That we’re spending too much on healthcare is taken as a given in the current debate, and so much of it revolves around cost containment, whipping inflation and “bending the curve down.”
But how do we know we’re actually spending too much? Maybe instead healthcare is climbing towards a more optimal level, given our desire for it, and our ageing population.
That’s what James Delong at The American argues:
In fact, the “we spend too much” argument makes little sense. There is no such thing as an amount that “should” be spent on healthcare, any more than there are pre-determined allocations that should go to housing, food, video games, or any other category of expenditure. The proper level of spending depends on the value derived from it, and in the end this level should be whatever results from the sum of consumer choices made in the light of the value received.
Historical comparisons are unpersuasive because there was no golden age when the porridge was just right. We spent only 5.3 per cent of GDP on healthcare in 1960 because, under the technology and choices then available, that was what made sense. We spent zero on personal computers and the Internet in 1960, but to argue that zero is therefore the proper level for such expenditures today would be regarded, rightly, as evidence of madness, not as a qualification for high political office.
And while there’s plenty of debate about certain end-of-life treatments, and their efficacy (given the cost), there’s no doubt that technology has made amazing strides in qualify of life:
The first fruits, which grew from the germ theory of disease, were the great leaps in public health associated with clean water and waste disposal, and the recognition of the importance of cleanliness in hospitals. The $47 billion cost of the 52,000 community water systems that serve more than 280 million people represent a significant health expenditure that is not included in the usual calculations.
Technology-based personal medicine came later. In 1836, Nathan Rothschild, richest man in the world, died of an abscess that could now be easily cured by antibiotics. An 1891 picture hanging in London’s Tate Gallery shows a doctor sitting by the bedside of a dying child. The image is one of dedication, but someone once commented that he sat there because there was little else he could do.
He adds this chart, noting that even though health-expenditure has grown as a percentage of GDP, the raw growth in GDP still means a lot more is being spent on non-healthcare than formerly.
So there’s something to be said for Delong’s point. But we’re still not totally convinced. For one thing, the population of people without insurance continues to grow, which is, prima facie, a sign that costs are growing out-of-control, since health insurance is typically something that people want to have.
The other problem is that from a consumer perspective, people don’t like the healthcare experience. Now, some of this is obvious since anything dealing with sickness and death is going to be unpleasant. But beyond that, just the process aspects — paperwork, making appointments, waiting rooms, sharing data, communicating with insurance companies — strikes many as wildly inefficient and wasteful. What’s more, we know we don’t have much of a real market in healthcare, so just based on knowing that, we’d have to assume that we don’t do a good job of cost containment.
In a market where consumer satisfiaction was higher, and where we had reason to believe there was real competition, then we might be more willing to accept that we don’t know what healthcare should be costing us, and shouldn’t necessarily be wanting to spend less.
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