At least cost effectiveness research will keep health care costs down.

I’ve been a bit busy, so I’m a little late to this. The senate just passed an amendment to the current health care bill which will include mammograms as mandated coverage.

The problem is this:

A panel of experts, appointed by the federal government, recently changed its recommendation and said that such routine mammograms should begin at age 50 rather than at age 40.

Yet, what did the politicians say? They say that is just a general guideline and that really, if the doctor says you should get it, then you should get it and it will be paid for.

The Democrats’ health care bill would generally require insurers to provide preventive treatment recommended by the expert panel, the United States Preventive Services Task Force. But lawmakers in both parties made clear that they wanted doctors to decide when a mammogram is medically necessary and that insurers should be required to cover the cost if the procedure is needed.

Now, I’m risking sounding like I’m some hater of women’s health. Who could be against mammograms? Surely, they have saved many lives. True. But this is a small example of a much, much larger problem. When a group of experts got together to determine when mammograms should be given, they came up with age 50 as the optimal cost-benefit age. This is because they determined that giving mammograms to younger women in general was a waste of health care spending. The fact is that we cannot afford to give tests to everyone in order to absolutely maximize the chances of early detection of cancer with no regard for cost. I’ve discussed this general concept earlier – it is a form of rationing. Also, more on prevention here.

You don’t have maximal car insurance because it is expensive. You don’t have a top notch security system because it is expensive. Yet, we all want maximum security, right? These things are rationed by price and over time, we get better insurance and better security for less money as businesses innovate and compete.

If we continue to want to have any test for free as early as possible, we will indeed maximize early detection and prevent a lot of cancer, but it will be really, really expensive. The problem is that for us, it will be “free” but we all will pay the bill. We cannot have “insulation” – we need insurance. Which must have its limits, somehow.

There is no such thing as unlimited insurance

This is another point I’ve tried to make in other posts, but I’ll try to make by itself here for clarity. There are no examples, really, of unlimited insurance.

Life Insurance: you choose a policy level that pays out in case of death, say $1oo,ooo. That is the maximum the insurer will ever pay.

Homeowner’s Insurance: the insurer will never pay more than the value of the home. It may go up over time, but that is somewhat predicable and thus built in to your premium.

Mortgage Insurance: Similar. They are basically insuring the bank against you defaulting on your mortgage, again capped by the value of the mortgage.

Car Insurance: capped by the value of the car.

In all of these cases, the insurance company has a known worst-case scenario. The one place where this seems to be failing is in Health Care, because new medical procedures that cost more and more seem to be coming out every day. It costs almost a million dollars to do a transplant. A premature birth is well over a million – and rising as they find new and amazing ways to treat premature infants.

So, to me, we need to come to grips with the fact that there is, in fact, a limit to what we can spend on health care. Whether we have HSAs, or government vouchers, or government budgeting, or private health insurance, all must have some sort of cap. Thus, even at the end of life, and even if you have a very expensive condition, there is a limit as to what can be spent. The government cannot provide complete and unlimited insulation from health care costs without itself imposing limits.

So, then the question is: how is this scarce resource, this health care budget, to be spent and who is making the decision?

Crisis of Abundance

…is the title of a book by Arnold Kling. It is available at Davis Library at UNC, but only costs $9.95 on Amazon.

He maintains that there is a trade-off among the following:

1. insulating consumers from costs
2. giving them free choice of medical services
3. holding down costs

meaning that you can’t have all three. I think he is basically correct though I don’t think each is a boolean choice; there are shades of grey.

Virtually every society on earth has chosen #1, including the US. The US has also chosen #2 in spades, and thus is completely missing #3.

Most government run plans provide #1 and #3. Sometimes you can change the structure of the cost from a dollar outlay to a time outlay (i.e. waiting in line) which makes dollar cost seem lower. Google the “NICE” outfit in the UK. I forget what the acronym stands for, but they are basically the group that chooses what is covered and what isn’t. Massachusetts is trying to cap prices.

While I am hoping for a solution to loosen #1 to allow us to get much more of #2 and #3, I’m having some doubts about our ability culturally to change that much. And when I speak of “insulation” I primarily mean seeing the cost – i.e. these high deductible plans with cash provided by employer or governemnt to cover it with incentive to spend less and therefore price compare/shop around.

But I think, culturally, we have an aversion to “paying” directly for health care. It seems ugly or something. So, I am perhaps growing more resigned to a ‘public school’ type of model where there is relative security of borderline crappy coverage for all with its own new set of problems, while those that can afford it do and get better private coverage.