Compounded interest is a powerful concept. Even at low rates it produces big amounts of money over long periods of time. This is true for both investments and the nation’s health bill. Those of us who argue that health care is inefficient because of the lack of a real market place believe that creating one by empowering consumers will accomplish two things. First, it will produce better quality care and outcomes by forcing providers to adhere to best care practices and by leading to more innovation in medical treatment. Why? Because health entrepreneurs who do this will make more money. Those who don’t innovate will be financially unsuccessful. I think that’s called capitalism.

Second, competition and consumer choice will force providers to become more efficient and reveal to consumers that more and better care has a higher price. The acceleration of innovation, along with getting consumer financial skin in the game, will slow the growth of medical spending. This chart from the Congressional Budget Office shows the long run dollar impact of small changes in the growth of health spending. We don’t need miracle outcomes that cut health spending by 30% over night. A slow, steady improvement in efficiency will get the job done. See this for more: http://cbo.gov/ftpdocs/85xx/doc8565/slides.pdf