What is the most efficient way to pay for health care?
Proponents of a single-payer governmental system content that patients should not have to pay the cost of their health care decisions and that the government can effectively control costs through top-down mandates.
On the other hand, opponents of such a system maintain that the most effective way to curb costs is to have patients bear a portion of their health care costs — such as routine expenses — and that the government canít efficiently control costs without rationing care.
In a recent JAMA op-ed, Dr. John Ford provided this graph (H/T Jeff Miron) to reflect the increase in third-party payment of health care expenses over the past half-century and the decrease in patient payment of expenses over the same span. Health care costs have skyrocketed over the same period.
Why should anyone believe that reform that continues the trend toward more third party payment of health care expenditures is going to result in meaningful reduction of health care costs?
tom,
i wish i could more accurately imitate ed mcmahon responding to johnny carson but regarding this post it would be something like, “you are absolutely, 100% correctomundo, el swami”.
Anyone who understands the breakdown of production of goods can see why we have classic results. When the payment for the final good is made indirectly by third parties, the connection between the value of the final product and the value placed on factors of production is broken or damaged.
Invariably, that means that costs are going to rise. At first, they rise more slowly than do the payments for health services, but over time, the trend reverses. It would be the same if we had third party payments for groceries.
William says – It would be the same if we had third party payments for groceries.
Exactly!
Imagine what a trip to the grocery store would be like if you had a $25 co-pay for what you bought, irrespective of whether you chose beans or fish or filet mignon. If it all cost you the same, what would you choose?
And, the finances of health care are even more pathologic than the analogy above – imagine instead that you had to go to the grocery store to tell the grocer that you were hungry, and it was the responsibility of the grocer to try to determine what would be best for you to eat – you might want the filet, but the grocer might think it was more appropriate for you to have fish – and your third party payor for food services might say that anything more expensive than beans would require a pre-authorization, and be subject to retrospective denial of payment. Whew!
I am of strong opinion that the only way to gain any form of control of health care expenditures is to get the patient back in the loop of (and ideally primarily responsible for) how health care dollars are spent on him.
jrb
won’t rehash previous arguments, but I will take quibble with the ‘curb costs’… making people pay for their own health care might reduce ‘spending’ on health care but it won’t necessarily reduce the cost of providing that health care (eliminating the mortgage interest deduction would lower house prices, but not immediately the costs of building those houses; it isn’t as if wood and steel are going to get cheaper to produce).
here’s another question for you who are obsessed with this issue: what is inherently wrong with spending X dollars a year on health care? is it that we’re not getting enough care for our dollars? or is it that those dollars are needed somewhere else in the economy? or is it simply that you don’t like some of what people buy with those health dollars… such as whatever it is you think that they’d be forced to give up (the ‘unnecessary’ trip to the emergency room? the real expensive end of life treatment? the prescriptions for every little ache and pain?) by shifting the cost burden onto them?
Sure, I wouldn’t mind paying less for the same amount of care, but given a choice between what we have now and spending less and getting less, I will stick with the status quo.