The expert on irrationality, Dan Ariely, on why healthcare costs are out of control.

Question: Should the government be responsible for universal healthcare?

Dan Ariely: Absolutely. So the . . . As you start realizing – and I’m realizing more and more over the years – our inabilities, mine included, you realize more and more that somebody has to take a role. Somebody has to take responsibility. So think about healthcare. Is this really the right system for a free market? If you’re . . . If you’re a free market fanatic, of course you will say yes. But how many people, for example, are going to shop when they have heart attacks? Not many. Seventy percent of the income for any hospital comes from the ER. These are not people who are shopping and comparing prices. Should these forces, when there’s actually a monopoly, be left for people . . . people’s decision? Well the other thing. Preventative healthcare is so crucial. It’s so crucial. I mean we can talk about diabetes, asthma. There is no reason for anybody to go to ER anymore about asthma. The medications are fantastic. But ER visits to the hospital for asthma are in charge of about 97 percent of the cost. I mean if you just take your inhaler on time everything will be fine. But people don’t. They fail repeatedly. Now diabetes is the same thing. Early detection is incredibly crucial because you can control it. If you don’t detect it early you have to cut people’s limbs off. I mean there’s blindness. There’s all kinds of consequences. Now we as a society are paying these consequences many times. Is it . . . Is it the case that you should just leave it for people to do what is the best for them? If you understand that people can’t do it, then you have to think about a different system.

Topic: Irrational Healthcare Policies

Dan Ariely: Yeah.  So . . . So I think that, you know, healthcare is crazy the way we do it.  And just give you some numbers.  Hospitals don’t recover about a third of their bills, okay?  That means that we have the most expensive national healthcare in the world.  Why?  Because people who are sick and don’t have money can’t go to a doctor.  So what they do – they wait until they’re very sick and they go to the ER.  That’s a crazy system.  Now in some sense we’re all paying through it from insurance, but a third of the bills of hospitals are never paid?  That’s an incredible subsidy, and something that could have been done much cheaper under a national healthcare.  So that’s one.  I think savings . . . retirement saving is a big problem, and in many ways.  One . . . One approach in which it’s very difficult is that the government is giving us clues about what’s the right amount of saving.  They tell us if you put $15,000 in your 401K, you’re fine.  If you put $3,000 in your Roth IRA you’re fine.  You are not fine.  If you’re my age – 40 – and you just start saving, you will never make it.  You will never make it.  So in some sense it’s very hard to figure out how much we need to save.  But the government is giving us hints, and these hints are wrong.  That’s . . . That’s another . . . another thing.  And then, you know, there’s all kinds of other small things, but I think those are two of the big ones.

Recorded on: Feb 19 2008