I'm very interested to see Herb Stein's famous quote being invoked by liberals to talk about healthcare. When Herbert Stein first said "If something cannot go on forever, it will stop" in 1980, he was arguing against people who were using scary charts mindlessly extrapolating some trend out to 100% of the total economy in order to demand immediate government action on a problem--in that case, the balance-of-payments problem.
The problem with these extrapolations is twofold. First, you definitionally cannot see the feedback systems that will probably mitigate the trend--all trends seem inevitable until they stop. Think about the population explosion literature of the 1970s. Now, in theory the people of the 1970s had a piece of information available to them that should have warned them that their charts were likely to be off: to wit, that women in the wealthy West no longer averaged six or seven children apiece. In practice, they were distracted from this data point by a lot of other factors, including their own racism.
But also, especially in cases like this, we react inappropriately to future extrapolations, because we project them onto our own situations--we ignore the fact that the changes in income shares devoted to a given product arise from economic growth. It is true that I cannot afford to spend 40% of my income on healthcare. It was equally true that my great-great grandparents could not afford to spend a third of their income on housing, and another half on clothing, manufactured good, transportation, and services--Land o' Mercy, everyone in the future is going to starve to death!!!
Obviously this is ridiculous. I am not consuming less food than my ancestors; I am consuming more. (Too much more, according to the waistband of my favorite pants.) But my income is vastly higher than theirs in real terms, so that the food I consume is 10% of my household budget, rather than 50%. Similarly, our descendents in 2100 giving over 40% of their income to health care (if indeed they do), will not be skimping on housing, transportation, clothing, entertainment, or what have you. In all probability, they will be consuming more of everything than I do, except maybe energy and housing. It's just that they'll be devoting a large share of their extra income to health care. This prospect doesn't worry me. And it probably won't worry them, other than the way it (mostly) worries us: because we'd always like everything we consume to cost less, and be more equally distributed.
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Excellent point about the problems with looking at proportional share of income. As we become more and more wealthy in absolute terms, why wouldn't we spend more of our excess on more health and a longer life?
A great comment, and true, Megan, but it will fall on deaf ears.
I'll give you a perfect example. New regulations coming down indicate that any new hospital built in the US should have all private rooms. The ostensible reason for this is to protect against hospital borne illness, things like MRSA, VRE, etc.
But, in addition the patients will find it more comfortable and quiter and they won't have to deal with a patients going through the DTs or suffering from senile dementia - etc. I'm sure we'd all agree that spending a little extra money so we're all safer and more comfortable in the hospital is a reasonable thing to spend money on.
If it costs us an extra 0.15 of GDP why the hell not? What else would you rather spend the money on?
I attended a CLE in January put on by Professor M. Gregg Bloche who was one of Obama’s health care reform advisors during the 2008 campaign. He made pretty much the same argument that health care costs were going to eventually consume nearly half of GDP and advocated controlling costs by slowing down the rate of innovation. His logic was that if new (and initially expensive) treatments, drugs, devices and tests don’t exist then patients can’t demand them and no one has to pay for them and technically we won’t have reduced the quality of care since people would still be able to get the treatments that are available today.
Frightening, just plain frightening.
These statements are frightening.
Just the other day I read something about CT scans becoming sophisticated enough to replace colonoscopy. Cheaper, and hence more available.
I think of my family. My grandfather died young, leaving a young family. It was said he was sickly since coming back from the WW1. My parents are healthy and strong in their old age, but I imagine that possibly my grandfather was similar to me. Heart problems in my 40's, etc. What I had would probably had led to an early death without the modern treatments available.
I remember distinctly seeing men die in their late sixties when I was a young man. Heart attacks mostly. Now there are effective drugs and procedures such as stents that extend life.
What will the next 20 years see? Obviously, if it is up to Obama, nothing.
Derek
A great comment, and true, Megan, but it will fall on deaf ears.
Agreed, great comment, but one that will hardly fall on deaf ears -- rather ears that simply don't agree.
I think in the first place the items such as food mentioned by Megan are amenable to increases in productivity. It seems to me healthcare -- which is labor intensive -- is unlikely to follow the same affordability track as other necessities have in the past. Moreover, people are paying for healthcare with Other People's Money, so it's not clear the normal price signals are effective. Sure, you could argue that Obama-Pelosi-care is exactly how not to go about reform, if lack of price signaling is one's concern (you outta go with Wyden-care in this case), but there doesn't seem to be much support for such a strategy. And there's zero support for doing away with Medicare/Medicaid, two huge programs that enable people to consume healthcare with Other People's Monday.
Anyway, a similar argument to the one used by Megan is also used by liberals -- I'd say with considerable justification -- to support increasing the size and scope of the safety net: sure, government in the year (pick a date) will be bigger than it is now, and will perhaps consume X percent of GDP. But that GDP will be much larger, and on average Americans will be a lot richer.
For the record I tend to agree that increasing the share of national income devoted to healthcare isn't a Bad Thing, anymore than increasing the share of national income devoted to education or leisure or environmental protection is a bad thing. That's what rich countries tend to do. I just think there are limits -- limits that are likely to be reached sooner rather that later in the USA, given the high cost of this country's healthcare system relative to the healthcare systems of other rich countries.
Jasper, you wrote:
This is clearly untrue. The medical care available 30 years ago is much cheaper today on a relative basis- the escalating costs are driven by the development of new technology, and the fact that we are older and find medical care has a higher utility. Where the rock and hard place meet is in the idea that everyone is entitled to the very best medical care- a financial impossibility unless you put a cap on what the very best care actually is.
Yes, the main problem is the disconnection between costs and customers, and the considered reforms are a big step in the wrong direction, but that is driven by the seemingly natural desire of humans to have something for nothing. These are the deaf ears I was talking about. Can you imagine what would have happened if we had treated personal computers in 1980 the way we do new medical technology? We would have demanded everyone have an Apple Diana, and we would have made profits practically illegal so that the cost could be borne more easily, and we would be using those same kinds of computers today, or maybe an Apple II.
I'll be honest with you . . . you don't see any dissonance at all with your post? You argue that our basic medical care was cheaper 30 years ago, but that technology will drive new costs upward, and since we're older and find medical care has more utility to us.
So, in other words, medical care is cheaper as long as you're buying bandages, but probably more expensive if you're being treated for colorectal cancer. And people with poor or no insurance should just take a hit on this one.
I'd be interested in seeing the average income of an Atlantic-reading blogger. Because most people here assume that the problem with medical care is people being annoyed that they have to spend money on it instead of going to the Bahamas. The fact that most of the uninsured or under-insured people I know have to choose between medical treatments and food escapes you.
If by "take a hit", you mean "receive better care than in the past, but not the best care currently available", then yes. People with poor/no insurance will take a hit.
@The Ninja Zombie,
With your user name, I'm almost afraid to write back. I don't think I'd want to tangle with a Ninja Zombie in a back alley.
But you make part of my point - health insurance produces cutting edge care because it saves lives. Poor people who can't afford the most effective new treatments, in some cases, die. And while you may find that an effective allocation of resources, it's pretty damn uneffective for the person in question.
That's why this issue is such an emotional issue for unisured people - you get patronized by people who have effective health policies, told you should be happy to have any coverage or treatment at all, while you suffer, or die, from illnesses that are readily treatable for people with better resources.
"health insurance produces cutting edge care because it saves lives. Poor people who can't afford the most effective new treatments, in some cases, die."
You seem to be saying that we should all give up that care, for the sake of "fairness". Cutting edge treatments, if they're effective, become more common and pretty soon practically everyone (in the US, at least) has access. As the Ninja Zombie said, care gets better even for the poor eventually, but with a time lag.
Under the current system, care for everyone gets better and better over time. If we freeze it all in place, simply so that a few poor people can have the satisfaction of knowing that they'll still die but have managed to cause the deaths of others also, it will hurt everyone eventually.
Most of your ancestors were likely growing at least some of their own food. Also, technology has made improvements possible in some areas.
An exemplar of the dubiety of extrapolation is the great New York manure crisis. Read about it here:
http://whatilearnd.com/post/41899136/new-yorks-first-environmental-problem
Another wrinkle is that nobody wants to consume health care. Nobody wants to be in the position where they have to consume health care. At best, healthcare is about making a bad situation less bad.
For that reason, I don't think people will ever welcome the opportunity to spend more in that area. There's pleasure attached to having more housing and more car and more vacation. There's not a lot of pleasure attached to having more surgery, unless you are very peculiar.
When I hear people talk about transferring their health care costs to someone else, the usual refrain is that they don't want to spend their income in an area that doesn't actually make them happy. They don't think they should have to spend to remove a "bad" from their lives, only to acquire a "good."
Perhaps this will change if new healthcare technologies are less invasive and involve fewer side effects. But at the moment, most people still try pretty hard to stay out of the hospital.
M.C.,
I'm pretty sure that old people love consuming health care. It gives them something to do with their time that is basically free. Unfortunately, going to the doctor to find someone to talk to because all of your friends are dead probably isn't a very good use of our wealth as a country.
I think this post partly relates to the fact that we are treating unpleasant symptoms, instead of trying to promote wellness.
Also the fact that many of our treatments are still pretty crude and invasive. When they can mess with our insides without cutting into us, as in Star Trek, I imagine health care will be more popular.
But there's already a lot of movement in the direction of surgery through smaller incisions and drugs that target a specific problem without screwing with everything else in the body. So I would say the trend is towards making health care more endurable and less unpleasant.
"Another wrinkle is that nobody wants to consume health care. Nobody wants to be in the position where they have to consume health care."
Just a question to those that know the details on this issue far better than I: Are cosmetic procedures included in the Medical spending share of GDP measures?
I would presume that they are. I am curious if the relatively recent growth in cosmetic surgery has had an overall impact on the medical cost increase curve.
"But my income is vastly higher than theirs in real terms, so that the food I consume is 10% of my household budget, rather than 50%. " Not so. The reason your food budget is a smaller percentage of your income is the much greater efficiency of the agricultural/food industry.
Just as the percentage of your income devoted to computer purchase is much lower today than it was 20 years ago, when the standard PC was about $2500.
Because agriculture and industry are so much more efficient than in the past, we can afford to spend more of our income paying doctors.
Is there a feedback (other than human activity) that will mitigate global warming?
I hope not, because if Gore and the IPCC are right and no feedback phenomena will slow global warming, then I should have beach front property by the time I retire.
This is clearly untrue. The medical care available 30 years ago is much cheaper today on a relative basis- the escalating costs are driven by the development of new technology...
Yancey: It's a truism (one that I don't argue with, mind you) that increases in healthcare spending are driven by technology. But what does this really mean in practice? I see few people bemoaning the exploding costs of computers and I.T -- and yet such products inarguably are characterized by ever-expanding, ever-advancing technology. In healthcare, improvements in technology are -- I would argue -- firmly tied to the ever-more-knowledgeable, ever-more expensive devices called American workers. Or, to put it another way, it seems to me that the advancements in technology we see in healthcare are not -- as they might be in other fields -- characterized by much in the way of savings in labor.
Industries are not going to respond identically to technological advances. Note that we could make the same argument about computers that we make about healthcare spending- i.e. we spent 0% of GDP on personal computers in 1975, and today such spending makes up 5% of GDP. So, should we be controlling the escalating amounts spent on personal computers? What is it about advances in medical care that makes it fundamentally different?
Yancey,
Because while mostly necessary, people who can't afford computers don't have to buy them. It might leave them competatively disadvantaged, but then, they can go to a public library.
In health care, the ranks of the unisured either seek emergency care at cost to the state (the least efficient allocation of resources, ever) or just don't get care. Then they get sicker, or die. So controlling the cost of health care makes a little bit of sense.
But control it where? That is the question very few advocates of universal coverage want to answer explicitly. We can provide the uninsured a basic coverage that actually doesn't cost that much. This is true because most of the uninsured are actually young and healthy- they aren't big consumers of healthcare resources to begin with. We can do this without "reforming" or "changing" the medical system for everyone else.
Lets stick with the computer analogy. If we were talking about computers, a lot of reformers would seem to want to cap spending by limiting the amounts spent on the latest, most powerful machines because it isn't feasible to provide those to everyone as an entitlement. Someone like me, for example, would point out that those without a computer can be given a barebones laptop that is a couple of years old by technological standards rather than trying to reform the market for personal computers altogether.
In healthcare, improvements in technology are -- I would argue -- firmly tied to the ever-more-knowledgeable, ever-more expensive devices called American workers
Uh... it's been that way in computer technology for quite awhile: most of the improvements -- and costs! -- came from software (esp. if you don't forget how much of the current "hardware" is actually firmware, Verilog et.al.). And the lion's share of the above is contributed by American workers.
@Yancey - blast to the limit on the replies-thread! Sorry.
But you only make my point - the computer analogy is a false-one. It doesn't work. Giving someone a bare-bones laptop is fine if you're trying to get internet connectivity, but terrible if you're trying to treat an especially invasive cancer. "Oh! You've got lymphoma. Here's an aspirin."
And while many uninsured people may be young and healthy, I assure you some are not. Many people are uninsured because they have pre-existing conditions which make them uninsurable on anything but the most expansive group policies, or because they work for firms that are small enough they don't provide insurance.
A stellar example being an old friend who worked for a five person firm and was diagnosed with ovarion cancer. Two surgeries later, they fired her - couldn't lose the production. Midway through her treatment, she lost her health insurance. Nice play, America).
Fantastic post by Megan. The proportionality argument about aggregate health care expenses completely ignores aggregate changes in our nations demand curve. People spend more on health care today because they spend less on food, clothing, energy and transportation. They also spend more on health care today because they want to. As my father likes to say he is alive today because medical technologies were discovered in time for him to consume. Absent those discoveries he would most likely be dead and while death would "save" on health care expenses I'll take the current outcome over the alternative.
I struggle to see how the heavy hand of government is going to make the distribution of health care more equitable or the quality of health care received better. The politicians may think they have to "solve" this problem but they would be wise to realize the more regulations they impose on the industry the worse the inefficiencies of health care industry will become.
How about this:
No one who contributed to the campaign of Barack Obama, put one of his bumper stickers on a car, voted for him, advised him, took a job in his administration or has defended him and his health care policies in any publicly accessible medium will be allowed access, under any circumstances, to any medical technique submitted to and/or approved by the FDA after Jan. 20, 2009.
There is no reason why they can't consume more energy than we do on a per capita basis. In fact, the whole world could consume energy at US levels and improve the environment. Nuclear power could today provide us with clean, renewable energy for 100s of years. (Maybe by then fusion power will be less than 20 years away.*)
There are hints that solar power could become economically viable in 10-20 years for mass use instead of niche use. Solar power satellites could beam down power with low environmental impact if launch costs are brought down. Ocean thermal systems are viable in some areas. Wind power can be deployed. With sufficient energy, we can manufacture fossil fuels out of air.
Housing could also be cheaper if mass production of homes wasn't effectively ruled out by building codes. Or if robots become cheaper than illegal labor.
*Fusion power has been "20 years away" since I first got interested in it in the 1960s.
I think I said something fairly similar on a blog that looked exactly like this one - wierd.
But this argument is absolutely fallacious. As many bloggers, strangely agreeing with Megan, point out, there are mechanics driving up the cost of health care that aren't present in the production of food - new drug development, new treatments, new studies. Innovation in health care tends to increase the costs of the most effective treatments in a way that MORE than offsets any reduction in the price of basic care.
What Megan conveniently ignores is that the simplest way for this demand curve to level off is to have less people able to afford health care. That's great if your rich. But it's more than likely that as we reach the point where health care starts to consume an inhospitable proportion of average income, then people will simply stop paying for it. Because they can't. Like, you know, uninsured people do.
And maybe, just maybe, the fact that real purchasing power is falling in the middle and lower class is another tiny problem on the horizon.
Strawman, you wrote:
So what? Almost every single new product costs more at the beginning than the products that it replaces. Five years ago, plasma and LCD televisions were multiple times the price of the televisions they are replacing, and yet that price difference falls continuously. Someday, the replacements for plasma televisions will be multiple times the cost of future plasma televisions, and the cycle will repeat. The same applies to medical technology. Of course, the real issue you and others have is this- in the case of medical care, many seem to think it fundamentally unfair that one person gets the most advanced medical care, while another with the same condition gets a less advanced treatment solely based on ability to pay.
@Yancey - exactly! You've summed up my point quite aptly.
That's the crux of our disagreement - you think it's acceptable to have a wide disparity in the quality of medical care between the rich and poor. I'm comfortable with some disparity, but not much, simply because it is a matter of life and death, or at least a matter of effective quality of life.
And the reason I'm somewhat passionate about this is because people who have access to health care really seem to see the same difference you do - the difference between an LCD or an old vacuum tube TV, between a battered laptop or an AlienWare gaming system. And that's a horrid misapprehension.
The basic costs of medical care, even for people with poor insurance, are staggering. Let's say you have Crohn's Disease, which might necessitate monthly visits to a doctor and a surgery every year or two. The copays alone could take $250 or more out of your monthly paycheck, to say nothing of the similar amount to pay for insurance in the first place, but a few hundred more for your surgeries. Maybe if you earn 50, 60, or 100k a year, that's fine - but what if you're trying to raise a family on 40k?
What I'm trying to say, and I think many people have missed, is that it's not just the cost of extreme illness - the catastrophic rise for basic care, when compared against the average income in the U.S., is a terrible injustice. The situation I described is real for anyone who earns a basic income in this country and has some type of recurring condition. How much worse is it if they have a life-threatening illness?
"But it's more than likely that as we reach the point where health care starts to consume an inhospitable proportion of average income, then people will simply stop paying for it. Because they can't. Like, you know, uninsured people do."
Getting existing care isn't going to go up, getting the new care is going to go up. For example - they have developed a new technique to sequence your DNA and they are able to tailor your chemo drugs to minimize side effects and improve outcome.
In 2020 nearly all the current cancer drugs will be generics and a poor person could be prescribed those drugs at a minimal cost. The issue becomes paying for the DNA sequencing and new drugs.
Should the poor, in ten years, be entitled to DNA sequencing and the latest drugs? Or should they just receive the generics and get the treatment that the richest Americans received in 2008?
Someone like me, for example, would point out that those without a computer can be given a barebones laptop that is a couple of years old by technological standards rather than trying to reform the market for personal computers altogether.
Yancey: And who, exactly, is trying to reform the market for healthcare "altogether"? Under the three main plans making the rounds, people who are insured by Medicare can continue with that. Ditto people who are covered by private insurance companies. Ditto people covered by Medicaid. I mean, one could certainly make the argument that, from the prospective of cost-containment, we need to reform healthcare "altogether." But that doesn't seem to be what's on offer. The most radical of the three plans being considered would essentially allow uninsured people to buy into Medicare (although they're not going to use that label). This strikes me as a fairly modest augmentation of social insurance. The other adjustments -- guaranteed issue, community rating -- are incremental changes that have been long discussed, and are already in place in some states.
Many of the commenters (and bloggers like Klein, Drum, Yglesias etc.) I encounter online vehemently object to the idea that we reform Medicare/Medicaid for cost containment before moving on to reforms of private insurance. Indeed, they often argue that Medicare/Medicaid are either fine (see RW last week) and it is the private market that needs to be fixed, or that those two government programs can't be fixed without reforms in the private market first.
Congress's plans may seem innocuous to some, but to me they seem designed to increase costs on private insurance in order to degrade it further.
Agreed, moreover the players in the Senate and the administration have been keeping mum on one of their most radical proposed changes – stripping self-funded plans (which make up most employer-based health insurance plans) of their ERISA preemption which prevent most States (Hawaii got an exemption because their law was passed first) from regulating their plans. Obama already said during the campaign that he favored have the federal government mandate which benefits employer-based plans had to provide (which would essentially rewrite their health plans) but removing the ERISA preemption would be an administrative nightmare to employers who would essentially have to have a different health plan in each State to comply with each State’s regulations including whatever benefits they want to require the plan to cover.
Fusion may only be 2 years away:
We Will Know In Two Years
How can it be, Megan, that the notion that Americans will pay ever-increasing shares of their income to cover health care does not worry you, and yet looming large projected budget deficits worry you a lot?
Do you not see any connection there?
How about ever-increasing shares of income going to taxes to cover growing healthcare costs, does that worry you?