Why we must not ration health care
You have advanced kidney cancer. It will kill you, probably in the next year or two. A drug called Sutent slows the spread of the cancer and may give you an extra six months, but at a cost of $54,000. Is a few more months worth that much?
Different people have different answers. By allowing different answers instead of mandating the same answer for everyone, the price will drop and the value will rise, and everyone will ultimately benefit.
If the government is in charge, and they say, no, it isn’t worth that much, then that’s the end of it. The company can’t make any money off of the medicine so it’s dead in the water. It will probably never even reach that stage because the manufacturer will know ahead of time that there’s no market for the treatment.
If the patient is in charge—either in charge of their actual care or in charge of the level of insurance they purchase—some will say no and some will say yes. The company producing the medicine will have money to continue research on this medicine in order to bring the price down or the value up and sell it to more people.
Singer argues that letting people choose whether it’s worth it for them will raise everyone else’s insurance, or everyone’s taxes if insurance is paid for by taxes. But in a truly open system, that’s not true. It will only raise the insurance of those people who choose to pay for coverage at that level of care. As long as the government doesn’t step in and say that insurance companies must provide care at the same level for everyone, people can make that choice. And the manufacturer of Sutent or other expensive drugs can slowly increase the value of their treatment and decrease the cost of their treatment so that more and more people decide it’s worth it.
In other words, if the government is in charge of the level of care people receive, Sutent won’t be available to anyone, or will be available at a fixed high cost that never goes down because there is no reason to develop slightly lower-cost versions. If the limit is set to $40,000 and the manufacturer thinks the best they can do is shave off %10, it will never drop from $54,000 to $48,000. And they’ll never discover the break-through that brings it down to $40,000 that then gives some other company the idea for an innovative technique to bring it to $30,000, etc. Nor will there be an incentive to increase the value from six months to nine months, and so on until it contributes to finding an actual cure.
When the price and value of something is such that more people will buy it if the price goes slightly down or the value goes slightly up, then a free market will make those improvements when possible. But if the only market forces are fixed bureaucratic price points, those improvements will only be made if the manufacturer knows they can reach those arbitrary points. Some treatments will never be made public because the original design doesn’t meet any of the bureaucrat’s artificial hurdles. And this means that other players in the market will never have the opportunity to make further improvements.
But if people choose their own level of care, Sutent, or some treatment with equivalent or better effects, will first be available at $54,000, and then at $48,000, and then at $40,000, then at $30,000… and on down to $1,000 or less. And while the price is going down, the extra time patients receive from it will go up: six months, nine months, a year, two years… that kind of competition doesn’t exist when the only competition is “will the government ration it today?”
- February 2, 2012: Health care reform: walking into quicksand
The first step, when you walk into quicksand, is to walk back out. You’ll find it a lot easier to build a bridge over the mire when you’re not sinking into it
We have a huge problem with health care costs in this country, problems caused by our strange system, mostly set up through tax breaks to employers but not individuals, that disconnects the people who need health care from the people who provide it. Rather than having people who need care purchase from the people who provide care, we set up a system that requires “insurance” even for routine, predictable costs. But the person who needs the insurance in order to get the care doesn’t buy the insurance either. They look for a job that pays for the insurance that pays the people who provide the care.
The doctor gets paid by the insurance company. The insurance company gets paid by the employer. The patient… also gets paid by the employer. The patient is completely disconnected from their own health care. It’s a system that obviously can’t work in the long run. Yet, when it fails, we set up a system—ObamaCare—that adds yet another layer, so that in order to get health care we’ll need to look for a job that pays for insurance that’s micro-managed by government that pays the people who provide the care amounts approved by government for approved care.
Either form is a recipe for higher prices and poorer care. And the reason we moved to the worse system that is going to make for even higher prices and even poorer care is that the original system raised prices and reduced care.
We need to back out of the quicksand before we can build the bridge.
While reading Priming the Pump, I started thinking about the advances that happened just because of computer-makers trying to cut costs to meet buyer needs. And then I thought, what if we bought computers like we do our health care? We wouldn’t buy computers ourselves. We’d get them through our employers. But our employers wouldn’t buy them for us either. They’d buy us a plan that guarantees us a computer when we need one. What can the plan buy us? The federal government and our state government both have strict rules on that.