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Healthcare: Society Gets What It Pays For



August 27, 2010 – Comments (13)

I have heard a lot in 2010 about health care costs to society. "It costs this much, and we can't afford it" is the general refrain.
The other side of the argument has been "It's the right thing to do, it's a right not a privilege, it's morally right to have health care for all." This is a silly debate.  Both sides are missing the point. 
Where are the people who should be pointing out that the money spent on health care pays for tangible benefits?
Let's make a quick analogy. To a first approximation, land, labor and capital are the inputs to an economy. To have a good economy you have to have roads - few would dispute this. If the roads get holes in them, then vehicles cannot pass, then goods and service-providers cannot reach their destinations, then the economy does not do well. For this reason we build roads and then maintain them by patching them.
For an economy to be healthy the labor force also requires this kind of maintenence. Healthy workers produce valuable output. Sick workers produce less output, maybe no output at all. When they are not sick any more they can return to the labor force.
Further, healthy workers who are afraid they will get sick and have no resources to pay for that contingency experience an economic distortion of their incentives, and therefore behave suboptimally from a macroeconomic perspective, compared to workers who know they have health care available if they get sick.
Why is everyone talking about health care costs for workers, and no one is talking about health care benefits?  There are real, tangible benefits to society and the economy if the work force is healthier.  Why don't we hear about that?  We already have health care for everyone who is too old to work - Medicare - that really is health care money down the drain, compared to health care money spent on the health of people who could be in the healthy workforce if they were healed.
Has anyone read any article in the last year on this topic? Especially, estimates of the tangible economic benefit to society? If so, point me that way.

13 Comments – Post Your Own

#1) On August 27, 2010 at 12:27 PM, Melaschasm (< 20) wrote:

You are misrepresenting the position of the Obamacare opponents.  The opponents claim that Obamacare will result in lower quality health care at a higher price.  If they are right, then Obamacare would be the equivalent of the government hiring people to drill holes in the roads.

Other than that, you do make one really great point.  Prior to Obamacare there has long been complaints that we spend to much money on healthcare.  I tend to disagree with this statement.  I often ask people making such a claim, "what is more important than spending money to insure good health?"


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#2) On August 27, 2010 at 1:18 PM, MegaEurope (< 20) wrote:

The problem is we don't get the healthcare we pay for.  Costs are way higher than other countries yet results are lower.  There are plenty of excuses like demographics and medical research subsidizing other countries, but even taking those into account the efficiency of the US system is totally inadequate.

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#3) On August 27, 2010 at 1:27 PM, chk999 (99.97) wrote:

MegaEurope hit the important point. The efficiency with which health care is delivered in the US is pretty bad. If we could figure out how to do it with efficiency similar to the way Walmart does logistics, it would be much cheaper.

The question is whether the proposed changes will make the system more efficient. I'm not convinced it will. 

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#4) On August 27, 2010 at 2:33 PM, leohaas (29.35) wrote:

An example of where efficiency has a long way to improve is the fact that so many unisured use the emergency room for non-emergency care. Going to a family doctor with a sinus infection costs less than $100, but for unisured poor, that comes out of their pocket. So they go to the ER, where the same care costs over $1,000, but since nobody expects the poor uninsured to pay that kind of money, the bill goes uncollected and charity care (that is us, the taxpayer) ends up paying.

THAT is why insurance for all, no matter how it is implemented and paid for, is needed. In the end, the poor will go to a family doctor or local clinic with their non-emergency problems, saving society roughly $1,000 per visit.

For the exact same reason, insurance should be available to illegal immigrants. Not because we feel so sorry for these poor saps, but because it will save us bundles in taxpayer money.

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#5) On August 27, 2010 at 3:09 PM, ikkyu2 (98.57) wrote:

40 percent of Americans are uninsured for health care.  Another 20-30% are what is casually dismissed as "underinsured." 

Talking about efficiency in this context is like talking about the big traffic problem on the road to the country club, when the road to the airport and the road to the factory have been dynamited and cannot pass any traffic at all. 

Let's keep the big picture in mind.

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#6) On August 27, 2010 at 4:05 PM, garyc27 (< 20) wrote:

ikkyu2--Not only are your statements incorrect--your post is downright offensive.

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#7) On August 27, 2010 at 6:12 PM, MegaEurope (< 20) wrote:

ikkyu - I think your insinuation that people who talk about efficiency don't care about the uninsured is totally bizarre and baseless.

Everyone's goal is a high quality medical system for ourselves and our fellow citizens.  We just have different ideas of how to get there.  (Who knows, I might even agree with your politics, you are just unreasonably latching onto the word.)

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#8) On August 27, 2010 at 6:27 PM, starbucks4ever (89.25) wrote:

People on welfare often have to decline jobs because they come without health insurance. And no wonder: when you subtract the cost of insurance that is similar to Medicaid, the real salary from the job turns negative. Especially if someone in the family is sick. Then welfare+medicaid definitely beats salary-taxes. 

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#9) On August 27, 2010 at 8:58 PM, RonChapmanJr (29.77) wrote:

"To have a good economy you have to have roads - few would dispute this."

I'll bite.  If roads were bankrupting the society in which they were being built and the return on investment would never be positive, then I would recommend that the society stop building them. 

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#10) On August 28, 2010 at 1:10 AM, ikkyu2 (98.57) wrote:

OK, let's recap: 

* The idea that healthcare for workers has an economic return is downright offensive

*everyone in America has health insurance

*healthcare in America is totally inefficient

*Society doesn't need roads - or healthcare - because building roads and taking care of sick people destroys an economy faster than anything else

Got it.  Thanks for clearing up my severe misconceptions, everyone.  Very sorry to the people I offended.

I studied medicine and neurology for 15 years.  I am downright delighted to hear that my services are no longer needed.  I have been hearing it for a while from the people who sell you health insurance anyway, when they refuse to pay for work I have already performed.  It's good to know that they actually do speak for everyone.

I quit seeing uninsured and Medi-Cal in my office this month.  I'm actually pretty happy about that.  I may go cash-only in not too long.  Why should poor people, or people too sick to work be able to get health care?  Grind 'em up and feed them to pigs.

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#11) On August 28, 2010 at 10:00 AM, lorteungen (99.67) wrote:

One of the things that I think is really overlooked in this whole debate is the improvement in quality of life that you get simply by not having to worry about what happens to you should you get sick, other than getting well of course. Having lived all my life in societies with full universal healthcare I have not once had to worry about the financial aspects of me or my family falling ill. All I have had to worry about is for them/me getting well (which is more than enough worry for one man). It is only with the recent debate about the american healthcare system that I have realized this. Improving our quality of life is what our whole economy is all about, directly or indirectly, and so all that worry and angst can be priced in dollars. Although it is probably impossible to quantify, when you think about it, the entire combined revenues of the american health insurance system is based upon removing that uncertainty from peoples lives.

I do like the idea of having the markets figure out what a life is worth though (at least so that nobody else should have to). We could probably spend our GDP several times over on healthcare alone, so somebody has to do it. 


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#12) On August 28, 2010 at 12:48 PM, MegaEurope (< 20) wrote:

* The idea that healthcare for workers has an economic return is downright offensive

Of course I wasn't offended by this platitude.  You accused me of not caring about uninsured people.

*everyone in America has health insurance

Nobody said this, you are making it up.

*healthcare in America is totally inefficient

Yes... This is not my opinion, this is a fact.  People are suffering and dying because our healthcare results suck compared to other developed nations.  Keeping the existing system and throwing more money at it seems unlikely to help.

*Society doesn't need roads - or healthcare - because building roads and taking care of sick people destroys an economy faster than anything else

Ron didn't say this.  Everyone agrees that some medical spending has excellent returns, but some is wasteful.

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#13) On August 30, 2010 at 1:26 AM, ikkyu2 (98.57) wrote:

Inefficiency in health care delivery is a red herring here.

Show me numbers about the actual return on health care dollars invested in America.  

What are the overall returns on US dollars spent on healthcare?

What is the marginal utility - in terms of personal incomes, GDP, employment, happiness, any metric you like - of the last health care dollar spent?  If you believe it is not enough, how much should it be?

MegaEurope, you are the only one who attempted to answer my question, but you did it with aggregate statistics.  You're perfectly well aware that the U.S population is in no way analogous to the other populations in that chart.  Sure, France -and some other European countries - have almost as many nonwhite people by percentage of total population as the US does - but the French Arabs and Africans are largely "guest workers" and so do not get counted into the statistics.  And guess what - every country in the chart with average lifespans higher than the US has universal healthcare.  Shouldn't the comparison really be between the populations of all those countries, compared to all *insured* Americans?

If you do the comparison by those metrics, the US healthcare system is the best in the world, hands down.  I have (insured) patients working on getting to a healthy, active 110 years old.  Meanwhile the poor chumps who get something bad at 45, pretty much the first thing that happens is they can't work and lose their insurance.  

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