Connecting Value and Costs

Abstract

AS A SOCIETY, we are in conflict with ourselves about the cost of health care.¹On one hand, we want the best care possible, regardless of cost. On the other hand, we are not willing to pay the cost of the care we want. Our conflict parallels a flaw in the medical marketplace. An essential condition for achieving an equilibrium between cost and value is that the two must be connected through decisions. When people decide what products and services (goods) they want, they must not only see the value they will receive, but they must also be responsible for the costs. Because of a variety of features of the medical marketplace—most notably third-party coverage, third-party advice, and uncertainty about outcomes—the required connection between value and cost is severed. The result is what we see. One side of our collective mind demands more services while the other side cries