Is there a health care bubble?

(H/t E)

Brian Klepper and David C. Kibbe over at Health Care Policy and Marketplace Review have a marvelous post about the current state of the health care industry and the forces shaping its future.

Here's a sample:

One of us recently had a 3.5 hour diagnostic procedure at a local hospital outpatient surgery center. The EOB (Explanation of Benefits) from the health plan showed the hospital had submitted a facility charge of just over $13,000 - more than four months of total income for one-third of American households - and the health plan paid approximately $1,300, which means that willing vendors and purchasers agreed that the procedure's market value was 10% of the charge.

But without insurance, we would have been legally responsible for that bill, with the willingness to negotiate utterly at the discretion of the health system.

I'm sure we all have had moments of incredulity when we view what our medical procedures "cost" on our bill. The fact that I don't have to pay the outrageous sums of money printed on my statement makes them somebody else's problem. But they are still a problem.

Here's the follow up:

1. Is it appropriate to add a 1,000% surcharge for the sin of uninsurance. For not-for-profit health systems especially, is it appropriate to do so while receiving a tax break for providing community service?

2. When a provider chooses to pursue a receivable figure that is more than the established market value (as determined through the contractual figure with the health plan), can that effort properly be understood as inflating the market?

3. Can a system maintain stability when it inflates value beyond the means of most of its purchasers ?

The definition of a market bubble is a high variance between the intrinsic value of a product and its market valuation. Bubbles always burst eventually, as inflated market values tumble back towards intrinsic value. We're seeing this with homes and banking stocks. Are we there yet with health care services? Could America's health system collapse?

All good questions - not like we don't have problems enough, but you have to wonder about all those inflated prices that have been cruising around in the health care industry.

What will happen if (say) a massive financial crisis were to put pressure on insurers and governments  who have been paying these inflated bills all this time?