Lack of Price Transparency Drives Profits for U.S. Health Care Industry — and Patients — to Foreign Hospitals
All of us have benefitted from Moore’s Law — which expresses the relentless rise in computing power, and the equally relentless fall in the price per unit of that computing power. It’s a particularly dramatic manifestation of the fact that consumer demand and the competition to meet that demand tend to drive the production of better products at lower prices. Competition also leads to volatility, especially noteworthy in tech: today’s Facebook can conceivably become yesterday’s MySpace.
But there is one sector of the economy where the operation of this law is far less apparent: healthcare.
Healthcare: Where Are the Benefits From Economies of Scale?
Several factors have led to a healthcare market in which technological change and mass adoption have failed to provide the price benefits to consumers that have accrued in other sectors…
What are some examples?
No Price Setting — But No Free Market, Either
This means that the current healthcare provision ecosystem will not yet be fundamentally challenged by Obamacare. In essence, the issue of prices could be addressed in one of two ways: either by thorough market transparency, or by direct state intervention in price-setting…
Even consumers who would steer clear of emerging markets like Mexico or Thailand for a major procedure are happy to go to Europe. We read recently about a knee replacement, paid for in cash at a private Belgian hospital, that cost under $14,000 — a fraction of the likely cost in a U.S. hospital. For now, these consumers will be the outliers.
Why are prices typically lower in Europe?
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Cheap Oil and Falling Domestic Demand Drive Exports From U.S. Refiners
In a dramatic turnaround, the U.S. has gone from being mostly a buyer of oil to being a significantly more robust provider of refined products to other countries. Two years ago the U.S. was a net importer of crude oil and of refined petroleum products. Today, the U.S. still imports crude oil, though in lesser quantities — and over the coming decade will probably become oil self-sufficient. And today, the U.S. is the world’s largest exporter of refined petroleum products…
What has been the drivers?
Falling Gasoline Consumption and Good News for Gasoline Consumers
We’ve commented in this letter before about the dubious economic and environmental foundations of the U.S. EPA’s ethanol mandate, which requires specified amounts of ethanol to be blended into the U.S. gasoline supply.
The percentages of ethanol that have been Federally required to be blended into gasoline have continued to grow, even as growth in gasoline consumption has slowed.
U.S. Gasoline Consumption: Historical Peak in 2007, But Ethanol Mandate Kept Growing
Source: Earth Policy Institute
The ethanol mandate favors corn growers, and has been aggressively supported by the ethanol industry and by legislators from agricultural states. Is ethanol cleaner? Extensive research shows that it is unclear whether the production of ethanol actually constitutes a net reduction in carbon emissions. To us, the ethanol mandate looks like clear rent-seeking from special interests — and one that has, in addition, been made even more ludicrous by technical change…
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Long-Term Outlook Strong for Chinese Residential Property
Under China’s new leadership, the country seems poised to continue its secular push towards urbanization and industrialization — within the framework of moderating, sustainable growth and political and economic reform. That push for urbanization and modernization of the agricultural sector will strengthen population movements to China’s cities — and therefore housing demand.
Since China’s economic transformation was inaugurated, its urbanization rate has risen from 17.9 percent to 52 percent. In the same period, the number of cities with over a million inhabitants has risen from 29 to 125. With the goal of reaching developed-nation status, the present leadership wants the urbanization rate to reach 70 percent by 2030.
Inexorable Chinese Urbanization — Driving Housing Demand
Source: Deutsche Bank
However, China’s leaders are taking a lesson from the urbanization experience of other developed nations…
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Guild Basic Needs IndexTM
According to the GBNI data for June, the cost of food, clothing, shelter and energy components are up about 6.1% over the past 12 months.
Track our analysis in these letters and at www.gbni.info.
In this week’s Premium Global Market Commentary available to Gold Subscribers, we feature:
- Executive Summary
- U.S. Tax Overhaul Could Bring Home Productive Profits From Offshore
The American Action Forum, a center-right think-tank, last week published an update to its 2011 study on the likely macroeconomic effects of a tax holiday which would allow U.S. corporations to bring home their offshore cash.At that time, U.S. corporations were estimated to be holding $1 to $1.5 trillion overseas. Almost alone among OECD countries, the U.S. has a corporate tax system which is globally rather than territorially based. The 2011 study notes…
- U.S. Housing Market Recovery Continues: Home Prices Up, Mortgage Delinquencies Down
New reports from the National Association of Realtors and the Mortgage Bankers Association have underlined the continued strength of the housing recovery… Who will benefit?
- Guild’s Premium Global Market Summary
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