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From Wikipedia

Difficulties of analysis

Cost-benefit analysis of healthcare is extremely difficult to do accurately, or to separate from emotional entanglement. For instance, prevention of smoking or obesity is presented as having the potential to save the costs of treating illnesses arising from those choices. Yet, if those illnesses are fatal or life shortening, they may reduce the eventual cost to the system of treating that person through the rest of their life, possibly dying of an illness every bit as expensive to treat as the ones they avoided by a healthy lifestyle.

This has to be balanced against the loss of taxation or insurance revenue that might come should a person have a longer productive (i.e. working and tax or insurance-paying) life. The cost-benefit analysis will be very different depending on whether you adopt a whole-life accounting, or consider each month as debits and credits on an insurance system. In a system financed by taxation, the greatest cost benefit comes from preserving the working life of those who are likely to pay the most tax in future, i.e. the young and rich.

Few policitians would dare to present the big picture of costs in this way, because they would be condemned as callous. Nevertheless, behind the scenes, a responsible government must be performing cost analysis in order to balance its budget; it is not likely, however, to take the most purely cost effective route. It may choose to provide the "best" health care according to some other model, but this still has to be costed and funded, and there is no uncontroversial definition of "best".

In producing a definition of quality of healthcare there is an implication that quality can be measured. In fact, the effectiveness of healthcare are extremely difficult to measure, not only because of medical uncertainty, but because of intangible quantities like "quality of life". This is likely to lead to systems that measure only what is easy to measure, such as length of life, waiting times or infection rates, and may reduce the importance within the system of treatment of chronic, but non-fatal, conditions, or of providing the best care for the terminally ill. Thus, it is possible for personal satisfaction with the system to go down, while metrics go up.

The Problem is socialization not market failure

The primary reason, U.S. health care costs have been rising is because Americans are usually spending someone else's money when they consume medical care. And out-of-pocket spending has been falling because government health insurance and tax subsidies for private health insurance have soared.

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