Reason for a New Age

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    What you will expect to see here are discussions of politics and tangentially economics. This blog will do its best to present a rational look at the world of today, how the modern world came into place, and the issues that are currently being discussed in the public realm.
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The Cost of Health Care – Conclusion

Posted by publius2point0 on 2010/01/06

The Combined Excess Costs of Health Care
I have listed several theories now of where our excess spending is or may be going. The results are summarized below:

Insurance Administration Overhead: $50-100
Insurance Profit: $210-500
Pharmaceuticals: $360
Medical Equipment: $160
Tort Reform: $0-550*

Minimum Total: $780
Maximum Total: $1670

Even given the maximum total, you will note that we have not hit our goal. The US currently spends about $6100 per person per year on health care. We should be paying no more than about $3000. We have only identified a portion of the excess $3100.

As I noted in part 4, however, I suspect that the rest of that money goes towards nicer buildings, nicer rooms, better service, and other non-medical niceties that make American patients feel like they’re getting something special out of their health care package. In end result though–i.e. as regards actual health–almost certainly most of this is needless waste.

Of course, I might be wrong. But of all theories that I have examined, it seems the most plausible and supported by our excess spending on pharmaceuticals and medical supplies, for which I do have accurate information. Assuming this money to come, principally, from the 31% of spending which goes to hospital care, if that number could be halved, another $946 would be saved, which starts to get us into the region where the remainder could be explained by simple inefficiencies or having overly conservative estimates.

* The $550 number is assuming a 9% decrease from the current per person per year spending of $6100.

Combined Proposals
I have stated several specific policy proposals through the series. Firstly, here are the suggestions which I believe to be fairly inarguable. They are well supported by data and reason.

1) State-by-state restrictions for insurance providers should be revoked and insurance companies encouraged to merge. This will decrease overhead costs on the part of insurance providers, and also make administration easier from the side of hospitals and clinics for having fewer companies to deal with. Easier generally equates to cheaper. It will also allow for more standardization of processes, which again makes things easier for hospitals and clinics, and thus cheaper.
2) Health insurance should be privately purchased, not part of a payment package. The excess of spending most likely stems from a lack of market feedback. Part of the cause of this is likely because the individual payer doesn’t personally write a check each month.
3) Health insurance should market itself solely based on expected years of increased longevity for each plan they offer. Similarly, our goal is to increase market feedback and so decrease the willingness of people to give excess money to health providers.
4) Patents on pharmaceutical-related research should be extended to last 50-60 or however many years, to allow research costs to be earned back.
5) Medical malpractice rewards should be capped at reasonable values.
6) Everyone should be insured.

My personal, added suggestions are these:

1) There should not be a “public option” for health care. All medical insurance should be private, even if mandatory. But, it should be optional whether you have to pay anything for this. Poor minimum levels of quality should prompt people to get properly insured with a paid package. I distrust the governments ability to maintain a financially sensible solution or compete fairly with private insurance. Just looking at the quality of life in prisons, you can see how welfare programs will continue to snowball in improved conditions for those who do not deserve it.
2) The minimum level of care should be based on the market. Enough money should be made via paid insurance packages to support those who pay nothing. A constant, set value like the minimum wage is in the end based on politics, which is liable to be based on nothing of any practical relevance. Unless a market solution can’t be created which provides some level of care for everyone, there should be no need for any further intervention or legislation to decide minimum standards.

About the American Average Lifespan
This series of posts was of course principally concerned with the cost of health care. But of course American health is below that of other nations as well.

A move towards preventative care may aid with this–which would be affected by guaranteeing universal care. But most likely the principal explanations are American poverty and American obesity.

Because the US has a larger income gap than all other comparative nations, even with guaranteed care–assuming that quality of care will be dependent on your income–we simply will have more people receiving worse care and subsequently living less long. There is no particular cure for this beyond an entirely need-based system of medicine, which personally I don’t recommend. (Most likely I will discuss the topic of American income inequality in the future at some point so I won’t go into it here.)

If you look at the OECD data (pages 3-4) you will see that the US has a higher PYLL (potential years of life lost) than other comparable nations by about a year or so. What this means is that there are entirely preventable factors leading to the early deaths of some number of the populace resulting in a lowered national average lifespan. These include smoking, obesity, drunk driving, and so on. Compared to other nations, at least one of or a conglomeration of these factors has resulted in our losing one year of life as a national average. Most likely the factor that this is is principally obesity. Improving the American diet is quite possibly the most important goal so far as matching the health of the rest of the world. Health care reform itself is unlikely to have any major effect.


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