Thursday, July 23, 2009

Myths of the health care debate

Cliff Asness of Stumbling On Truth has a long, but powerful common-sense refutation of many of the myths that we've heard over and over during this whole debate over health care reform. He starts off by answering the arguments about how health care costs so much more now than it used to.
Myth #1 Health Care Costs are Soaring

No, they are not. The amount we spend on health care has indeed risen, in absolute terms, after inflation, and as a percentage of our incomes and GDP. That does not mean costs are soaring.

You cannot judge the "cost" of something by simply what you spend. You must also judge what you get. I'm reasonably certain the cost of 1950's level health care has dropped in real terms over the last 60 years (and you can probably have a barber from the year 1500 bleed you for almost nothing nowadays). Of course, with 1950's health care, lots of things will kill you that 2009 health care would prevent. Also, your quality of life, in many instances, would be far worse, but you will have a little bit more change in your pocket as the price will be lower. Want to take the deal? In fact, nobody in the US really wants 1950's health care (or even 1990's health care). They just want to pay 1950 prices for 2009 health care. They want the latest pills, techniques, therapies, general genius discoveries, and highly skilled labor that would make today's health care seem like science fiction a few years ago. But alas, successful science fiction is expensive.

In the case of health care, the fact that we spend so much more on it now is largely a positive. The negative part is if some, or a lot, of that spending is wasteful. Of course, that is mostly the government's fault and is not what advocates of government control want you to focus upon. We spend so much more on health care, even relative to other advances, mostly because it is worth so much more to us. Similarly, we spend so much more on computers, compact discs, HDTV, and those wonderful one shot espresso makers that make it like having a barista in your own home. Interestingly, we also spend a ton more on these other items now than we did in 1950 because none of these existed in 1950 (well, you could have hired a skilled Italian man to live with you and make you coffee twice a day, so I guess that existed and the price has in fact come down; my bad, analogy shot). OK, you get the point. Health care today is a combination of stuff that has existed for a while and a set of entirely new things that look like (and really are) miracles from the lens of even a few years ago. We spend more on health care because it's better. Say it with me again, slowly - this is a good thing, not a bad thing.
He goes on to refute the arguments about Canadians paying less for medicine than we do by explaining the differences between the fixed costs of researching a new medicine and the variable costs of producing more pills. From there it's on to looking at costs in countries with socialized medicine and reminding us that the United States, by providing the economic benefits of medical research is, in a sense, subsidizing their health care. If they had to depend just on what it was profitable for innovators to develop in their own countries, they wouldn't have any access to all the wonderful developments we've seen in medical care in our lifetimes. And if we "reform" our system as the Democrats are proposing, we won't have anywhere to look to for providing the next generation's medical breakthroughs. And we will all pay in the cures not yet discovered.

Go read the rest of his essay and bookmark it for future reference when you hear these same arguments thrown up in debates again and again.