Why Insulating Everyone From Cost Makes Healthcare Less Sustainable

Part 3 or 3 on an informative discussion regarding healthcare

Healthcare feels different from other markets for a reason — and part of that reason is intentional insulation from price.

When patients pay little or nothing out-of-pocket, they’re told not to worry about cost. But cost never disappears. It’s just shifted to premiums, taxes, and future spending.

Without price signals, there’s no shopping, no pressure to compete, and little incentive to ask whether more care is actually better care. Healthcare starts behaving like a utility, not a market — and costs rise accordingly.

Doctors feel this pressure too. Defensive medicine isn’t driven by greed. It’s driven by fear. Missing a diagnosis once can end a career. Ordering extra tests almost never carries a penalty. The rational response is escalation: more imaging, more procedures, more intervention.

That protects physicians legally, but it doesn’t always improve outcomes.

The ACA didn’t invent these dynamics, but it amplified them by relying heavily on insulation — cross-subsidies, capped margins, broad mandates, and especially subsidies that grow with prices.

This doesn’t mean expanding access was wrong. It means subsidies can’t do the heavy lifting alone.

When rising premiums trigger larger subsidies, consumers feel less pressure to question value. Insurers face weaker incentives to suppress total spending. Providers encounter less resistance to higher prices. Costs rise — and subsidies rise with them.

That ratchet effect makes the system more expensive and more fragile over time.

Sustainable reform doesn’t mean eliminating subsidies. It means pairing them with reforms that restore price discipline: clearer pricing, smarter cost-sharing, stronger accountability, and incentives that reward efficiency instead of volume.

Subsidies can absorb shocks. They can’t fix broken incentives.