America's Healthcare Is Expensive Because Third-Party Payment Eliminates Market Discipline
Source: https://www.facebook.com/americanspectator/. "Why Health Care Is So Expensive in America, and What to Do About It | The American Spectator | USA News and Politics." March 5, 2026. spectator.org
The Gist
Healthcare is expensive in America because most people don't directly pay for their care - insurance companies or the government do. When you're not spending your own money, you don't shop around for better prices or question if you really need expensive treatments, so costs spiral out of control.
Conclusion
America's healthcare system is expensive not because markets have failed, but because the market has been blocked from succeeding through third-party payment systems that eliminate consumer price sensitivity and competition
Premises
- Roughly 90 cents of every healthcare dollar is covered by a third party (insurer or government), not the person receiving care
- When someone else pays, consumers don't shop around, compare prices, or question whether services are worth the cost
- The employer-sponsored health insurance tax exclusion, codified in 1954, created this third-party payment system
- This tax exclusion is projected to reduce government revenue by $487 billion this year and has shaped harmful behaviors over eight decades
- The tax exclusion has chained workers to employers, eliminated consumer price sensitivity, and suppressed wages
- Health Savings Accounts (HSAs) demonstrate that when people control their own healthcare spending, they spend less and engage more with wellness programs
- Expanding HSA eligibility would restore direct financial relationships between patients and providers
Assumptions
- Market mechanisms naturally control costs through consumer choice and competition
- Direct payment relationships between consumers and providers lead to better price discipline
- Government tax policy is the primary driver of healthcare market distortions
- Consumer behavior changes predictably when they bear direct financial responsibility
- The current third-party payment system is the root cause rather than a symptom of other problems