The inevitable dangers of third party payers:
In the context of the current conversation about Obamacare, we must be clear to our fellow Americans why the economics of 3rd party payer systems will destroy our healthcare system. When the consumer turns over his money to the government to purchase a product or service for him, the cost of that product inevitably rises because the consumer becomes less price sensitive (he is not paying directly). The supplier, knowing the consumer is not paying directly but through the government (the 3rd party), also has little incentive to price the product competitively because he understands that the consumer is not paying.
The fallout from these 3rd party payer systems is predictable. The suppliers must grow their administrative staffs to keep up with the burdensome red-tape imposed upon them by the government bureaucracy as a condition of accepting tax dollars. The additional money spent on staff comes at the expense of investment in productivity and product or service improvements stagnate. Cost spiral out of control as the government grows its bureaucracy in an attempt to control the fraud and exploding costs from the payment systems it created.
If you need real world examples consider this; there are two service arenas where the costs have exploded and far exceeded the rate of inflation, healthcare and college education. What do both have in common? The growing role of a third party payer; the United States government.
We can fix this. We do not need to accept as fact exploding healthcare and college tuition costs.