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Good Health Care Costs

Sep 2, 2009
Economics, Politics

By now, we all know that President Obama said he would not pass a health care reform bill health insurance reform bill if it adds to the deficit. And one significant problem is that the Congressional Budget Office (CBO) has scored the reform that has made its way furthest in the political process (H.R. 3200) and said it would add $1 trillion over the next 10 years. That has left some House Democrats angry, saying that the CBO has not accurately accounted for the savings that will come from increased preventative care.

Unfortunately for them, the facts don’t support their claim. CBO Director Doug Elmendorf cited a study from the New England Journal of Medicine saying that in 80% of preventative care programs, the costs of treatment actually increase. A new article in the journal Circulation says that increased diagnosis and treatment of diabetes actually costs more than the alternative.

How can prevention of disease be more expensive than treatment? Two reasons. First, you have to test a whole lot of people before any of them show symptoms and many of them would not get the disease anyway, so that costs money. Second, because unfortunately it is cheaper to let someone go undiagnosed with diabetes and die prematurely than to spot it early and pay to treat them every year they live, especially when that treatment will make them live longer. As Stuart Varney essentially put it this morning: it’s cheaper to have someone drink a fifth of Jack Daniels and smoke a carton of cigarettes every day and die at 50 than it is to have them live long lives and have to spend money on them for 90 years. If you want to save on health care costs, encourage unhealthy behaviors and people die sooner, as health care costs rise significantly the older a person becomes.

That sounds absolutely horrible, right? Well that’s what happens when all you focus on is costs. When conservatives get up in arms over health care costs in this manner, they’re falling victim to the same distorted logic that liberals use when they say that our health care costs too much. Not all health care costs are bad — when we save lives with new pharmaceuticals and surgery techniques, and prevent disease with new methods of testing and diagnosis, that costs money. But aren’t those things good?

(Aside: We have a lower life expectancy in the U.S. than in many countries, but much of that is due to violent crime and automobile accidents, not health care — adjusting for that, we perform much better, and it’s likely due to our advances in medicine. If memory serves correctly, about 80% of Nobel prizes in medicine in the last 30 years have been given to Americans.)

When we make people live longer, that costs more money too. This is worsened by our Social Security system: since the program was created, life expectancy has increased by more than 10 years, yet we have only pushed back the age at which you can receive full benefits by 2 years. Old people keep living longer and they retire at the same age, so that increases the burden on everyone else. But despite this increase in costs, my questions remain: is the cost of health care the only thing that matters? What about the benefits?!

I remember a study I read about a few years ago which stated that the increase in life expectancy that has occurred in the last century has increased the overall benefits of the average person by over a million dollars. You live longer and have more health care costs, sure — but you have more time with your family, your quality of life increases, and we’re all better off as a result. Democrats say “we spend too much on health care” despite the fact that this spending ends up making us better off. (Here’s a study saying this very thing about the US, and another one saying the same thing for Japan.) And now Republicans are saying that spending more money on prevention is bad just because it costs more, ignoring the potentially beneficial effects on quality of life.

I think  Charles Krauthammer puts this in its proper context: prevention is not the magic bullet that some Democrats think it is, and it has its own costs – but it still can be a good thing, and worth paying if it means people live longer, healthier lives. A little more emphasis on the benefits of health care, not just the costs, would be a refreshing change — from both sides of the political spectrum.

P.S. I think there is an analogy here to the global warming climate change debate: some would argue that we should focus on prevention regardless of the cost, and impose taxes on carbon and other costly regulations, while others say we should focus on treatment — work to adapt to future climate change if and when it happens with economies that are stronger and better able to withstand fluctuations in climate.

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6 Comments

  1. Benjamin Seghers  •  Sep 2, 2009 @6:42 pm

    I don’t think I understand your diabetes example. Isn’t the point of prevention that one avoids the disease in the first place? When talking about giving life-elongating medication to diabetics who have been diagnosed, aren’t we talking about treatment rather than prevention? And wouldn’t it be cheaper to prevent someone from smoking and drinking than to have to treat the smoker and drinker (or even more than just letting them die)? I agree having people live longer, say past 50, creates a cost, but is that cost greater than the gain created (because living humans create more wealth than dead ones)?

  2. ProfSwitzer  •  Sep 2, 2009 @7:52 pm

    In this case, preventative care = diagnosing people early and treating it so that it doesn’t get to the point where it is more difficult, and/or more costly, to deal with later.

    “Wouldn’t it be cheaper to prevent someone froms moking and drinking than to have to treat the smoker and drinker?” No, because they live longer lives and we have to pay for them when they’re old. The problem is that when all you look at is costs, it’s better to have them smoke, drink and die young. But if you also look at benefits, as you should, then obviously it’s better to have them be healthy. I agree with you, Benjamin. (The problem is that the government pays the costs but doesn’t get the benefits of the extra time you get to spend with your grandkids, because they can’t tax that…yet.) That’s the point of the post — the Republicans who don’t want to spend more money on prevention just because “it costs more” are only looking at half of the picture and making what I believe to be a faulty conclusion.

  3. Stevo  •  Sep 2, 2009 @8:17 pm

    Switz — good discussion. I would comment that it is very hard to measure “cost” in terms of health. If a teenager dies young of cancer because his insurance wouldn’t pay for proper treatment, we could say that society saved money because it is cheaper to let him die than it is to treat him, but what is difficult to measure is the years lost in terms of his productivity both to his family and to society. And the emotional loss to his family as well as the morality of letting him die is really priceless.

    I think of healthcare in our country much like the micro-world of a family — are we going to take care of each other no matter what, or not? A family that cares about and for each other is a healthy one (whether literally so or not). The more we discuss COST of health care, the less the USA is a family or a people. If we are a society of individuals with our individual freedom being our main value, where in our values do we have that we care about each other? I suppose liberty and freedom do not include caring for one another — that is a separate value which us Americans have not been so big on, in my opinion. My argument follows that if we don’t care much about each other but more about ourselves (“liberty and freedom”), than why do we defend our country with a government-run military? Why do we have a government-run fire department that ‘battles’ fires with ‘armies’ of firefighters to protect our common land? Who cares about our common land or property if we don’t care about each other? If it’s every man for himself, then it should be every man for himself through and through — anarchy!

    Why should I pay tax dollars for a fire dept to protect my neighbor’s property but not my neighbor’s health? Oh, I get it, if my neighbor’s property is destroyed by fire, then the value of my property goes down, so I guess it all goes back to individual priorities.

    If on the other hand, someday we ARE going to be a people that care about each other, let’s prove and actually take care of each other, starting with health care. People who are anti big government but want the biggest government-run military in the world and who are proud of our firefighters but don’t care about their neighbors with cancer make no sense to me!

  4. Benjamin Seghers  •  Sep 2, 2009 @10:12 pm

    Thanks for the clarification, Dr. Switzer.

    Stevo, I think you make some good points. The point I was trying to get at is that I don’t think it’s necessarily the case that letting someone die early is always cost efficient. That would ignore the possible wealth creation from that person. A living individual, while being able to enjoy things like spending time with family, also has the opportunity to be productive, work, invent, create benefits to society, and so on (in ways that are quantifiable).

    That might not be the case after they retire, at which point they’d solely be creating accounting costs for society. After that point, I think it’s conceivable that letting them die would save costs. Of course, as Dr Switzer points out, that’s only looking at one half of the picture.

  5. ProfSwitzer  •  Sep 2, 2009 @10:20 pm

    Benjamin — It’s hard not to be cynical about this whole cost thing, but from the CBO’s perspective it wouldn’t be about the wealth creation of that individual — it would be about how much we could tax them. So they may be a net benefit to society as a whole but a net cost to the government.

    Stevo — Definitely some good points and I appreciate your take on this. One thing about fire departments: we didn’t always have public fire departments. When houses were more spread out, you had to pay for fire protection and if you didn’t pay, they let your house burn. But with urbanization, people lived closer together and now if I don’t pay for fire service and my house catches on fire, then my neighbor who does pay can call the fire company and have them put my house out because it’s a danger to him. This creates a “free-riding” problem, where nobody wants to pay since they think their neighbor is going to pay — that makes government provision the more sensible approach to a case like this. There are still some areas of the country that make people pay for fire protection. I use this article in my class.

    I guess the analogy to health care would be in a situation of communicable diseases. If my neighbor gets sick, I’m more likely to get sick, so he poses a public health risk and the government should help pay for him to get a virus or treatment — we all pitch in for that so that we minimize our risk for exposure to the disease.

  6. Stevo  •  Sep 4, 2009 @6:52 pm

    Switz — if my neighbor works at a local factory, let’s say, and he gets diagnosed with cancer, then I think an argument can be made that his treatment and recovery is good for the local economy which is therefore good for me. Or — even better — if his cancer is diagnosed very early because of a preventive screening test, this might be even more cost-effective and beneficial to the economy and therefore me. Yes, this can be debated, and the actual numbers involved would make a difference I am sure, but I think there is a decent chance that the well-being of our fellow Americans is important for our economy both local and federal. Plus — think of this — since private insurers have higher overhead vs government run health programs (the former approx 20% overhead vs Medicare at only 4%) — wouldn’t it make business sense to cut costs on healthcare by going with a plan that has lower overhead?

    Even if you argue that preventive care is not cost-effective, and this again can be debated over and over and probably depends greatly on the specific health issues in question, there again is the emotional and social losses associated with lack of medical care, early death and disability, etc., which are very difficult to assign numbers to.

    Lastly, in this country we are fascinated with WAR — not just real war but we always talk about the “war on drugs”, “the war on crime”, etc. In fact, one of our country’s most popular sports, football, is like war — we talk about the “air assault” of the passing game, the “ground attack” of the running game, etc. There are many other references to war in the language of football which you can probably think of, but that I won’t go into. Why am I bringing this up? Because with firefighting, it is war-like and very macho — “an ARMY of firemen went to BATTLE today under extreme conditions and came out VICTORIOUS”, the news media might say. They also might talk about how fire crew travelled from northern california to help their southern california compatriots battle a big blaze and talk about solidarity (army-like). There is a fascination with firefighting in my opinion due to its macho-war-like qualities inspite of the fact that firefighting is a GOVERNMENT-RUN program (government-run programs are SOFT)!?

    Most people who are against government-run anything think that socialism is for weak pansy Europeans (I am completely paraphrasing). But if a program or activity is war-like in any way, then we don’t even consider or mention that it is government-run. When’s the last time you heard on the news something like, “today the government-run fire department was delayed in putting out a fire and many critics are now questioning the ability of the government to run the fire dept., arguing that private industry is best for everything…”? You never hear that because it is war-like! No one ever questions the strength of our military SIMPLY BECAUSE it is GOVERNMENT-RUN. The military is for war, which is OK for the government to run. Macho!

    So maybe if healthcare was macho and war-like, it would be ok to have it government-run. But since helping people stay well and treating and caring for them when they are ill can be seen as a soft, more nurturing endeavor with out much macho-ness to it, then forget it, no way in hell the government will do that!

    As far as disease outbreaks such as H1N1 flu, or more exotic infections like ebola for example, everyone likes the government getting involved not only because the government is probably better suited to do so for the public good, but because it is exciting and war-like! “The war on supergerms!” There are many good exciting thriller-type movies covering scary disease outbreaks. But a family doctor taking care of a family and their medical needs is not war-like or exciting enough.

    Perhaps my thoughts seem a little out there or off base, but I am confident that we are a nation fascinated and addicted to war. You got a problem that requires a war to fix it, better chance of getting the government involved and getting support for it. People suffering with cancer or diabetes or asthma or heart disease — too soft to be war-like for this country. So I am tired of hearing people say the government can’t run anything. It’s more of a difference of what people want the government to run. The same people that don’t want government in healthcare would never even consider removing government from the defense of this nation. My two cents.

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