some quick thoughts and then I'm out the door but I'll check back later today
you've given a concept of inelasticity but no proof of it's actual impact on the cost of healthcare
It is impossible to actually measure elasticity of supply, we can only make 'guesstimates'. A supply curve represents how much of a given resource would have been supplied at a given level of prices and demand. You can only know what that number is if you're "at" that number in prices/demand. You cannot know (in real life) what the entire supply curve is.
So our best guesstimate regarding the health care market is that it is inelastic... why? Because it takes about a decade and thousands of dollars in college costs (this is not counting the FULL opportunity cost) to train a new MD. It can even take longer for other types of doctors. Then there are very byzantine government restrictions on how many hospitals are built and where they are located. There's a lot more which I cannot call off the top of my head.
do you have any info on the difference in admin costs (and profit) btw a source like Medicare and a private HMO and it's impact on rising costs?
don't the marjorty of people with health care have it provided by their employer (with some sharing of the costs). Doesn't this also cause an increase in demand. if this is true (and I'm not saying it is) then doesnt' employer sponsored healthcare actually exacerbate the problem even more than Medicare (which people pay into their entire lives)?
Yes, employer-paid health insurance exacerbates the problem. That is because a third party pays for your health insurance, so that third party is responsible for the costs you incur.
And why do we have this system of third party health insurance in this country? Because of the tax code. Employers get a tax credit if they buy health insurance for their employees. However, if the employers decide to drop the health insurance and instead pay out those benefits in the form of salary/wage increases, then the employees would be taxed more. Thus, it's better to include health insurance as part of the employment package than just paying a straight salary/wage.
Then there's also the problem of health insurance mandates... states mandate that health insurance cover all sorts of things, from pregnancy to HRT to alcoholism treatment. This increases demand for health care, much of which could be unnecessary.
This way you end up with a system where individuals don't face the costs that they incur and thus have no incentive to limit themselves... this pushes demand up, and in a market with inelastic supply, this causes prices to skyrocket. This, in turn, locks people out of the market who otherwise would be able to afford certain medical procedures - but now can't because prices are too high due to high demand.
What needs to happen on the demand-side is an end to Medicare, Medicaid, the state-level health insurance mandates, tax loopholes favoring employer-paid health insurance, etc. This will lower demand for unnecessary health care procedures, which will dramatically bring down the price. The lower price will allow a lot of people who weren't able to afford health care before to be able to pay for the health care they need now.
Of course, in any free market system there will be some people who will not be able to afford what they need... but that is something that is not only a mainstay of free markets but of the reality of economics. Not everyone can have access to scarce resources. The issue here is figuring out how to allocate those scarce resources in the best possible manner - and a free market system does exactly that. What we have now is a broken system which increases demand unnecessarily and thus leads to a poor allocation of health care resources. By attacking the root of the problem and introducing free market health care, more poor people and more people with pre-existing conditions would be able to afford the health care they need. It's as simple as that.