Health care in the US (debate with E), part 1

(This is a continuation of a thread that began as a discussion of drug patents with my friend E. However, I decided to change the title, since the original topic has morphed into a discussion of what's wrong with health care in the United States.)

JCB: Yes. Health care is ridiculously expensive in this country. The question is: Why is this the case?

E: Quite a few factors I'm sure.

JCB: Yes. I think it's due to a combination of factors, including extensive government interference in the market, an aging population, and lawsuit abuse in a legal environment that favors plaintiffs.

E: One would seem to be clearly the unmitigated greed of the insurance industry and the drug industry (in other words, the free market going where it always goes for other than commodities).

JCB: The problem I have with this explanation is that the health-care sector doesn't have a monopoly on greed. Pretty much all of us are greedy. I'm a greedy engineer working for an unmitigatedly greedy multinational consulting corporation. Yet my salary and the rates [my employer] charges its customers have risen at about the same rate as overall inflation. Other than health care and higher education (another industry suffering from massive government interference), I can't think of a single example of an industry for which the average inflation rate has been consistently so much higher than the overall inflation rate. There may be some of which I'm unaware. Let me know if you can think of any.

E: Another would the fact that the relationship is so bizarre between customers (including companies trying to offer benefits), the insurance industry, and care providers.

JCB: That's a great point. But what is the source of this bizarreness? Is it the free market and the unmitigated greed of the health-care industry? If so, why haven't such bizarrely dysfunctional relationships evolved in other similarly-greedy yet less-heavily-regulated (i.e., more free-market) industries?

E: It's more than I can understand but I'll try to find that really good article that I think I was telling you about.  The author thought that insurance should be just that - insurance against catastrophic events, rather than a product that paid for every little evaluation or treatment.

JCB: That's a great idea. If people would self-insure as much as possible, they'd be much more sensitive to costs and competition would drive prices down.

E: He made the analogy to car insurance, which doesn't pay for your oil changes and people don't expect it to.

JCB: Good analogy.

E: If I recall correctly he also thinks that private insurance companies are corrupt and part of the problem, not the solution.

JCB: I'll have to read the article. I'm certainly no fan of the insurance industry as a whole. The sales pitches used by a lot of life-insurance salespeople, for example, are deceptive to the point that they border on fraud or may actually be fraudulent. Bank on Yourself is one such sales pitch I've encountered recently. Yet, rates for non-health-care-related insurance (i.e., life, homeowners, auto, etc.) have not risen faster than overall inflation, as far as I know. So I doubt that insurance-industry corruption could be an important root cause of the health-care-inflation problem. However, it could be that a higher-than-normal level of corruption has resulted from the massive government interference in the health-care market.