It's Baumol's Disease, and it pretty much guarantees that healthcare will stay expensive. In ancient Asian cultures, citizens paid their doctors to keep them well. If people got sick, it was the doctor's responsibility to take care of them for free. The alphabet soup of healthcare reforms, including HMOs and PPMs, was supposed to change all that by increasing efficiency among doctors and hospitals and by controlling frivolous spending, but things didn't turn out as planned.
Medical inflation is back, besting managed care at the very thing it was supposed to extinguish.
Paying for a few runaway cases of breast cancer turns out to be cheaper than screening every woman with mammograms. Preventative care clearly isn't cheaper. Increasing a doctor's productivity is a lot harder than many Wall Street analysts once predicted. William Baumol is one of those rare economists whose principles have been borne out in the working world. His principle, known as Baumol's Disease, says that because productivity in service sector jobs tends to lag behind productivity in manufacturing, the costs in service related businesses end up rising over time.