* The reason for health care cost inflation

Topics: Health
20 Jun 2007

From: Ervan Darnell

A recent KQED Forum [1] had a panel discussion on containing health care
costs. One of the panelists was a Berkeley prof [2] specializing in
this (I don't always give Berkeley top marks for objectivity on
political matters, but this guy seemed credible). His analysis: most of
cost increases are driven by more technology, not by malpractice awards,
not by defensive medicine, not by rapacious health care providers, but
simply by ever better technology. He said that (first world) socialist
health care systems had all the same problems as the U.S. and were
simply a bit behind the U.S. in absolute cost because of where they
started down this path.

Dow didn't have a prescription to fix it, the other panelists all wanted
more regulation, of course.

One of the scariest things they mentioned was "technology assessment".
The claim is that everyone from HRC to Gingrich and Schwarzenegger is in
favor of this. It's a euphemism for some government bureaucrat having
the authority to outlaw a new medical procedure, on the theory that it
is not cost effective. How about letting me decide what I think is cost
effective for my life? But this logic follows perfectly from a
socialist assumption that everyone should get the same thing, some new
technology will banned to everyone because only some could afford it.
Politically it's astute too. People are not conscious of a better life
they are deprived in the same way they are upset over something existent
being banned. It does beg the question though of why this hasn't worked
in Canada or England.

Returning to the first point, to the extent that Dow's analysis is the
full answer, it says there is no problem. Real health care costs are
not in fact increasing. It says only that our desires to consume ever
more things are increasing faster than our incomes. That's a surprise?

Well, okay, there is a problem in that our apparent bills are rising,
but this then is the result either of cost transfer from one patient to
another (e.g. indigent ER care, forcing insurance to cover foreseeable
expenses) or demanding the latest and greatest. For instance, a
laproscopic appendectomy is more expensive than an open appendectomy
[3], but we all want the laproscopic one now and then view this as
appendectomy getting more expensive, but it's not the same appendectomy
we would have had 20 years ago. What would happen if someone tried to
offer 1980 quality care (or an insurance policy that covered such)? I
suspect they would be sued out of existence inside of a week. In that
sense, defensive medical costs are high. But just as surely no one
would accept such a low standard of care.

Either way you slice it, the problem is not an intrinsic one of delivery
so much as it is one of rising expectations.

[1] http://www.kqed.org/epArchive/R705140900
Mon May 14, 2007, KQED Forum
[2]William Dow, professor of health economics at the School of Public
Health at UC Berkeley
[3] http://www.medscape.com/viewarticle/430259_3
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