Tuesday, October 03, 2006

Health care - are we getting what we pay for?

I've been meaning to get to it for a few days, but there was an an excellent article about health care spending in the New York Times last week. The article makes the essential point that while, yes, we are spending much more than we used to on health care, we are also getting much more for what we spend:

"To understand why, it helps to look back to a time when Americans didn’t worry much about health care costs. In 1950, the country spent less than $100 a year — or $500 in today’s dollars — on the average person’s medical care, compared with almost $6,000 now . . . Most families in the 1950’s paid their medical bills with ease, but they also didn’t expect much in return. After a century of basic health improvements like indoor plumbing and penicillin, many experts thought that human beings were approaching the limits of longevity. 'Modern medicine has little to offer for the prevention or treatment of chronic and degenerative diseases,' the biologist RenĂ© Dubos wrote in the 1960’s."
Let me interject here a brief observation that the accepted medical wisdom at any given time frequently turns out to be remarkably incorrect, and not always that far into the future. This is a topic I've done a lot of thinking about and want to explore more in future posts. But I digress.
"But then doctors figured out that high blood pressure and high cholesterol caused heart attacks, and they developed new treatments. Oncologists learned how to attack leukemia, enabling most children who receive a diagnosis of it today to triumph over a disease that was almost inevitably fatal a half-century ago. In the last few years, orphan drugs that combat rare diseases and medical devices like the implantable defibrillator have extended lives. Human longevity still hasn’t hit the wall that was feared 50 years ago.

Instead, a baby born in the United States this year will live to age 78 on average, a decade longer than the average baby born in 1950. People who have already made it to their 40’s can now expect to reach age 80. These gains are probably bigger than the ones the British experienced in the entire millennium leading up to 1800. If you think about this as the return on the investments in medicine, the payoff has been fabulous: Would you prefer spending an extra $5,500 on health care every year — or losing 10 years off your lifespan?"
In fact, there are economists that do exactly this type of research, trying to decide what the "value" of extra years is, for example. Morbid stuff, and we'll skip those details for now. But you get the idea. Ignoring the exact amounts, we can all agree that increased health and longevity have value, and things that have value usually cost money. No surprise there.
"Yet we often imagine that the costs and benefits are unrelated, that we can somehow have 2006 health care at 1950 (or even 1999) prices. . .

Somehow, going to the mall to buy clothes has come to be seen as a vaguely patriotic way to keep the economy humming, and taking out a risky mortgage is considered to be an investment in one’s future. But medical care? That’s just a cost.

It’s easy to be against high costs, and it will no doubt be hard to come up with a broad health care solution. But the way to start is by acknowledging that an affluent society should devote an ever-growing share of its resources to the health of its citizens. 'We have enough of the basics in life,' Mr. Cutler, the economist and author, points out. 'What we really want are the time and the quality of life to enjoy them.'"
There are a lot of complex issues here, many of which deserve to be dealt with separately. We'll get to each of them eventually, just not all today. Instead, the message I want to leave you with now is two fold:

First, the health care that we "buy" today (in aggregate) is quite different and vastly superior to what we have bought in the past. In other words, it is important to remember that we are getting something very different from what we did, say, 40 years ago. We are so used to amazing new medical technologies, that it is easy to forget how revolutionary, not even evolutionary, so many of them are.

Second, there is no specific level of health care spending that is the "right" amount to spend. Go back 100 years, and a much greater share of our national income needed to be consumed to keep everyone fed than we need to spend today. Take that change, and many others, and one consequence is that as a society we have a greater ability to devote resources to health care than we have had in the past. To say this another way, there is nothing per se wrong with a modern, prosperous society deciding (implicitly or explicitly) to spend a greater share of GDP on health care, compared to what was spent historically. In many ways, this is a benefit of having to spend a lot lower share of GDP on, for example, food.

Of course, we want to make sure we are happy with what we are getting for that money, and that we prefer consuming this amount of health care as opposed to other potential uses for the money. Also, questions of access, waste in the system, costs of specific treatments, etc. - all of these are important, but none alter the basic conclusion. You can be concerned about all of those things and others, but that is different from being alarmed that overall health care has reached some specific level or share of expenses. There is nothing wrong with investing increasing amounts in our own health, and likely a whole lot right about it.

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