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The Cost of Illness

Okay, I'll semi-concede the point to Nathan Newman. If I implied that a healther population would in no way reduce health care spending I was wrong. Some health care spending goes to treating people who get sick, then recover. Insofar as people don't get sick in the first place, you can save money on that kind of spending. More importantly, there's an economic cost to illness in terms of non-productivity. I'm certainly not one of those people (i.e., Republicans) who thinks that the way to build economic strength is through an Alabama-style low-wage, low-tax workforce featuring little education and bad health care (indeed, the madness of Southernomics deserves a whole discussion of its own; it's like the Middle East, where there's oil -- as in Texas -- things sort of work, elsewhere it's more like Jordan). Nevertheless, the fact remains that the bulk of public sector health care expenditures come from treating the terminally ill. The desperate measures taken near the end of life are very costly. And, to raise a point I've raised before, physically healthy people have a tendency to spend years and years requiring very costly nursing home care because of alzheimer's and whatnot.

That's not to say that we shouldn't promote measures to get people to live healthier lifestyles. There are plenty of other good reasons to do it. But it's not going to work as a primary method of reducing the rate of growth of health care expenditures, something America's mixed public-private health care system is uniquely bad at. You either need to march forward into command-and-control supply and price management, or else backwards into a real market system where people just die if they can't afford medicine. The combination of market pricing with all sorts of subsidies (both hidden and explicit) to prevent the undesirable consequences of market pricing (i.e., people just dying because they can't afford care) just pushes costs up, up and away in a manner that diet and exercise can't do much to mitigate.

January 10, 2005 | Permalink

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Comments

Another Major solution is to allow euthanasia and encourage people to accept death. Lots of people think this is EVIL, but personally I'd rather retain my dignity. I would never personally choose euthanasia, but I have written a living will that encourages doctors to pull the plug if I am ever reduced to a vegetative state. I know from my personal family experience that this step alone can save 1,000s of dollars / person and allow a person to retain some of thier self and control when faced with the abyss, rather than have some life-obsessed doctors strap them into machines and keep thier basic bodily functions going as though that really meant something. Also, as someone who believes in souls, the idea of the soul being trapped in an essentially dead but still functioning body gives me the willies.

Posted by: MDtoMN | Jan 10, 2005 12:41:02 PM

Actually, preventative healthcare saves a lot of money for two reasons. First, people are treated early in their illnesses when they are much cheaper to treat. And secondly, study after study has shown that people who live healthy lives are less likely to have serious health problems late in life and are less likely to need long term pallitive care. They are more likely to keep going until they keel over bungie jumping at the age of 95.

This is why the European model is so much better. Not only is the overhead on healthcare so much lower but old people in Europe are much healthier because they are in better shape and need less long term care.

Posted by: Freder Frederson | Jan 10, 2005 12:53:55 PM

"the fact remains that the bulk of public sector health care expenditures come from treating the terminally ill"

I'd love to see a cite for this. I suspect that a good deal of the expenditure goes to chronic illnesses and disabilities that are not terminal, things like asthma and diabetes.

Posted by: Anne | Jan 10, 2005 1:40:08 PM

Matt, your theory assigns no value to good health habits as they relate to end-of-life healthcare. Many problems suffered by the elderly would not exist or be less severe if they entered their final years healthier. A person with proper body weight to body frame ratio, no history of smoking or drinking and lifelong good diet and exercise habits will be far better able to withstand the ravages of various illnesses in their later years. Fate or family history may have it you're going to drop dead of a heart attack at age 80. Far better to have that coronary in your living room, otherwise healthy and with little warning. An alternative is dying following the same attack after lying in a nursing home for 6 months, suffering from a series of minor strokes, cirrhosis and emphysema brought on a least partly by a lifetime of smoking, drinking and obesity.

Posted by: steve duncan | Jan 10, 2005 1:46:10 PM

You missed it again - the point was that though health care expenditures might be inevitable, an additional 10 years of health means up to 10 years of wages. At the micro-level, that's family sustainability, and at the macro-level that's more GDP and taxes.

The only other point I'd raise is that delaying costs IS reducing costs, but you really know that and were probably just making a rhetorical point.

Posted by: Matt | Jan 10, 2005 2:50:11 PM

It's pretty obvious that health-care spending isn't a zero-sum game: the healthier a population becomes, the higher the bar is raised on what is considered "healthy"; the longer the average lifespan gets, the longer people expect to live; and the more medical science can do, the more people ask it to do. Lots of healthcare dollars (no idea what the exact stat is) get spent on screening for diseases in ostensibly healthy people because, rightly or wrongly, we believe that this can prevent or minimize illness. People spend huge amounts of money on infertility treatments, when a generation or two ago they would have had essentially no opportunity to spend the money that way.

Then there's the issue of chronic disease, which is largely an invention of the 20th century. It exists because of advances in health care: for example, before the beginning of insulin therapy in the 1920's, type 1 diabetes was a 100% fatal disease. Now it is a chronic disease, and with hard work, good medical care, and luck you can live with it for 50 or 60 years. Or cystic fibrosis: the expected lifespan of people with this condition has increased dramatically over the last 50 years. A number of conditions are the same way -- no cures, but treatments that keep people alive and functioning longer. Turning these conditions from fatal to survivable is an advance (one that I'm personally grateful for), but these improvements in care are expensive and place additional burdens on the healthcare system.

Posted by: janet | Jan 10, 2005 3:43:57 PM

My company charges a higher premium for medical coverage if you smoke. I've long wondered why there wasn't a financial penalty in Medicare or Medicaid for personal habits placing you at higher risk for needing medical care. Society charges many of us for risky behavior. Higher auto rates for excess accidents or tickets. Increased homeowner premiums for living on a flood plain or a historically dry forest or earthquake area. Why not the same approach for health care costs?

Posted by: steve duncan | Jan 10, 2005 4:32:42 PM

The point of investing in a healthy population is that primary care, as provided throughout someone's middle age and early retirement, is a lot cheaper than providing secondary and tertiary care throughout that entire time period.

It's true that death is expensive, and since everyone dies, there's a fixed cost in the health system (maybe not so fixed if we adopted some sensible reforms).

But that in now way changes the fact that having chronically unhealthy adults adds a fortune to our healthcare costs. An obese diabetic who dies at 65, after requiring twenty years of treatment for leg ulcers, retinopathy, and kidney failure, is often a lot more expensive than a healthy worker who retires at 65 and dies at 75.

Part of the problem in getting people to address this is that insurance companies experience declining returns in preventative health investments. Why pay for cigarette cessation when 15% of your patients turn over to another company each year anyway? That's like investing in making the competition's patients healthier than your own.

Of course if everyone invested in preventative healthcare, global costs would go down. And that's why its a sector of the economy ripe for government involvement.

Posted by: Jonathan Dworkin | Jan 10, 2005 8:24:19 PM

There are 2 points here that are being confused. Point one is Matt's. Most of the health care dollars in the US are spent in the last couple of months of a person's life. Much of the benefit of health care spending comes earlier in life.

There are proven ways to deliver health care in a cost effective manner. Prenatal care (Maybe $1000) is far far cheaper than the cost of a low birth weight baby ($100,000+). So it makes a lot of sense from a health perspective and a societal economic perspective to provide free or low cost pre-natal care. This is where good quality health care really makes a difference.

People at the end of their life are candidates for all types of tests and interventions. However, some improve the quality of life and others do not. Too often, family votes for the possible miracle intervention and ends up with the more likely low quality of life result. Basing decisions on likely outcomes would save money and might provide a better quality of life near the end. The point Matt makes is that these costs are similar whether a person dies at 40 or 100. That is true, but extending the productive life into later years allows the person to have a greater lifetime contribution.

One reason why health care is so expensive is it is labor intensive and requires trained labor. There are ways to reduce this cost by having family be responsible for some of the care, keeping people in their own homes etc.

Posted by: bakho | Jan 11, 2005 12:19:33 AM

Suppose we were more successful at getting people to recover from the things they usually die of now.

Then a given person might have *several* extremely expensive times. He could recover from the first few interventions and finally die of the last one.

If it's true that most health care costs are spent in the last 2 months of life (which may not be true, but let's run with it for now), then it means most health care costs are mostly *ineffective*.

And if that could be documented, it would imply an easy palliative. Require a maximum expenditure per month.

The people who'd run close to that maximum and survive long enough to repeat it their last month or two, would be rare.

People mostly don't want to have a couple of extremely expensive extremely-uncomfortable months at the end. But they don't want to die of something they'd recover from if they could afford adequate healthcare, either.

If it could be proven that the expensive stuff mostly doesn't do much good, then that last objection wouldn't be nearly so important.

Posted by: J Thomas | Jan 11, 2005 10:05:30 PM

"(indeed, the madness of Southernomics deserves a whole discussion of its own; it's like the Middle East, where there's oil -- as in Texas -- things sort of work, elsewhere it's more like Jordan)"

Very interesting. Why then do people flee the rustbelt and flock to the sunbelt? I can hardly wait for the explanation.

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I would never personally choose euthanasia, but I have written a living will that encourages doctors to pull the plug if I am ever reduced to a vegetative state.

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Many problems suffered by the elderly would not exist or be less severe if they entered their final years healthier.

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Part of the problem in getting people to address this is that insurance companies experience declining returns in preventative health investments. Why pay for cigarette cessation when 15% of your patients turn over to another company each year anyway? That's like investing in making the competition's patients healthier than your own.

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