A very good article on health care economics

By David Goldhill, here is one bit:

How am I supposed to be able to afford health care in this system?
Well, what if I gave you $1.77 million? Recall, that’s how much an
insured 22-year-old at my company could expect to pay–and to have paid
on his and his family’s behalf–over his lifetime, assuming health-care
costs are tamed. Sure, most of that money doesn’t pass through your
hands now. It’s hidden in company payments for premiums, or in Medicare
taxes and premiums. But think about it: If you had access to those
funds over your lifetime, wouldn’t you be able to afford your own care?
And wouldn’t you consume health care differently if you and your family
didn’t have to spend that money only on care?

Here is another:

From 2000 to 2005, per capita health-care spending in Canada grew by 33
percent, in France by 37 percent, in the U.K. by 47 percent–all
comparable to the 40 percent growth experienced by the U.S. in that
period. Cost control by way of bureaucratic price controls has its
limits.

His preferred reform reminds me of Brad DeLong's plan, namely universal catastrophic care combined with required HSAs at lower levels of expenditure.

Comments

Milton Friedman was a fan of Universal Catastrophic Health Insurance as well.

"A more radical reform would, first, end both Medicare and Medicaid, at least for new entrants, and replace them by providing every family in the United States with catastrophic insurance (i.e., a major medical policy with a high deductible). Second, it would end tax exemption of employer-provided medical care. And, third, it would remove the restrictive regulations that are now imposed on medical insurance—hard to justify with universal catastrophic insurance."

http://www.hoover.org/publications/digest/3459466.html

This argument is similar to suggesting we could improve our national defense if we just disbanded the armed forces gave each American $2.1 billion dollars to buy their individual choice of weaponry.

"His preferred reform reminds me of Brad DeLong's plan, namely universal catastrophic care combined with required HSAs at lower levels of expenditure."

Anyone know what share of all health expenditures are in the catastrophic category (e.g. more than 25% of the median family income)?

It also probably makes sense to add coverage for standard preventative care (vaccines, routine checkups, periodic diagnostic tests, etc) since it would be foolish to encourage people to wait for ailments to become catastrophic.

Anyone know how much of health care falls into those two categories (catastrophic, or preventative)?

"From 2000 to 2005, per capita health-care spending in Canada grew by 33 percent..."

Interesting. So not only are the expenditures dramatically lower in other countries, but they aren't growing any faster either. Apparently, the lower cost structure is sustainable over time.

Despite the lower costs, people in other nations all seem to like their health system better than we do. We come in last out of 10 countries surveyed in satisfaction, e.g. An 82% to 8% majority of Canadians believe their system is superior to the U.S. system.) See

http://www.thefreelibrary.com/Is+the+U.S.+Health+Care+System+the+%22Envy+of+the+World%22%3F+Not+in+Canada.-a0205609832

1.7 million is pretty misleading.. what happened to discounting?

If you completely ignore the free-rider issue I'd almost agree with you.
The article references "how much an insured 22-year-old at my company could expect to pay—and to have paid on his and his family’s behalf—over his lifetime".

If I take the $2100 (annually) spent per capita on American military expenditures and discount that at 4% over 50 years (so ages 22-71 or ages 0-49 for someone born today), then I get a lump sum of about $47,000 in present value. How about we give that to every American man woman and child and then eliminate public defense? I could probably get a few assault weapons, an anti-tank weapon, and munitions for less than that. Plenty to defend my own little patch of homeland.

Sound reasonable?

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Didn't think so.

For people claiming to be emphasizing small positive changes and conservative values, there is really a lot of magical thinking from the libertarian wing of the health care debate.

The debate is if the US should move in the direction of European style healhcare, and how much. Not that they should completely adopt the UK or, say, French system wholesale.

where does 1.77M come from? if i take $1500/month * 43 years i get only $773K.

Yes. Bad example. Not only could the U.S. defend itself with nothing but ARs and Stinger missiles (and a handful of nukes), we'd be better off because we couldn't "project our strength" everywhere which would require a humble foreign policy. Thus, being a threat to noone, we wouldn't have to spend more on defense than almost every other country combined. I'm not proposing it, but it's true.

And, aside from a nominal amount of vaccinations to prevent outbreaks (which would not even require universal vaccination), what exactly is the free-rider problem with medical spending. We have a free-rider problem with it now, that Obama wants to make worse, but other than that...

The problem with the Health Care system as it exists is that we are not insuring, we are budgeting. People should be able to hedge catastrophe with a policy but pay for their other health care needs as they occur. This puts the burden of expense on the consumer as needed yet shields them from devastation. Isn't that the point of insurance? And if we didn't have medicare payments the Government would still get that percentage of our income for some other program. Anyone seeing taxes going down?

These few comments are some of the most bizarre I have ever read on this blog. I'm not sure which takes the cake: the health care versus defense expenditure commentary, or the revelation that people (in this case Canadians) who think Americans are all bankrupt from medical bills (for which they received inferior care and outcomes) believe their system is superior. (Although having been heavily involved in cancer support groups for much of this decade now I can't say I've run across many Canadians coming to the U.S. for cancer treatment who seem to agree.)

It's as though the more widely disseminated becomes data and commentary countering the idea of America as a complete health care failure - even in the slightest manner, and despite the large volume of data putting the lie to common memes about that health care - the more the true believers (often non-Americans) fall back on sticking their fingers in their ears and repeating their memes, but with increasing volume.

83 y/o with pneumonia has a highish probability of death, regardless of treatment. Also, the article is riddled with errors. He should have had it proof read by someone who works in medicine.

Steve

AADL asks "Once the cost of medical tourism, to name one example, is factored in, what are the adjusted figures?"

Good question. Apparently, relatively few Canadians actually come to the U.S for treatments (anecdotes notwithstanding). See http://content.healthaffairs.org/cgi/content/full/21/3/19

However, a lot of Americans travel to Mexico and elsewhere for health care: http://www.eurekalert.org/pub_releases/2009-05/uoc--n1m052609.php

I'll agree that this is one of the most bizarrre comment thread I've seen on MR. It seems that some people have latched on to government-provided health care so much that, when confronted by a good argument, go into irrational convulsions.

BTW, it's 1.7 million after assuming medical insurance costs will rise by the rate of inflation. After adding in how much more health costs are rising compared with inflation, it comes out to about 4 million.

It's true that the exercise doesn't discount, but still think of that mind-boggling amount of money. Some goes to catastrophic events, like cancer or brain surgery after a car accident, but a lot also goes to relatively small stuff, like MRI's.

Studies have shown the wonderful things exposing costs to consumers does for health care, both in cost and customer service. We should try to extend its benefits as far as possible.

"an F Internet Econ 101"

I'm disappointed by your small-minded liberalism, Noah.

If each citizen were given $2.1 billion dollars annually for their own defense, wouldn't it eliminate all the inefficiencies of a bloated, wasteful Big Government bureaucracy in favor of a lean, private-sector, market-based rivalry for national security services?

I'm disappointed by your small-minded liberalism, Noah.

If each citizen were given $2.1 billion dollars annually for their own defense, wouldn't it eliminate all the inefficiencies of a bloated, wasteful Big Government bureaucracy in favor of a lean, private-sector, market-based rivalry for national security services?

a $600 quadrillion defense budget seems like overkill.

Not sure where the 1.77m comes from, but this 2000 NIH paper finds the per capita lifetime healthcare expenditure is roughly $320k.

http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=1361028

"wouldn’t you consume health care differently if you and your family didn’t have to spend that money only on care?"
As a Libertarian I believe in this line of thinking. However, as a consumer with an HRA plan, I would have to disagree. At a previous employer, I had an HRA plan that consisted of a catastrophic component that kicked in at $4000. The employer paid the first $1700 and I had to pay the middle amount. So it was like having an insurance plan with a $2300 deductible. I can probably live with that. I figured from my old costs that I would fall within the $1700 that was fully paid by the employer. Unfortunately, the doctors offices and hospitals, and especially the pharmacy, charged me full price for everything, and it was often three or four times what I was charged before. There was no plan discount, I was essentially on my own. But the plan still restricted where I could go, so there really was very little choice. The only choice I had was whether to have a procedure/medication or not (to "consume" differently). I was more involved in my healthcare, but I didn't have full choice to go somewhere else.

Doesn't the title of the article call for changing our current health care system: "How American Health Care Killed My Father"??

He blames the failure to wash hands for his father's death. Sounds like a good case for filing malpractice lawsuits against the hospitals and doctors so that they will be forced to correct their poor methodology because this problem is well known and clearly understood how to control it.

Oh, wait, but doing that would force the doctors and hospitals to perform preventative medicine. And besides, malpractice lawsuits and the mere fear of lawsuits is what drives up the cost of health care, so we need to eliminate the threat of malpractice lawsuits by pretty much prohibiting them, because malpractice law reform in Texas done to the doctors and hospitals specifications by conservatives didn't prevent McAllen Texas from having one of the highest costs per Medicare patient of anywhere in the nations where the bleeding heart liberals let the doctors be sued for billions in punitive damages. (If the threat of malpractice lawsuits is the reason for higher costs in the US vs Canada, then they are adding hundreds of billions in costs, to as much as $600-700B.)

So the threat of malpractice can't be used to prevent infection.

And we know that prevention doesn't work, because conservatives keep trotting out studies that say that prevention costs more. And it has to be true; disinfecting and washing hands over and over when no bacteria exists is a waste of money and thus is going to just add to the cost of health care without saving any money.

Now one might argue that regulation might be the path to making doctors and hospitals follow the well known and well understood and proven effective procedures, but government regulation is always bad, so we can't allow that.

So, that leaves eliminating the unlimited spending of Medicare; I'd say that if this family had to pay the hundreds of thousands in health care, and were booted out of the hospital if they couldn't pay the bill (after all, if you have your car in the shop, and you won't commit to paying the repair bill, you are forced to remove your car from the shop or it is towed to the junk yard where it will be scrapped after the bill reaches a point greater than the value and you have failed to pay the costs).

But he went into the hospital for a condition my dad described as the old people' friend. My dad talked about sitting at the homes by the beds of old people when he started in the ministry in the 40s and into the 50s waiting for pneumonia to take them quietly and peacefully. He was telling me this in the last year of his life as he battled cancer while hoping for my mother to die like that as her mind deteriorated from dementia. The last five years of both their lives easily cost $500,000.

Which I guess says that we should stop vaccinating people for the flu, or at least stop vaccinating old people, and especially old people in nursing homes or assisted living facilities. Clearly this is preventative care that results in higher health care costs. And we should stop admitting old people to hospitals who have the illnesses that are the friends of old people, like pneumonia.

So, what we need are death panels to decide when the government run single payer health care system should deny care to the people it covers to be a better program. Clearly, the obvious steps are to deny old people with pneumonia admission to hospitals because the hospital will kill them with an antibiotic resistant infection so it is for his own good to be refused hospitalization, and since prevention doesn't save money, this is also a good money saving scheme, and if he dies, he will die peacefully at home and will have gotten the best possible care at the lowest price.

But the government running health care is bad, so we should eliminate Medicare, and thus, lacking money to pay a huge bill, he would have been refused admittance to the hospital and died peacefully at home from pneumonia.

Of course, he was working and productive, and the odds are that he would have continued to live and work for years if he had gotten a flu shot or a more effective flu shot.

Of course, the question that intrigues me is that while he compared the number of CT and MRI machines in the US to the UK and Germany, he states uncategorically that "But as long as our government shovels ever-greater resources into health care with one hand, while with the other restricting competition that would ensure those resources are used efficiently, sustained high profits will be the rule." he fails to note that in Canada, Japan, the UK, Germany, France, Taiwan, Norway, Sweden, and dozens more nations, those were the very steps taken with equal or better health outcomes and much much lower costs.

What I can't figure out is why outlier in health outcomes in the rest of the world's health care systems are used to argue that we can't adopt their particular form of universal coverage with government rules eliminating much of the profit incentives, but when it comes to examining why the outcomes are so poor and the costs so high in the US, no one ever looks to the dozens of other nations with both universal coverage, lower costs, and equal or better outcomes.

Seems to me that the arguments being used over and over are cherry picking the data in order to make an argument for more of the same old failed policies.

In the 50s and 60s, the model in the US was in most cases as close to universal coverage as possible with community based cooperatives between doctors, hospitals, employers, individuals and the government in a non-profit cooperative effort to provide better health care, lower risk of financial ruin for either the patient or the doctor or hospital, and to make health care costs predictable and as low as possible. And even with Medicare added in the mid-60s, the cost of health care in the US was running about the same as it as in Europe and Japan as a share of GDP, but then the view was to control costs by introducing competition and free market principles. And ever since, the call has been for more competition, more free market for profit, and in response to the increases in costs that result, calls for more competition and more free market profit seeking.

Yes, costs have been rising in the other nations with universal coverage, but they have no mass health fairs with massive numbers of people waiting for days to get health care because the current US system doesn't provide affordable care to them. And yet, the US system is costing much more than in those other nations that don't need to have the non-profits that were organized to bring health care to third world nations struck by natural disaster, war, or pandemnic.

As they say, when you find your self stuck in a deep hole, stop digging.

There should be a full public option for baseline healthcare. People should have a choice to get healthcare without paying the 20% that insurance companies add to the bill. They don't do anything for it; they give NO added value. They gamble in the financial markets to cover your proctologist. They just skim the money off the top -- and apparently contribute to Congressional campaign coffers. We just had to bail-out the rich bums on Wall Street -- including the insurance companies. How are we going to bring down healthcare costs if people can't choose to go without useless drains on the system? Why in hell are we protecting this industry?

Sam writes "the waiting list argument against reform is a pathetic red herring."

And your anecdote of waiting 3 months for a neurologist (as a dependent!) makes it one? Got anything else?

I'll admit, there are many unwarranted claims against Canada's system, but when Canada's own Supreme Court challenges the waiting lists, you know they've got problems.

http://www.opinionjournal.com/editorial/feature.html?id=110006813

I can understand wanting to believe that national health is a rivalrous and excludable good. Because if national heath were in fact a common good, our current system of profit-based rivalry and exclusion would be an unthinkable nightmare.

Fortunately there is no other industrialized country on Earth which has dis-proven the utter perfection of our heath care model. Which is why our emergency rooms are swamped with refugees from France and Canada.

I can understand wanting to believe that national health is a rivalrous and excludable good. Because if national heath were in fact a common good, our current system of profit-based rivalry and exclusion would be an unthinkable nightmare.

Prevention doesn't work - but not for your handwashing example, try my field (I'm not a doctor) - urology. Prevention means screening, which means more tests, with associated false positives and negatives, which lead to more tests and procedures, which may or may not lead to better outcomes than countries that don't bother with some of the nifty new technologies and tests we have in the US. Cost more? Yes. Better? Sometimes. Will Obamacare change this dynamic? No.

Sounds like PSA tests and digital exams don't save money nor improve health. Yet the claim is the US health care system is better because the life expectancy for US prostate cancer is much better than Britains.

By the way, I assume that flu and other vaccinations like measles, mumps, etc., are also not cost effective preventative care as well. Along with mammagrams, BP and glucose checks for hypertension and diabetes, also prevention.

Since the US spends more than 50% more than any other country, anything less than a 60% increase over that period represents a healthcare system more efficient and getting even more efficient than the US. Score one for socialized medicine.

The article is quit good and hopefully there will be more of the same. http://www.laptopsite.info/
Thanks for the information

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