Medical Costs – Exactly How Out of Control? Part 2

We are discussing here this article from Time, Bitter Pill: Why Medical Coasts are Killing Us. We are attempting to ratchet down the melodrama manifested in the title and fanned in the body of this article, in order to take a more rational view of health care costs.

Recap: taking Mr. Brill’s numbers and assumptions at face value, in America, we pay $100 for the same health care other rich countries pay $63 for.  So, if we were to follow their lead, we could expect to reduce our healthcare costs by about 27%. The long-term average inflation rate for health care is about 5.5%, which means that, in a bit over 4 years, costs will have increased enough to erase these theoretical savings. In other words, assuming inflation in health care costs continues to climb at its historical average, and assuming we were able to reach European-level savings immediately, we will have bought ourselves a 4 to 5 year reprieve. Then, we’d have to come up with some other ways to save money before healthcare costs effectively consume the entire economy.

Is it realistic to assume that there are other savings in the way Europeans and other rich countries run their healthcare services, such that bancruptcy or worse can be avoided? Not really.

There is a consensus among economists that most of the Western European countries today run healthcare systems that simply cannot be financed in future.

Back to Mr. Brill’s essay. While acknowledging the real human suffering in the stories that he tells for most of the essay, I will not address them further here, for the simple reason that they don’t help us understand how to control medical costs, but instead lead us towards embracing the classic syllogism: We must do something. This is something. Therefore, we must do this.

Bottom line: wring out all the abuse and fraud, and cut all the executive salaries, regulate all hospitals like public utilities, use Medicare-style pricing & billing – and, best case, you will save some fraction of that 27% we were looking at above.  And, within about 5 years, given the historic inflation rare of medical care, you’re back to the same cost baseline you started with. And, of course, this assumes no loss in quality – an assumption firmly asserted but never backed up.

Finally, the essay concludes with a series of recommendations, many of which are very appealing – applying anti-trust laws to hospitals, taxing healthcare profits (at non-profits!) at a high rate, making all hospital pricing cost-based and transparent to the user – but, again, these do not explain how we’re driving inflation out of the system so that these steps are a solution rather than a reprieve.

My take: an aging population of entitled Boomers plus fewer and fewer children plus a high unemployment/low wage growth economy plus a spineless yet dogmatic government leadership = no real solution. Well, except for the two-pronged solution of denying care to some based on some formula more ‘fair’ than inability to pay and killing off the old, the expensively sick and the crippled – that’ll work, at least for a while.  Strike that – too grim. But the math stands a better chance of working.

What would I propose? I have no more right to have an opinion than anyone else, and would advise against anyone paying any attention to anything I say about this. But, fools rush in. The pragmatic side of me says: Use the Medicare pricing and billing model. Establish a baseline of acceptable care that everyone gets and provide it free to the user – this would include all basic maintenance and health stuff, and proven, conventional treatment for all diseases and disorders that afflict more than, say, 1% of the population or for which financially manageable treatments have been established.  Exclude treatments for very rare and expensive conditions and for experimental treatments.

But most important, the following must become our healthcare mantra, chanted regularly, until we all are singing along:

We’d sure like to pay for all the healthcare anyone would ever want. But we can’t. What we can do is pay for all the truly routine healthcare for everyone from womb to grave, from pre-natal care to nursing homes for the aged infirm. And we encourage, in the great American tradition, that private insurers and charities be set up to help provide care for those rare or experimental treatments some people might need at some point. But we can’t responsibly spend more than X% of government revenues on health care and still fulfill our obligations to future generations to hand on to them an economically viable country.

Author: Joseph Moore

Enough with the smarty-pants Dante quote. Just some opinionated blogger dude.

3 thoughts on “Medical Costs – Exactly How Out of Control? Part 2”

  1. Well, if you ask my wife, a health-care provider, costs are rising not only because of the things you mentioned, but also because of taxes and the fact that the government pays pennies on the dollar of cost to most providers, so you have to charge many times the actual amount to break even.

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