The fundamental problem is that everyone in the system benefits from spiraling costs, and so they make them spiral in ever more egregious ways.
Everyone benefits? Well, higher costs are obviously better for hospitals and doctors, but don't insurers want to control costs? Not really. As long as insurers pass costs through, the more they pay, the more they can get away with charging, and the bigger their profits can be. Insurers want predictable and rising costs, not low ones.
How egregious is the inflation getting? Let me give you an example. From the mid-90s to now the cost of childbirth tripled. See http://www.nytimes.com/2013/07/01/health/american-way-of-bir... for confirmation. In England there was controversy because the royal childbirth cost over 2x what the average childbirth there does. It still cost half the average US childbirth.
And no, Obama's plan does not address this issue. It says that insurance companies must spend at least 80% of premiums on health care. If I was an insurer, I'd look at this and see fraud as an opportunity to have the 20% slice which covers my costs and profits continue to rise, and put out effort to catch exactly enough fraud to keep the amount paid out at exactly 80% of the premiums that I collected.
Everyone benefits? Well, higher costs are obviously better for hospitals and doctors, but don't insurers want to control costs? Not really. As long as insurers pass costs through, the more they pay, the more they can get away with charging, and the bigger their profits can be. Insurers want predictable and rising costs, not low ones.
How egregious is the inflation getting? Let me give you an example. From the mid-90s to now the cost of childbirth tripled. See http://www.nytimes.com/2013/07/01/health/american-way-of-bir... for confirmation. In England there was controversy because the royal childbirth cost over 2x what the average childbirth there does. It still cost half the average US childbirth.
And no, Obama's plan does not address this issue. It says that insurance companies must spend at least 80% of premiums on health care. If I was an insurer, I'd look at this and see fraud as an opportunity to have the 20% slice which covers my costs and profits continue to rise, and put out effort to catch exactly enough fraud to keep the amount paid out at exactly 80% of the premiums that I collected.