Monday, July 27, 2009

News That Doesn't Depress You: Health Care Costs

There's a lot of gnashing of teeth over healthcare costs lately. Any business owner probably goes through the annual to bi-annual fight for affordable insurance (before settling on obscenely expensive plans with high deductibles). Yet, according to Andrew Biggs at the American Enterprise Institute...

The United States rate of excess healthcare cost growth from 1990-2006 is right about average among developed countries. U.S. health costs grew an average of 1.66 percent faster than the economy from 1990-2006, while the OECD average was 1.62 percent. Clearly, the U.S. has not had unusually fast health care cost growth over the last decade and a half.

Biggs continued, "Countries with far more government control over healthcare have had just as much difficulty controlling costs as the U.S. The UK, for instance, in which doctors and hospitals are directly controlled by the government, saw costs rise 2.08 percent faster than GDP."

What Biggs is saying is that healthcare costs are rising a little above inflation for everyone, not just the U.S. And costs are rising regardless of government control and rationing. I think his point is that the argument that we must socialize health care over the expense lacks merit.

If he didn't make the point clearly enough, Biggs compares health care expenses with veterinarian expenses. Guess what? Pet health care has been increasing at a slightly faster rate than human health care.

So what gives? Are Vets out of control? Are Americans at risk of bankruptcy over out of control pet care expense?

Maybe the whole thing is much simpler. Maybe health costs for people and pets are rising because new technologies and drugs are being developed. I bet aggregate broadband Internet expense has exceeded the rate of inflation too, mostly because we are developing new technologies.

Maybe we're spending more on health care simply because we can afford it. How else can you explain spending more on pets?

If we were serious about reducing health care expenses, we would start with tort reform to reduce defensive medicine. We would go after the paperwork and bureaucracy, rather than increasing it. We would allow the formation of health care pools. We would let insurance companies sell across state lines. We would figure out a way to make the consumer the payer, rather than a third party.

Bottom line... things aren't nearly as bad as you've been told.

(c) 2009 Matt Michel

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