Wednesday, July 01, 2009

The health care cost explosion

Via John Stossel's blog I found this Goldwater Institute graph that provides yet further evidence of the folly of making health insurance the centerpiece of health care in this country:

The less people pay the more they consume -- and the higher costs go up. And wherever insurance goes, paperwork and bureaucracy is sure to follow. Rather than seeking to eliminate this dependence on insurance current efforts are focused on how to extend it. Such an approach, based on more involvement by the government and insurance companies, does not strike me as a recipe for either higher quality health care or reduced costs.

Update: To be clear, insurance is not THE driver of health care costs -- medical advances and technology also play a considerable role. But that's not a bad thing given that you're probably willing to fork over more if it means it will save your life. As George Newman says about the rise in health care costs:
That's like comparing the price of hamburger 30 years ago with the price of filet mignon today and calling the difference inflation. Or the price of a 19-inch, black-and-white TV 30 years ago with the price of a 50-inch HDTV today. The improvements in medical care are even more dramatic, leading to longer life, less pain, fewer exploratory surgeries and miracle drugs. Of course the research, the equipment and the training that produce these improvements don't come cheap.
Now that doesn't mean that all of the increased costs are a result of better technology, with the insurance problem also playing a role, but it is a factor.

1 comment:

Paradigm Shifter said...

The statistical phenomena that is going on here is called "confounding". That is to say, the lower costs paid by the consumer leads to higher consumption, but higher consumption leads to higher overall costs and a lower rate paid by the consumer. It becomes very difficult to ID the root cause of the effect.

What the graph does tell us is that right now we can't tell if the consumer really feels the increased cost of health care is worth it. If the consumer paid a higher proportion of the care, we could then more clearly say that the current state of health care best optimizes the consumer's cost/benefit equation. As it now stands, Obama and others can bemoan the high cost of care, consumers nod their heads, and no one is forced to put their money where their mouth is and accept the consequences of lower cost care.