Whose Costs? Which Health Care?
One issue with a lot of health care commentary (Michael Kinsley’s correctly maligned column for example) is that the concept of “cost” is somewhat ambiguous in a lot of these contexts. For example, on one way of looking at things, an initiative that raises $90 billion in tax revenue, reduces private health expenditures by $100 billion, and then provides equivalent services for $90 billion is very expensive. It costs ninety billion dollars! From another way of looking at it, though, it’s an initiative that saves $10 billion.
That’s the question of whether we’re talking about cost to the government, or cost in some more general sense.
Another issue has to do with value. If we cut $1 billion worth of regular pediatric care for poor children, that will “save money.” But that’s not the same as cutting $1 billion worth of unnecessary treatments for senior citizens out of Medicare. The latter would be a genuine saving; the former would just be denying useful services to people.
Pure fiscal cost to the government is an important thing to keep our eye on. Among other things, we need tax revenues to be adequate to cover the pure fiscal cost. At the same time, I think it’s a little perverse to view it as the main thing to worry about. If you have a system that has a high fiscal cost because it’s providing a lot of genuinely valuable services to people then the thing to do is to pony up the necessary tax revenue. The thing to really be worried about is the prospect of spending money on health care services that aren’t delivering the goods in terms of health outcomes. And that’s just as worrying when it happens in the private sector as when it happens in the public sector.
13 Responses to “Whose Costs? Which Health Care?”
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July 11th, 2009 at 11:51 am
Right. You shouldn’t confuse cost with the question of who pays. Why should I care if I write a check to the govt or to a private insurance company or directly to a doctor?
Never forget that many other countries get as good or better healthcare at half of our per capita cost. Even countries with uneducated fat people with bad habits.
July 11th, 2009 at 11:53 am
Cutting $1 billion in unnecessary treatment for Medicare beneficiaries is like cutting $1 billion in energy usage. You save on the fuel needed to generate that electricity but all the infrastructure costs remain in place, the plant, transmission lines, etc.
The same is true in health care. Hospitals have considerable expenses associated with the facility and staffing is variable in more of a stair steff vs. linear fashion.
Due to fixed costs in the system, the savings aren’t as large. We hear of the the cost of interest on the federal debt. Did you know the sale of HCA to KKR and Triad to CHS added $2 billion in annual interest costs to our health care system? No new doctor was added, no new bed was built, just a bill of sale was signed and financed.
Someday, America will need to consider a public utility model for hospitals. It will occur after for-profit health care sucks the system of blood.
July 11th, 2009 at 12:08 pm
Pardon a frivolous comment, but am I the only one who’s sick of that stethoscope-on-the-George-Washingtons photo? New graphics needed, Matt! Or at least rotate the photo or something.
July 11th, 2009 at 12:24 pm
Given American voting patterns, you have that exactly backwards.
July 11th, 2009 at 12:27 pm
Rather the opposite, I expect, since most mergers are immediately followed by reductions in staff, plant, etc, because of excess capacity, economies of scale, etc….
July 11th, 2009 at 12:43 pm
One other thing is that health care spending crowds out other things like cars and flat screen TVs. Typically we let the market decide the relative worth of different things ie. cars vs. TVs. But if government is paying a big portion of health care costs then the decisions about relative worth have to be made by government. Its one thing to compare the value of pediatric care for kids to hip replacements for old people, but that doesn’t give us a price point for health care services. Since this is government I assume that the outcome will depend on the relatvie power of different interests.
July 11th, 2009 at 1:29 pm
When a hospital sets prices for services, they have to consider the hundreds of different payment arrangements they have with insurance companies. Some of those contracts make it necessary to set a base price that is HIGHER than the cost to provide the service in order to get reimbursed enough to cover the costs. Bottom line, the current insurance model inherently drives up prices, and adds to costs (the administrative costs associated with claims pricing is unbelievable).
Let hospitals charge what services actually cost. We’d save billions.
July 11th, 2009 at 5:30 pm
Childhoods immunizations are needed to be able to protect your child from getting any types of illnesses. In this way, you will assure their health and safety.
July 11th, 2009 at 9:24 pm
This whole discussion would be easier too if we could get rid of the the notion that the federal government is some alien institution being forced on us by some external force. It’s our government, and we can decide what purposes we want it to serve.
July 11th, 2009 at 9:44 pm
Michael Kinsley is a dufuss? who knew?
July 11th, 2009 at 11:54 pm
If state is spending 100 billion dollars, this is either vile oppression of the taxpayers, or, if the taxpayers enjoy the effects of the spending, insidious oppression.
State funded pediatric care? So we will inculcate the wee tykes with the worship of the state? What deviltry is it?
July 12th, 2009 at 9:56 am
#3
You’re not the only one. I’ve been thinking MattY should use “cliche kitty” as the emblem of health-care finance posts. “Cliche kitty” has nothing to do with health care, but who cares? No one gets tired of cute kitties.
July 14th, 2009 at 1:50 pm
The focus on cost to the government has forced the reform debate into an area that is not conducive to real reform. Because we have identified reducing healthcare spending and protecting the deficit as the primary targets of reform, we have limited the kinds of changes we can make. Here is a column I wrote on the same basic topic as this post: http://centraljersey.com/articles/2009/07/14/opinions/doc4a5cb788d36c7906999330.txt