Lets talk about incentives to not care about costs

How much do you care about the cost of something you buy if someone else is paying for all or most of that purchase? I’m guessing not much.

Many people believe that higher out-of-pocket costs are the secret to managing health care costs and to that end health plans and employers have embraced high deductibles and health savings accounts.  If you accept that simple logic, this will lower health care costs because people will be more price sensitive. I don’t buy the concept simply because when it comes to serious spending the emotional aspect of health care and illness does not allow for objective purchasing.

But let’s look at another purchase.  In this case, you decide objectively what service to purchase, you determine the quality of the service, you select the options among those available and you even determine how long you will purchase the service.  To pay for this service you spend your money (or generally someone elses), you may receive a grant, and you may borrow money.  If you borrow money, yobilly_bully_dunce_lg_clru can pay it back over many years, you can pay a very minimum amount that does not even cover the interest and in several years the loan is forgiven and you are off the hook …. or you may simply not pay and mostly nobody cares or does anything about it.

That’s a heck of a deal and I suspect that during the years you are buying this service, you are little concerned with how much you are spending, how you are spending it or much else of a serious financial nature … you are in college.  Hey, paying for your college and getting loans is not even based on the quality of your education, the type of study you are pursuing (like one that will allow you to actually pay back the loans), nor does it matter if you actually learned anything, obtained good grades or partied your way to the minimum required to graduate.

Do you think this price insulation and lack of responsibility and accountability could have anything to do with the cost of a college education?  You bet your sheepskin it does!

If I am wrong and more skin in the game for health care does positively affects health care costs, then it certainly would do the same for college costs. Doctors order tests and have no idea what they cost.  Colleges and universities spend money like water and don’t care how their spending impacts tuition.  Americans readily blame   insurance companies for high health care premiums, but ignore high salaries for college administrators and professors and the impact on tuition.

While the reality of college costs is ignored, left leaning politicians like Old Liz and Old Bernie call for lower or no interest loans, for “free” college and for loan forgiveness.  Tell me how any of that makes sense.   Populist rhetoric sounds great to the uninformed, it’s basically a something for nothing philosophy with no accountability for all.  Do you know of anything that actually works that way?

Look, higher education is important and we should collectively be helping to fund it which we do, but that does not mean with no strings attached.  Strings, like completion of a degree in a reasonable period of time, like measuring quality and outcomes, like holding students accountable for their performance and like incentivizing education in disciplines that are important to the Country.  A degree in humanities or art history is a luxury.

One comment

  1. I think your statement that when stuff is free people do not care about cost has some truth to it. I also think that when it comes to healthcare 1) nobody really knows the total cost of care the first day you walk into the doctor’s office and 2) it is very hard to comparison shop from an ER bed. As for the college cost, I agree that the ROI should be a factor when picking a college, but America has been sold that you must get into the best school, college graduates always earn more than high school dropouts, and you to school no matter what the cost because the government will help you with loans.

    Too many buy stuff because that have a need to feel good and for instant gratification and not they need it. American advertising has turns wants into needs and politicians have turned needs into a right to be provided for by the government. Entitlements should be only the very, very basic human needs, not our lowest wants.


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