Via the LAT, Soaring cost of healthcare sets a record:
In a stark reminder of growing costs, the government has released a new estimate that healthcare spending grew to a record 17.3% of the U.S. economy last year, marking the largest one-year jump in its share of the economy since the government started keeping such records half a century ago.
The almost $2.5 trillion spent in 2024 was $134 billion more than the previous year, when healthcare consumed 16.2% of the gross domestic product…
[…]
Fueled by new technology, an aging population, rising incomes and other changes, spending on medical care has been consuming a larger and larger share of the nation’s economy for years, jumping from about 5% of the gross domestic product in 1960 to nearly 14% in 2024.
There can be no doubt that something needs to be done in regards to health care in the United States. My main concern about the current bills in the Congress is that I do not think, based on my understanding of their contents, that they will do much to address the cost question.
One of the problems that we seem unwilling to address is that because people (quite understandably) value their health and the prolongation of life at very high levels that basic market forces don’t work as well in health care as some would like to think. If I am buying clothes, a car, or a house, I have to address the question of “how much can I afford?” and at some point have to recognize that if all I can afford is a Corolla instead of a Lexus that the Corolla, while not as nice as a Lexus, still gets me from point A to point B and back again just as ably. When I break my leg, or my kid falls off his bike and hits his head, I can’t go shopping for a deal or decide to forgo a purchase because it isn’t in he budget. Instead, I have to get it fixed and worry about the cost later—that short circuits the basics of a market transaction. Sure, there are times I might decide that I don’t feel bad enough to expend the money to do to the doctor or to buy a specific pharmaceutical product, but on balance, we value health above all else (because, after all, if you are dead or incapacitated, that money you saved by not going to the doctor won’t exactly do you much good, now will it?)
For that matter, if it comes down to extending my life (or my parents’, children, wife’s) in a meaningful way (say, by having surgery, receiving cancer treatment, etc.) I am not going to cost out the process. Indeed, I am likely going to have to make a decision on the spot and worry about the cost later. This is in no way comparable to buying anything else.
Beyond even way that the health care product (especially the most expensive elements thereof) is different from other products, the current system that we have further distorts the price issue by totally divorcing it from any kind of discernable market logic. In other words, even if one assumes that health care is amendable to market logics (which is questionable at best—again, see above), our current system isn’t one governed by such logics.
For example, I get reports from my insurance company which detail what the doctor has charged and what the insurance company will pay. It can often be almost comedic, such as a real example of a lab test for which the hospital charged $40.00, but the insurance paid $3.40. All well and good, but if I didn’t have insurance, I would be paying the full $40.00 (indeed, the total for the visits was charged at $375.00 v. the paid amount of $78.60). Whatever else one might call this, it is not a system in which the market is setting price. One thing for sure that it is: it is a system in which the insured pay one price and the uninsured pay another (and, indeed, one in which one suspects different insurance companies pay different rates based on negotiations between providers and insurers).
We have a similar situation with prescription drugs, where one pays a set co-pay of, say $35.00, for a drug that costs $246.00. While I am hardly complaining that my out-of-pocket expense is radically lower than the actual price of the drug, I again submit that we are not talking about a market-based system.
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February 4th, 2024 at 5:34 pm
(Reordered a bit):
It’s not obvious to me that rising health care expenditures are a symptom of a problem. As someone else once wrote:
In fact, as some other costs (food, clothing, technology) have dropped over the last fifty years or so, wouldn’t it make sense that we would put some of the savings into thigs that we “(quite understandably) value … at very high levels”?
We agree there.
February 4th, 2024 at 6:04 pm
We agree on the lack of market logics, but if that is true, then comparisons (like to TVs and pro sports tickets) really misses the point, yes? At a minimum it would be helpful if those who are happy with the status quo would acknowledge that there is not market-based health care system in the US, and it hasn’t had one for quite some time.
And, btw, no one is arguing that is it bad to spend more on health care than baseball, but rather that the costs continue to rise and the burden on citizens is also rising in a way that one can find oneself in dire financial circumstances as a result of those costs (costs not optional like a TV). Further, there are a substantial number of persons who have no insurance, and that is a serious problem, whether we think our medical care is great, or not.