Silly Little Country

What is the Problem with Health Care Costs?

I've long wondered what the problem is with having higher health care costs in an economy than somebody thinks right; if people want to spend on health care rather than something else, why should they not? One's health is extremely important; I know I care about mine.
In my case, my government makes it awfully difficult for me to spend on health care, except in idiotic ways, like wasting money on chirpractors or homeopaths or naturopaths. But in a country with no such restrictions might not someone want to spend an unlimited amount of money to protect this precious condition?
Megan McArdle produces a rather nice graph, comparing the growth of human health care costs and veterinary expenditures.

Veterinary spending is rising just about in line with human medical spending. Kudoes to AEI for publishing a graph that seriously undercuts one of the major conservative arguments about health care: that the main problem is consumers who don't bear their own costs. Veterinary spending is subject to few of the perversities that either left or right suppose to be the main problems afflicting health care spending. Consumers pay full frieght most of the time. They are price sensitive, and will let the patient die if keeping him alive costs too much. There is no adverse selection. There is no free riding on mandatory care. Government regulation is minimal. Malpractice suits are minimal, and have low payouts. So why is vet spending rising along with human spending?
Two reasons, presumably: technological change and rising income. As we get wealthier, we spend more of our income on former luxuries, like keeping our pets healthy--nineteenth century veterinary care for sick cats consisted of a sack and some stones to weight it down with. And improvements in health care technology are giving us more things to spend that money on. With the help of my family, I bought my dog five extra years of life with an MRI that diagnosed his slipped disk; without it, we'd have had to put him to sleep when he was three. Worth it? I think so. But in 1950, I couldn't have afforded it, even if it had been available.

So the main ways to achieve Obama's goal of controlling costs would be to discourage medical innovation, and make people poorer. He may be on the right track there.

posted by Alan Adamson @ 5:39 PM