Wednesday, April 15, 2009

Further Memorable Thoughts on Health Care Spending

Two commenters at EconLog ("John Thacker" and "Matt") posted comments yesterday that I think are well worth repeating:

From Matt:

As someone who works in the medical industry, I can attest to the fact that health care consumers want to have their cake and eat it too. There is simply no way to reduce health care costs without some form of rationing.

The fact is we do ration health care in favor of the elderly in this country. An earlier poster, Neil, brought this up and anyone who works in health care can tell you this. Medicare, which at current levels of payout, will overtake the majority of the US budget as the baby boomers start taking benefits. When you turn 65 in this country, you enjoy a bottomless pit of medical expenses. It is not uncommon for an obese smoker on Medicare to consume well over a million dollars of health care in a year. If you are an unemployed pregnant 20 year old you get the bare minimum - that is if you get enrolled into Medicaid. You can forget about experimental cancer treatments. Not to sound conspiratorial but the AARP has a lot to do with this sorry state of affairs.

A lot of great ideas are being thrown around like Computerized Medical Records and More Research. I can tell these people don't work in health care. These reforms will save money, but its just nibbling around the edges of the problem. The "meat" of the problem is the inherent high cost of medical care that will never go away no matter how much efficiency you introduce to the system. Medicine is not like other businesses. Costs continue to rise as we are able to treat more and more diseases.

Doctors are expensive. Nurses are expensive. MRI machines are expensive. Don't get me started on malpractice insurance (grrr!!!) Do you think these costs will go away if the Government takes over medical insurance?

From John Thacker (slightly edited down):

Medicare spends considerably more on over 65s than universal health systems in other countries spend on over 65s. Other apples-to-apples comparisons, such as comparing health care costs among people file for Medicare early, or among people who have private insurance (such as UAW retirees) instead of Medicare after 65, or simply comparing costs among people 63-64 who are just barely not under Medicare with people 65-66 who have just signed up, show no significant difference. Medicare does not save money; nor does it spend less on health care treatments. Medicare and Medicaid "look like" the US's private insurance health care system, from treatments to cost, much more than they look like the universal health care systems in other countries.

[Commenter Dan Weber wrote]: "I would very willingly put my health decisions into the hands of a group that said 'we won't try any radical treatments, and we won't try super-hard to save your life once you are over 60.'"

[John Thacker replies:] You say that now, and perhaps you mean it. However, I feel that many people would say that and change their mind in the actual case. Still, your argument remains the most plausible one-- that government will somehow have the ability to force through even stricter rationing, of the kinds imposed by HMOs in the early 1990s that people politically rebelled against, and manage to grant itself sovereign immunity to the inevitable lawsuits that would occur against private insurers.

And once again, there seems to be a lot of people who regard the idea that insurance companies engage in rationing as some kind of trump card. Certainly they do, but the argument from universal health care proponents is that they don't engage in enough rationing, and that we need to go back to early '90s HMO you can't choose your doctor style rationing and other savings. And that just seems to me to be politically impossible.

I see nothing that changes my opinion that universal health insurance in the US will be like Medicare and Medicaid, not like other countries'. The experiences of TennCare and Massachusetts do nothing to change that. Spending and premiums in Massachusetts are rising much faster than the national average, as political pressure groups ensure that everything must be covered.

There are some savings from forcing the young and healthy to get insurance and subsidize the sick, but it's not clear that that actually leaves the young better off. (And President Obama, when a candidate, specifically denied that he would mandate coverage.) If OTOH the deal is sweetened sufficiently that all young and healthy choose to sign up, then there are no savings.

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