health costs & benefits

[Jim Devine <jdevine03@xxxxxxxxx>]

September 27, 2006
Economix/ New York TIMES

[this column seems to be the NYT's answer to Freakonomics.]

The Choice: A Longer Life or More Stuff
By DAVID LEONHARDT
The most authoritative report on the cost of health insurance came out
yesterday, and it's sure to cause some new outrage.

The average cost of a family insurance plan that Americans get through
their jobs has risen another 7.7 percent this year, to $11,500,
according to the Kaiser Family Foundation. In only seven years, the
cost has doubled, while incomes and company revenue, which pay for
health insurance, haven't risen nearly as much.

These spiraling costs — a phrase that has virtually become a prefix
for the words "health care" — are slowly [!] creating a crisis. Many
executives have decided that they cannot afford to keep insuring their
workers, and the portion of Americans without coverage has jumped 23
percent since 1987.

An industry that once defined the American economy, meanwhile, is
sinking in large measure because of the cost of caring for its workers
and retirees. For every vehicle that General Motors sells, fully
$1,500 of the purchase price goes to pay for medical care. "We must
all do more to cut costs," G.M.'s chief executive, Rick Wagoner, said
on Capitol Hill this summer while testifying about health care.

Mr. Wagoner's argument has become the accepted wisdom about the
crisis: the solution lies in restraining costs. Yet it's wrong. Living
in a society that spends a lot of money on medical care creates real
problems, but it also has something in common with getting old. It's
better than the alternative. [unless, of course, the alternative is
much more efficient.]

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, notes David M.
Cutler, an economist who wrote a wonderful little book in 2004 titled,
"Your Money or Your Life."

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 René Dubos wrote
in the 1960's.

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?

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. We
think of health care as if it were gasoline, a product whose price and
quality have nothing to do with each other.

There is no question that the American medical system does suffer from
a lot of waste, be it insurance industry bureaucracy or expensive
procedures that haven't been proven effective. But the No. 1 cause of
the cost increases is still the one you can see at the hospital and in
your medicine cabinet — defibrillators, chemotherapy, cholesterol
drugs, neonatal care and other treatments that are both expensive and
effective.

[somehow this guy ignores how inefficient the US health-care delivery
system is relative to other countries.]

Not even most forms of preventive care, like keeping diabetes under
control, usually save money, despite what many people think. The care
itself has some costs, and, more important, patients then live longer
than they otherwise would have and rack up medical bills. "When I make
this point, people accuse me of wanting people to die earlier. But
it's exactly the opposite," Dr. Jay Bhattacharya, a researcher at
Stanford Medical School, told me. "If these expenditures are keeping
people alive, it's money well spent."

As Dr. Mark R. Chassin of the Mount Sinai School of Medicine in New
York says, "You almost always spend money to gain health." Of course,
the opposite is also true: the best way to reduce health care spending
is to reduce health care itself.

Which is exactly what we're starting to do. The growing number of
families without health insurance are, in effect, families who have
been kicked off the country's health care rolls. Many will go without
available treatment, will get sicker than they need to get — and will
thereby save the rest of us money. They are what now passes for a
solution to the health care mess.

The current situation is indeed unsustainable, a point that the
conventional wisdom has right. The cost of health insurance can't keep
doubling every seven years, and wasteful spending — the brand-name
drugs that are no better than generics, the treatments that haven't
been proved to extend lives or improve health — does need to be reined
in.

But far too much of the discussion has been centered on this narrow
idea. 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."

E-mail: leonhardt@xxxxxxxxxxx

Copyright 2006 The New York Times Company


--
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.