Health Is Forever

Why is the American health care system so inefficient? Well, there are a lot of reasons. But one important reason, which is especially important because it's also related to bad health outcomes, is that the horizon-line for incentives is messed up. Oftentimes, spending $X on a patient in one year will allow the patient to not get sick in a way that requires spending $3X or $4X some years down the road. From a holistic point of view, you want to spend the $X. But that requires the person who's deciding whether or not it's a good idea to spend the $X to be the same person as the one who's responsible for the $3X or $4X down the road. There are a few ways you could get that result. One would be to have a genuinely libertarian health care system where I need to pay my bill no matter what. This means making sure that if I don't spend the $X and then wind up being unable to afford $4X later in life, that we stand idly by and watch me die. As in, if I haul myself into the emergency room and the doctor is sitting there with free time on his hands, and knows how to cure me, but I don't have the cash, I just die. Right there in the waiting room. If the doctors wants to treat me for free during his time off without using hospital facilities, that's fine, but otherwise I've got to die. It's necessary to make the incentive structure work.

Alternatively, you need the entity providing me with insurance to be the same throughout my life. This is basically how the Veterans Health Administration works and it works well. Employer-based insurance could reap the same kind of efficiencies if almost everyone worked for very large firms and could be expected to have life-tenure in their jobs. We could even, John Kenneth Galbraith-style, try to deliberately engineer this result where the private sector is dominated by huge, highly regulated, oligopolies. Or, rather, if there were an independent reason to think this was a good idea, then tax-subsidies for empoyer-sponsored insurance pools would be a good idea to add to it. But it isn't actually a good idea.

The last alternative would be to create a pool so large -- United States-sized -- that very few of its members would ever leave. Technically, of course, people do emigrate from the United States. But it's a small number of people. Basically, a nationwide health care system would have the right incentives to make sure investments were made at treating people when doing so would cost the least rather than waiting until the situation was so dire that it's morally (or legally) unacceptable not to provide treatment, but the treatment may be hugely expensive. You don't even need to do this European-style where the government pays for basically everything that's a bona fide medical expense. Free provision of catastrophic care combined with free provision of preventative care (including an appropriate number of check-ups and tests as determined by family history and lifecycle position) would do the trick. I think this is what they do in Australia -- people buy private insurance or pay out of pocket for mid-range medical expenses, and the state pays for the rest. Now that wouldn't begin to tackle America's exhorbitant end-of-life spending, but it'd be a good start on getting a handle on the situation.