Monday, February 06, 2006

Reduce healthcare spending by stopping research

Chicago's Richard Posner recognizes that health care costs rise because people want to spend money on their health, and we (as a society) feel that people should spend other people's money on their own health. As new treatments appear, people have more ways to spend other people's money on their own health, and so costs to other people (also knows as taxes) rise.

The solution to control costs is to reduce the production of new, expensive treatments, particularly anything that keeps old people alive for longer. Posner is an old person himself, so reaching this position must have required an additional burst of clearheadedness and alturism on this part. But his basic insight is correct:
I don't think the problem of the free-riding patient is a very serious one, however, because people who don't have insurance don't get the best (and most expensive) treatment and because most people don't demand medical care unless they have a serious need for it; many people have a horror of doctors and hospitals. The basic reason why so much money is spent on medical care in the United States is that people attach a very high value to their health. The frequent complaint that 15 percent of GDP is "too much" to spend on health care is superficial. When 80 percent of the average family's budget was spent on food, no one thought that this signified a "market failure" in the food industry....
Finally, an efficiency measure worth considering would be to reallocate federal funding of R&D from diseases that afflict mainly elderly people, such as most cancers, and from diseases avoidable by behavioral modification, such as AIDS, cirrhosis of the liver, and most Type II diabetes, to diseases that are not avoidable by changing behavior and that afflict mainly children and young adults. Such a reallocation would reduce net medical expenditures and also increase productivity.
Not that it's ever going to happen, but I get the point.


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