With What?

Mickey Kaus takes note of the Robert Samuelson article I commented on yesterday and observes:

a) Maybe none of these options–single payer, competition among health plans–will significantly lower costs, and we’ll simply have to pay the increasing bill. Just a thought. b) If, as Samuelson says, “doctors hospitals and patients don’t want to be limited,” it sounds like the debate over our system of “open-ended reimbursement” isn’t a “debate we need.” It’s a debate we’ve had. Samuelson’s side lost. Nobody wants to bend the curve.

In response to Mickey’s observation:

we’ll simply have to pay the increasing bill

I can only ask “With what?” Healthcare spending isn’t just growing faster than the GDP, it’s growing faster than our GDP can reasonably be expected to grow. It’s already occupying a substantial proportion of the available investment that the economy needs to grow and growing faster than every other sector of the economy means that much less to spend on healthcare.

Questions like that remind me of the cat and rat farm. You know, you have two sheds, one for cats and one for rats. You feed the cats to the rats and the rats to the cats and sell the cat skins. Profit! No inputs!

There is no perpetual motion. You can’t keep the healthcare system going by taxing the healthcare system and, if that’s the segment of the economy that’s growing, adding jobs, and making money, then that’s what you’re planning to do. And you can’t keep the healthcare system going by sacrificing the rest of the economy to it, either.

And that’s my answer to the implicit question with which Mickey starts his post. I don’t expect the public option to control costs. That’s why I’m critical of it. We need cost control in order to be able to expand coverage or even to maintain the healthcare of people who have it now.

7 comments… add one
  • larry Link

    Don’t insurance companies compile huge amounts of data which they use
    to determine risks and other things that keep them making profits…has anyone ever seen these data bases…what do the insurance companies know that we don’t and they really don’t want us to know…?

  • TimH Link

    The answer to ‘with what’ is ‘the rest of our GDP.’ We’re not talking about spending 50% of our GDP on healthcare anytime soon. Over the past 50 years, the percentage of GDP that we’ve spent on food, clothing, etc. have all gone down — essentials are cheaper. What to do with the extra money? Keeping it as discretionary income is one option, but one way of looking at high health care spending (note that ‘high’ does not necessarily mean ‘wasteful’), is that we’d rather spend the money on staying alive and improving our quality of health than on a bigger flatscreen.

    It’s hard to make the case that money can be spent on anything better than living longer and better. This is especially true of a more developed society, since those that live longer work longer, thus generating a bigger RoI on education expenses, etc.

    We need to ask ourselves: if we want to ‘bend the curve’ (and at this point, I’m not sure we do want to), what do we want to cut? Cutting wasteful spending (which is hard to define) is obviously a good idea; but what about ‘cutting bone?’

  • Actually, it’s a lot sooner than you might think. We’re already spending 16% of GDP on healthcare and costs are rising sharply even as other sectors are dwindling.

    Before the present downturn it was estimated that we would spend 20% of GDP on healthcare by 2017. Unless healthcare slows or other sectors increase, that will be a lot faster now.

  • Brett Link

    It’s already occupying a substantial proportion of the available investment that the economy needs to grow and growing faster than every other sector of the economy means that much less to spend on healthcare.

    What’s the problem with spending a huge fraction of GDP on health care? What “should” it be spent on? Manufacturing and Agriculture have both declined heavily in terms of a fraction of GDP due to globalization and productivity increases.

    It’s not as if there is some ideal GDP make-up.

    There is no perpetual motion. You can’t keep the healthcare system going by taxing the healthcare system and, if that’s the segment of the economy that’s growing, adding jobs, and making money, then that’s what you’re planning to do. And you can’t keep the healthcare system going by sacrificing the rest of the economy to it, either.

    Are you mixing up health care spending with government health care spending?

  • Something over 60% of all healthcare spending is government healthcare spending and Medicare functions as a price support for healthcare. They can’t be separated.

    As to what sectors of our economy should be growing, basically it’s anything that does not require taxes to rise or public borrowing to increase for it to grow.

  • steve Link

    The fact is that we just dont care that much about costs. Look at all the luxury medical centers we build. In much of the rest of the world they post the costs of the care for patients to see. Not in the U.S. Heck, even we doctors dont know what much of what we do costs. Any minimal attempt to cut costs generates major negative feedback. The politicians use any attempts to cut costs to score points against the other side. Look at what happened when it was suggested we cut the Medicare Advantage program.

    I think the question of what percentage of GDP we should spend on health care is still open to debate. Cowen has written a lot about it if anyone is interested, as have many other economists and health care people. The more immediate question, I think, is whether or not we are getting a good return on what we spend. We pay a lot more than other countries. If our care was a lot better, it might very well be good spending. That is not what the data shows unfortunately.

    Steve

  • What’s the problem with spending a huge fraction of GDP on health care? What “should” it be spent on? Manufacturing and Agriculture have both declined heavily in terms of a fraction of GDP due to globalization and productivity increases.

    Data please. Employment in those fields has declined, but I’d be curious to see that those sectors have declined in terms of GDP as well.

    As for how much we spend, sure we could just let things go, problem is that as Dave notes most health care expenditures are government expenditures. So you are looking at increasing tax rates. That will eventually limit economic growth. Its similar to eating your seed corn vs. holding on to it for future plantings.

    I’d be happy to let things go where they may if it was a market process. But we aren’t, we have a system where we allocate resources via the voting mechanism and that usually doesn’t work all that well when you have a large population. If the country were smaller (see Singapore), or it was a local issue then voting or non-market mechanisms might work (see the work of Elinor Ostrom), but we are talking about national policy here for hundreds of millions of people.

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