Expensive Trade Offs in Health Care

We often hear that the U.S. spends more on health care than any other country.  That stat has been used to sell us on the need for government involvement in the health care market to get that cost down.

First, we need to understand that previous government interventions in the health insurance and medical markets contribute to amount we spend on health care.

But, there are other good reasons that explain why we spend more.  Two of those reasons are because we can and we choose to.

We are a wealthy country.  Poor people in our country have a standard of living not  known by kings and queens of the past.  Meeting the basic needs to survive – food, clothing, shelter –  takes a much smaller percent of our income than it once did, which makes more of our income available to be spent on other things like iPods, flat screen TVs, restaurant meals and health care.

We choose to spend more on all of these things than folks in other countries, yet it’s health care that we worry about.

Another reason we spend more is because we value the benefits we get from the higher spending, though many are not aware of and do not appreciate those benefits.  As we move to more government involvement, we may gain a new appreciation for some of these benefits as we lose them.

One such benefit is short wait-times.  Many comparisons of wait times between the U.S. and countries with government health care show that the U.S. outperforms by large margins.  Procedures that have wait times of days in the U.S., may take weeks, months or years in other countries.

Thomas Sowell once gave an example of a relatively standard surgery to fix a painful problem.  In the U.S. the surgery could be scheduled and completed within a few days and a person could be back to work quickly.  In the U.K., the wait time for the same procedure was weeks and the person would not be able to work while waiting for surgery.

The higher cost productivity gained is part of the medical spending stat in the U.S., but the cost of productivity lost is not in the U.K. spending totals.  Comparing U.S. medical spending to the U.K. is a naive apples-to-oranges comparison.

Other benefits of our higher spending, unfortunately, we may never  realize we lost.  One such benefit is the pace of innovation.  Some of the higher spending on medical care goes to cover the costs of developing safer, faster, easier, less invasive procedures with less recovery time.  One such example of innovation was given by commenter Davesix at Cafe Hayek:

Look at what’s happened with the practice of cardiology. Ten years ago, athersclerosis was treated with coronary-artery-bypass surgery, performed by cardio-thoracic surgeons. The procedure was expensive and invasive, and it resulted in extended recovery times, and relatively long hospital stays.

Today, most athersclerosis is treated by cardiologists using ablative stents, with catheters inserted into blood vessels in the patient’s legs in a cath lab, using as many as five catheters. The procedure does not even require general anesthesia, and the patient usually goes home the following day.

Had this innovation never occurred we would know no different.  We’d still use the invasive procedure.

I experienced this myself first hand a few years back with an emergency appendectomy.  I thought I had it bad.  When comparing my story with a friend’s appendectomy story from about 15 years ago I realized that I was the beneficiary of some major advancements in medicines in just a short time, which allowed me to get back on my feet and back to work earlier than he did.

Innovation is real.  Just about every medical has experienced vast improvements over the last 10 – 20 years with U.S. based innovation.  This has led to substantial increases to effectiveness of medical procedures, which has vastly improved the quality of life and those on the receiving end.  Further, people in countries with government medicine have benefited from U.S.-based innovation.  Their countries get to adopt the effective advancements.

We should think hard about whether we want to manage the cost and benefit of innovation out of our medical spending.

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