If we ever get a real dialogue going on intelligent rationing of health care in America, I would be quite optimistic about our future as a people. If we do not achieve this result, then I would be less optimistic.
For we all know that when it comes to economics, the basic issue is/has and always will be about how we spend our money as a people. Yet sadly we have moved far from this fundamental truth as a collective.
Take the whole discussion around preventative medicine. While I want to make it clear to everyone that I am a strong proponent of spending even more money on preventative medicine, still anyone who thinks preventative medicine reduces costs ignores a basic truth of mathematics which I will illustrate below.
But perhaps more fundamentally, anyone who thinks this has forgotten the basic fact that we will all die of something one day.
Let me illustrate with a rather gruesome example to simply make my point:
Scenario A- Society spends nothing to prevent illness. As a result of neglecting preventative medicine, people sadly die at the relatively young age of 55. And while their death can be from anything, in this example, let's say they die from a heart attack and that society is willing to treat them in death with $300,000.
Scenario B- Society spends $1000/year per person preventing cardiovascular disease. As as a result of this increased spending on preventative measures, people die at much older age 75 but then they do eventually die. Their deaths might be from cancer or another illness, but they do still die. To illustrate this point, we'll also assume these different methods of death also cost $300,000.
Let's add up the costs for the different scenarios...
Scenario A: total cost $300,000/person (people live to 55)
Scenario B: total cost: $375,000/person (people live to 75)
Remember, as we all eventually die, the cost of treating our second method of death must still be taken into account when we think of how preventative medicine saves money by preventing the cost of the first thing that would have killed us. Increasing the age of our death is a great deal but we must not forget that it still means we swap one expensive illness for another at life's end. Sadly death is still inescapable for all of us- in death we are all truly equal.
Now let me illustrate the effects of rationing- and please note that I am not saying rationing must be done by either the government or the market, I am simply illustrating the effect of rationing. As it should be clear from the following example that it is rationing that gives much greater value for our health care dollar.
Say we take the same two scenarios from above but include the concept of rationing at the end of life. This might look the following way:
Scenario C (no preventative spending AND rationing at life's end): total cost $0 (people live to 55)
Scenario D (preventative spending AND rationing at life's end): total cost: $75,000 (people live to 75)
Obviously, of these four scenarios (A,B,C and D), the best VALUE in health care spending is scenario D- i.e. we spend lots on preventative services but not much at the end of our life. In scenario D, people still get to live to 75 but at a cost of $75,000.
Scenario B also gets us to age 75, but at a cost of $375,000/person which is obviously considerably more expensive than $75,000. You can decide how you want to spend this new found money (research to prevent more deaths?).
Now I realize not all end of life illnesses are equally expensive, but never make the mistake of thinking that the ones we have earlier in life are more expensive than the ones we have later as this is most decidedly often not the case.
Again, I use this rather gruesome illustration simply to make a point: when you hear people talk about how preventative medicine saves money, please realize they are incorrect, it was always the rationing that saved the money. Preventative medicine ALWAYS increases spending though it is much better value for the money we spend.
And for those of you who missed Peter Singer's NYT article, I highly recommend it.
Only rationing will save us from an otherwise national calamity and hopefully as a people we can move on to a more intelligent discussion around this issue.
In my next post, I will describe why rationing has nothing to do with private or public medicine and why either system can incorporate rationing fairly.
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