Two libertarian bloggers have had a few posts on health care costs recently. Arnold Kling argues, and I agree, that Peter Orszag “makes it sound way too easy to control health care spending.” While there is undoubtedly waste as there is in any industry, most of the low lying fruit has been picked after years of various attempts at reducing health care costs (although I am always amazed that they are not doing more to crack down on all the fraud in medical equipment).
While Kling and others have written a considerable amount about the various reasons why it is difficult to cut health care spending, in this post Kling makes his point with an anecdote:
My oldest daughter is in her mid-twenties. She has a friend the same age who was stricken with cancer last year. She was treated with chemotherapy, Initially, the doctors thought this had worked, but now the cancer is back. My guess is that her prospects at this point are rather frightening.
That ends the anecdote. What follows is my imagination.
Imagine it were my daughter. What would be my attitude? I imagine that I would be walking into the oncologist saying, “Look. There has to be something you can try. I don’t know whether it’s bone marrow transplants or stem cells or some clinical trial somewhere. But we can’t just sit here and watch her die. Either you give us something that has a chance of working, or we’ll find another oncologist who will.”
Next, imagine that the best hope is a treatment that costs $100,000 and offers a chance of success of 1 in 200. Would I want her to get that treatment? Absolutely.
But look at the issue from a rational, bureaucratic perspective. You have to treat 200 patients at a cost of $100,000 each in order to save one life, for a cost per life saved of $20 million. Is that what a rational bureaucracy would do?
A rational bureaucracy would not even tell the family about this treatment option. But I think that in the American culture regarding medicine, I would find out about it.
Megan McArdle adds that we are exporting our attitudes to other parts of the world:
It’s worth noting that, at least anecdotally, the internet means we’re increasingly exporting our cost inflation to other countries. In the 1990s, breast cancer patients wouldn’t even have found out about a treatment like Herceptin. Now they fight (and win) public relations battles with their governments to get their treatments covered, even when the treatment is not deemed cost-effective by the health care regulator. And the woman who fought that famous and “inspirational” battle in Britain recently died; the drug didn’t buy her that much extra time, perhaps because she had to fight so long to get it.
In another post Megan gave reasons why health care costs so much along with pointing out the difficulties in overcoming these problems. I was surprised by her conclusion as to whether we should be spending so much:
Practically, we have to pay healthcare workers a lot because we have to pay everyone a lot; in a rich country, wages for healthcare workers are high. And measuring healthcare productivity is really insanely difficult, which makes it very hard to figure out what’s worth spending money on. As long as Americans don’t want to sacrifice access to procedures–and they don’t–there’s just not much room for decreasing costs.
That doesn’t bother me that much. The mindless trend extrapolation about how much we’ll spend on health care in the future elides the point that we’ll be much richer in the future; why shouldn’t we spend all that extra income on healthcare? Your ancestors spent 2/3 of their daily income on food. Now you spend about 15-20%. But spending much more of your income on clothes and housing doesn’t mean that you’re starving; it means that you’re so rich, you only spend a small fraction of your income on food. When I look around at our incredibly bountiful economy, I don’t see any obvious lack that we’re creating by spending ever more of our income on leading longer, healthier lives.
Businesses and individuals struggling to pay for health care coverage might not agree that we are not creating any problems by our spending, but her point is a valid one. We continue to spend more on health care because not only do Americans want the best health care available, they want it without restrictions or waiting. Add to that ever increasing technology and an aging population, and it is hard to see any significant reductions on health care spending which will be acceptable in this country.
Update: More along these lines from Mickey Kaus.