Thursday, January 7, 2010

The Expense of Health Care

Much of the concern with our present healthcare / healthinsurance system seems to center around cost.  "Bend the curve" of cost increases says the president - without much evidence that the bill before congress will do any such thing.

But why are the cost rising?  Carpe Diem, one of my favorite econ-blogs notes the increased use of "other people's money" as a cause.  And it probably is part of the problem.  But there are two fundamental issues that are easily overlooked.

First, there are a lot more older Americans than there used to be.  Frankly, it's us "old farts" that use the expensive parts of health care.  Treating my heart attack is more expensive than setting my son's broken leg.  And let's not forget the mom-in-law's hip replacement.


Remember that image of the babyboomers dominating the market for consumer goods twenty years ago?  Guess where they are now?
 


And the second reason for increased costs?  Well, we now can do something for the old folks.  Remember grandpa's treatment for a bad hip?  He got a cane.  Mom-in-law got a hip replacement. 

When president Eisenhower suffered a heart attack in 1955, the standard treatment was six months of bed rest.  I believe that Mamie was instructed to cuddle up and "keep him warm!"  Today, we would have seen a stent inserted at a minimum but more likely a triple or quadruple bypass.

The reason we spend more money on healthcare is because:
  • It's possible
  • It's effective
  • We have the money
The only real question is should I pay for my own stent or should I charge it to your children and grandchildren?  That's what the debate is really about.  And that's where professor Perry's "Other Peopl's Money" chart comes in.

(Note cross-posted at my numbers blog)

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