Thursday, March 23, 2006

Three health care systems

On Asymmetrical Information, Jane Galt has started a discussion about controlling health care costs. Comments have included the usual arguments about "socialized medicine" vs. "free markets", but as the commenter Jessica points out:

"The twin elephants in the room that no one wants to discuss are 1) rationing and 2) end of life care."

These issues are probably the most important issues in cost control. Wrestling with these issues, indeed confronting any issues in health care financing requires recognizing that there are really three health care systems:

1. well care involving regular office visits, screening tests, preventive care, etc.

2 catastrophic care: auto accidents, inherited diseases, cancer

3. end of life care: care for people who have no hope of recovering. For example, senile dementia never gets better; it only gets worse. Providing complex medical care to these patients is extraordinarily expensive.

In the well care health system, needs are predictable and limited. A variety of financing systems would work and markets can operate as envisioned.

The catastrophic health care system has predictable needs (how many will have accidents, how many will get cancer), but the costs are astronomical and rising all the time. This is where health insurance really operates like insurance, however. Anyone could be struck by these problems, virtually no one could pay out of pocket and all of us want to be protected. The problem here is that new technology is extremely expensive, and there is essentially no limit as to what the costs might be. Even so, parameters could be developed to control costs. We could make a decision as a society that there is a limit to how much money we are willing to spend to save one person.

In the third healthcare system, though, all bets are off. The cost of this system is staggering and growing by leaps and bounds. No one gets better, extraordinary amounts of healthcare resources are diverted and essentially no value is provided. Billions of dollars are spent simply making hearts beat and lungs function.

It is this third healthcare system that is bankrupting us and fixing it will require rationing care. In other words, we have to draw the line beyond which we will not continue to spend money. It isn't "end of life" care per se; it is "prolongation of life" care beyond the point where there is any hope of recovery. There are those whose religious beliefs compel vitalism, a philosophy that any human life is worth extending at any costs. Those religious institutions could offer that care if they wished to do so; society as a whole should not be paying for this care and should not be diverting resources from the young to the dying elderly.

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