Some thoughts on rising health care costs and the difficulty of a solution

https://www.brookings.edu/blog/up-front/2020/01/21/middle-class-income-growth-is-lagging-the-rich-and-the-poor-how-much-is-due-to-healthcare-subsidies/

Hat tip to Steve Benner who posted this link to Facebook and engaged me in a very helpful discussion on this topic.

It is no secret that health insurance policies get more expensive year after year after year. The link American system of linking health insurance to employment was designed from the beginning to reduce labor mobility and to this day is a major factor discouraging entrepreneurism and self-employment. Rising insurance costs have limited wage growth and the growth of full-time positions with benefits, encouraging firms to employ workers part-time to reduce benefit costs whilst forcing more and more workers to string together multiple part-time jobs to make a living. The labor economist in me wants me to footnote all these trends, but as this is a blog post in a blog whose title admits a lack of strong epistemological claims, I'm going to focus on getting my main thoughts down and readable, and leave the supporting research as an exercise for the reader; if any of the facts I cite turn out to be wrong, I welcome your corrections.

Whilst insurance company profiteering from market power must not be discounted, it is undeniable that health insurance policies are expensive and keep becoming more expensive in at least part because health care itself, that which the policies exist to pay for, is very expensive and becoming more so. Some of this is circular: rising health care costs raise the price of benefits in labor-intensive industries relative to industries less reliant on labor — except health care itself is labor intensive, so rising health insurance costs raises the benefit bill for the labor-intensive health-care industry. But rising health care costs are due in part to the fact that what we mean by "health care" is an ever-expanding set of possible treatments. Advancing the frontiers of medicine means an increased capacity to save lives and to improve the quality of life for people who suffer from a wide array of once-untreatable conditions. It also means that the limits of our capacity no longer shield us from the most serious moral dilemma with regard to health care: the problem of rationing.

Rationing is how society determines who gets to use scare goods and services. If there's more interest in something than that which is available, everyone can't get everything they want, and somehow society has to determine who should get the thing and who should not. In the case of concert tickets or artwork, being on the "not getting it" side might be disappointing, but when it comes to health care, this is a life-or-death question: the question of rationing health care is literally a question of who lives and who dies.

The present system is an odd hybrid, but a lot of it comes down to price rationing, which is the way our society rations the bulk of scarce goods and services. When there is a shortage of a good, the price rises, both motivating producers to supply more of the item in question, while making fewer consumers able to afford it, until the number of willing buyers match the number of willing sellers at the market price. Under the best of circumstances, it means that the people who value a good most are the ones who get it. Under less noble circumstances, it means that when something is scarce, the rich get it and the poor go without, regardless of relative need.

It may at some point have been a reasonable stance to say that "health care should be a right" – that is, everyone should have access to health care up to the point where “the doctors have done all they can do.” Limits to the capabilities of medicine in the past might have made the provision of literally "all the health care we can provide" to everyone a goal within the universe of possibilities, making a clear moral position affirming the sacredness of life: we should do what doctors say is necessary and possible for whomever needs it, and to worry about the resources would be to value money over life.

If this were ever the case, it is not now. The theoretical capabilities of medicine are expanding to the point where if everyone was entitled to “the doctors doing ALL that they can do,” providing such care could approach using the entirety of resources at society’s disposal. Technological limits no longer shield us from the difficult moral choices about how much health care we should provide to whom. But wow that’s a loaded and difficult moral question. The current system is a terrible approach, but the question of how we ration health care is becoming unavoidable, and there are few comfortable answers.

 I worry that we don’t have a shared moral framework as a society to tackle the problem of how to ration health care. The current system sucks. But any proposal to change necessarily involves changing who decides literally who lives and who dies. The cries about “death panels” with regard to "Obamacare" were misplaced, but the underlying fear is very real and, I would argue, unavoidable. If technological limits mean there’s not much health care we can really provide, we can say "do all we can for everyone." I believe we’re past that point. Currently, price rationing determines who lives and who dies. That’s a terrible system. But any change would necessarily mean putting someone besides the market in a position to make these determinations, and people privileged in the current system will use their power to fight it tooth and nail because a different decision-making process might, literally, kill them. Reforming the health care system is so essential, and yet even if it saves many lives, it will also cause people who live longer under the current system to die sooner. It is in no small way a version of the infamous trolley problem.

This is just about the perfect intersection between my two jobs or economist and priest, and it’s a terrifying question. If not via market pricing, how should society ration who has access to what health care? We literally can’t do everything medically possible for every sick person. So how do we decide who gets what treatment? Which steps are considered ordinary and which extraordinary? Who should have access to what care? The current system is terrible. Any different system will make some people who are winners in the current system losers in the new system, which will kill them. This has to happen, but wow this will NOT be easy. And all the harder in a culture that is terrified or in denial of death.

(The dismal science has spoken. The Christian answer, I suspect, lies in 1 Cor 15:55, and focusing on medicine to help people thrive whilst they are alive rather than maximal delay of death, but that won’t fly with many people today unless we can pull off massive conversion.)

Sorry to unload on you all here (well, that's assuming anyone is reading this blog, probably a big assumption), but I’ve put a lot of thought into this over the years. The “death panels” scare latched on to the wrong particulars, but the underlying fear is real. There ARE currently death panels and there will be under most systems we can generate. But no one seems to want the debate to be “who should properly be on the death panels and what standards should they use” or “what would a society look like in which death panels weren’t a necessary component of a health care system.”

Health care has been, is being, and will continue to be rationed for the foreseeable future, the possibility of a post-scarcity economy notwithstanding (the subject of another post). Our current rationing system is a bad one, but changing it requires replacing it with something. It is one thing to say that the standards for determining who should have access to what health care should be "not what we're doing now," but another thing entirely to come to any sort of public consensus who should be making such decisions and on what basis.