Health Care or Immortality?

It’s very telling that healthcare costs have been soaring at 3-4% above inflation since the 60’s, and no one seems to be talking about the underlying cause.

Its share of GDP has grown from 5.1% in 1960 to 7.0% in 1970, 8.8% in 1980, 12.0% in 1990, 13.3% in 2000 and 15.3% in 2003. It has actually tripled, and is still heading higher (1). That’s perfectly unsustainable.

All the restraints we’ve struggled to put in place have slowed it but failed to change it, and the impact on businesses large and small are visible everywhere. On the public side the Medicaid funding crisis is far larger and sooner than that of Social Security, and more and more individuals are losing their benefits. Major change is about to happen.

Why we’re not talking about what’s doing it is the key. It isn’t because we don’t see the threat. It’s because we’ve run out of solutions that can be easily discussed in public. Most options seem to require a drastic change in our promises or values, so the politicians can’t talk about them. All would agree, doing nothing will only make matters much worse, but we’re still not doing anything.

To open it up we need to talk about the real cause. The problem is that we’re inadvertently trying to buy immortality. It’s quite simple; we’ve made what used to be called a bargain with the devil. We’ve accepted the wonderful gifts of modern science and its ever more effective and expensive medical advances, and cling to an idealistic insurance model for sharing all natural risks.

Good health used to be a matter of luck, and free. Now science has made it a matter of cost, multiplying exponentially the closer it gets us to achieving our impossible goal, to always be cured. It’s actually one of the strangely beautiful laws of nature, that perfection is unattainable because approaching it takes ever increasing effort to progress by ever smaller steps.

One option is to conclude that medical insurance was just a bad financial idea from the start. It is indeed flawed. It’s like having unlimited demand (good health provided at a prix-fixe) chasing unlimited supply (an ever exploding menu of great treatments).

The challenge is to design the market forces differently, so that the total price remains constant while the benefits of the service continually improve. To do that requires being able to measure and compare costs and benefits, and there is some good work under way in that area.

Alternately, we could do simple rationing, cut out expensive care for hardship cases, expensive end-of-life care, expensive experimental and rehabilitation services, and various other things. Ultimately we could just stop insuring anyone who gets sick.

These things might provide insurance more efficiently, with excellent average returns. The problem, of course, is that people are not numbers. Still, any effective system will have the effect of making us decline the most expensive care.

Few of us think we abuse the system when we get imaging studies for an odd swelling behind a knee, for example (it might be a blood clot, say). What we usually fail to do is consider with the doctor whether the measurable risks and benefits justify the expense compared to simpler treatments. That’s a complicated question, but we need to learn how to ask and answer it.

Using that kind of reasoning we might begin a general system redesign by deciding that everyone has to assume the risk and responsibility for their own health care decisions. We don’t want HMO lawyers or the government making the decisions for us. We might also choose to keep the ‘all risks’ type of coverage we have.

Where the pinch would come is in providing insurance payment only for new services with lower costs for the benefit than the old ones, with patients assuming the marginal cost of choosing treatments that are less efficient. For the same measurable benefit, if the new treatment costs less you get it, if it costs more, you don’t.

Just accepting that ideal would be a start. With good design, benefits would then keep getting better and costs would remain the same. We’d need to measure the costs & benefits and provide consumers with the information.

These are significant hurdles that would take time, effort and money to develop. Perhaps there’s no other way to get the information needed to make good decisions.

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You could call it the “Complicated Sensible Plan”. One thing is for sure, strong medicine is needed.

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(1)health care cost stats http://www.kff.org/insurance/7031/print-sec1.cfm

 

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