What does the rising cost of healthcare buy us?

Students: Hear Antony Davies live at the Exploring Liberty http://lrnlbty.co/x5Zi3P or Scholarship and a Free Society Seminar http://lrnlbty.co/wz3Ao9 this summer

Economics professor Antony Davies demonstrates that over the last 40 years, the cost of healthcare in the U.S. has been rising much faster than the cost of other goods. However, he suggests that it is also important to consider what that higher cost has bought us. What have been the changes in the quality of healthcare over that same period? Using data on mortality rates, Prof. Davies demonstrates that the increased cost of healthcare has been accompanied by important improvements, which save hundreds of thousands of lives each year. While the improvements in medical care are not the only factors leading to increased costs, these better outcomes are significant, and should not be forgotten in today's healthcare debates.

See a PDF of the presentation here:
http://www.antolin-davies.com/conventionalwisdom/healthcare.pdf

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[KagarBeardtooth]

Cosmetic surgery has increased in quality and yet it is constantly getting less expensive. The difference? Cosmetic surgery isn't subsidized by the government. In a free and unregulated market, things get better AND cheaper.

Those statistics regarding how our health care has improved are interesting, but higher prices over time doesn't necessarily mean better quality over time, and vice versa.

[BeaveHolio]

@TheDave

You are forgetting about Medicare and Medicaid, AMA, and the FDA keeping prices up.

[KittenKoder]

@KagarBeardtooth Gotta agree with you there 100%. The one flaw in this video is the nature of markets, the top quality should not increase in price, the lower quality should fall instead, if based on GDP though. From personal experience, doctors do care less now, as a whole, the ability to save a life is better, but the ability to improve quality of life is worse, a LOT worse.

[theredscourge]

@therichardking4242 In this simplified example which leaves out every other factor of life, yes, it apparently is a good thing.

However it is possible that if we were to introduce far more competition into the market, we might have had even more innovation at an even faster pace, and perhaps even lower costs. It's hard to measure what could be, especially considering on how what might be is highly dependent on the EFFECTS (not the intentions!) of policy changes.

[theredscourge]

This is of course making the assumption that nothing else has affected mortality rates. I'd say smoking and drinking rates going down, healthier products (such as via the removal of lead from paint), the healthiness of food available for the same standard of living adjusted cost, the amount of wasted dollars in delivering healthcare services vs. health innovations, etc. Some of these might be very large factors.

[stebecool]

"In fact, there's only one thing that I could find whose price rose faster than healthcare, and that was the cost of the federal government"

Epic quote of the century.

[therichardking4242]

So the increased cost of health care starting in 1967 soon after we began Medicare and Medicaid is a good thing. Then why try cutting or changing it?

[david52875]

@ca1cifer The reason laptops are getting cheaper is because of advances in semiconductor technology. Also, the reason healthcare costs are increasing is the same reason education costs are increasing. Government subsidies.

[ca1cifer]

I disagree with his argument. There are other services and products that have been getting cheaper (i.e. elective surgeries, technologies like laptops, etc), but the prices have actually gone down. With improvement in technology, I would expect the quality of healthcare to raise and the price to go down like any other service, but this has not been the case.

[KagarBeardtooth]

(2) are life saving and yet the prices increase. Just as with college tuitions, the folks receiving the service aren't the primary payers. The recipients pay a creditor, or an insurance company in the case of health care, and then they cover the cost that the provider of the service demands (regardless of how high it is) and the lender or insurer will increase costs as necessary. The provider of the service then has an incentive to charge as highly as they want with a guarantee of payment.

[KagarBeardtooth]

@mechadamuramu

"...because people can always not get the surgery and wait until prices fall." But prices don't just fall because people abstain for the time being. After all, most frequenters of cosmetic surgeons don't mind their budgets all that much to begin with. The primary factors that drive the prices down in the first place are (1) competition, and (2) the absence of a 3rd party payer which allows the doctor and patient to deal directly over prices. Not all health care procedures...

[mechadamuramu]

@KagarBeardtooth No, the reason that cosmetic surgery is getting less expensive is because its a luxury procedure. The prices are very "elastic" because people can always not get the surgery and wait until prices fall.

Life saving health care on the other hand has an "inelastic" price, meaning people are willing to pay almost any price to buy that service. It makes sense that people pay to life longer, however there's no incentive for companies to lower prices unless forced to do so.