Re: TownHall.com – 2/11/2008 – “Hillarycare Is Not the Answer” – Star Parker

Parker asks “Why have health-care costs gone out the roof when the prices of just about everything else have gone down?” and then answers her own question with “Because health care already has become a highly regulated, highly bureaucratized industry”.

But regulation and bureaucracy are only minor components of the rise in health care costs, and the bureaucratic burden is found in the private sector health care insurance industry as well as the government health care payment systems --- bureaucracy arises in a system where a third party payer tries to “simplify” their internal processes without much regard for the other two parties, and the insurance industry as well as government are equally driven in that direction. Speaking as someone who ran finances for my wife’s medical practice, government regulation of insurers (at least to the point of having them all use identical billing procedures) would reduce, not increase, health care costs.

What are the significant cost drivers for health care?

One health care cost driver is the increase in demand for care in our society. That increase in demand is driven by several factors:

(1) Advances in health care allow treatment of health problems that previously remained untreated. Where patients used to just live with their problem untreated or be killed by it, they are now treatable at substantial cost. Where patients used to be a financial burden only to their family (and/or to their employers who lost their productivity), patients’ health care financial burdens are now classified in the health care sector. And the most cost intensive treatments seem to be of health problems where continuing treatment but not cure is possible, and as the suffering patients live longer due to the treatment, the total cost of treatment grows, even if the unit cost of treatment remains constant.

(2) As health care can accomplish more, more people demand the new health care capabilities, some of these (lifestyle treatments such as elective cosmetic surgery and Viagra) having little to do with health.

(3) Shamelessly advertising in a way designed to demand more health care services than health really needs. Inventing new “diseases” that their commercial products can treat and promoting new and “improved” treatments that offer little benefit over older treatments but at much higher cost are two successful techniques that the health care industry uses to jack demand, raising both volume and unit cost simultaneously. Getting the government to mandate and/or finance use of their products is another obvious marketing ploy.

(4) The unhealthy lifestyle our society has adopted leads to the incidence of diseases far sooner and more frequently than they would in a healthier population. Leveraged by health care’s success in prolonging the lives (and thus the treatments) of those with these diseases is a particularly large cost driver factor.

Another health care cost driver is the direction of research and development to develop newer (and more expensive) treatments of problems with already existing reasonable treatments at the expense of investment in cost reduction of current treatments. I believe health care is unique in this respect, with the unit costs of developing and marketing new treatment (especially new drugs and medical devices) so expensive that reducing manufacturing costs has little effect on total costs which to a large extent is the recovery of development and marketing costs.

Parker claims that in the past 45 or so years, per capita health care expenditure has quintupled. Pardon me for my math, but isn’t that about 3.5% per year? How much faster than inflation is that?

Parker is right in pointing out that if free, health care demand can become frivolous and ineffectual. And Parker should add, nearly infinite. But long before government stuck its head into health care, unions demanded for their members and corporations offered their employees employer covered health care payment policies not unlike what government now provides for many people. If Parker wants to blame government for health care coverage induced inefficiencies, she should fault the private sector for inventing and implementing the model government used to form its current system.

Parker is right about Clinton’s health care plan, but for the wrong reasons. Something must be done to provide health care to those who cannot afford it --- without it we will become a nation split between those who have access to health care and those who cannot get it, and therein lay the seeds of workplace inefficiency and perhaps civil unrest. Someone will have to fund that health care and it is unlikely to be funded by those who can’t afford it. Is society really willing to deny emergency health care to those who refuse to pay for it? Clinton’s health care proposal recognizes these problems and tries to do something about them. Unfortunately, her proposed solution is completely unacceptable, not because it involves the government but because it is an absurd plan in its own right and will make the health care problem worse, not better. Parker should admit to the real problem with health care access and that government involvement is a necessary (but not sufficient) component of the solution. Parker should also do more to contribute to that solution. Rejecting HillaryCare is an important first step, but denying the need of government in the solution is a very poor second step indeed.