Elizabeth Holmes dropped out of Stanford at the age of 19 to pursue her idea for making blood tests cheaper and easier. Ten years later, Holmes is the world’s youngest female billionaire and her company, Theranos, valued at over $9 billion, is nearing entry to every Walgreens throughout the country. A competitive free market, not over-subsidized government programs, produced this innovative and life-saving solution.
Theranos’ use of a few drops of blood obtained via fingerstick rather than traditional needle tests lowered one diabetic woman’s test costs from $876 to $34. This 96% savings is a simple example of how healthcare costs throughout the country can be lowered through advances in technology. Free markets encourage new products to be developed with the goal of efficiency, cost-effectiveness, and high success rates. These lower costs can then be passed on to the patient. Instead of raising new taxes or fees or whatever Obamacare wants to call its countless mandated charges, real healthcare reform can cut costs through encouraging innovation in a free marketplace.
As Milton Friedman famously observed, we spend the most economically when we spend our own money on ourselves. Conversely, we are the least efficient when spending somebody else’s money on somebody else. In much the same way, government run healthcare is least efficient when the government raises taxes (someone else’s money) to spend on enhanced welfare programs (someone else). In order to make the American healthcare system more efficient and lower costs, we must realign incentives so that patients are invested in their coverage and must look for the most cost-efficient alternative. On the other end, insurance providers will seek to cut costs by finding the cheapest and most effective forms of treatment. Holmes and Theranos were allowed to freely innovate; this freedom ultimately produced a life-saving medical breakthrough that they estimate will save US Medicare and Medicaid around $200 billion a decade. This innovation is what will lead to higher quality, lower cost medical care.