doctor many years ago. I had recently switched to a high-deductible, low-premium plan and he prescribed me a brand-name statin for cholesterol. Because I would be paying out of pocket for stuff until I hit my deductible, I asked him how much it would cost. He smiled and said, “I have no idea,” and started to leave the examination room with a good-natured wave of his hand. “Could you find out?” I asked, a bit tentatively—I was raised to think of doctors, like Aztec priests, as supreme lawgivers you generally didn’t question. He stopped and said, “You know, that’s a good question.” He had his office manager call my plan and when it turned out the name brand would be like $80 a month, he wrote me a script for a generic, which he said was just as good.

Based on that modest, minor interaction, I was hopeful that the health care industry would soon reform and we’d be living in a better world as price signals finally cascaded throughout the entire system! These days, I’m less sanguine, at least in the short run. I meet via Zoom with my current doctor once every couple of months to go over various prescriptions. According to my insurance, that should cost $60 but I keep getting billed for upwards of $200 for various things that make no sense. Every time I talk with a medical practitioner, I seem to get multiple bills from places I have no knowledge of. Is this long Covid brain fog on my part, or the resilience of a system that seems impervious to the sort of reform that will force it to be more competitive?

Eric Boehm’s Why We Can’t Have Nice Things clarifies a lot of the problems and offers up good, market-based solutions. He and Hunt Beaty, his producer, have done something wonderful here. So check it out, right after you check out my interview with Eric (we end with him telling a story about how hearing Bob Marley’s haunting song I Shot the Sheriff may well have turned him into a libertarian as a young boy).

Here is the Reason Interview with Eric Boehm:

And here is the first episode of Eric Boehm’s Why We Can’t Have Nice Things, featuring Mark Cuban:

For more on the whole season—and the previous season—go here.

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