Wednesday, September 12, 2007

We Should Just Stop Ordering So Much Health Care

Robin Hanson has written a fascinating essay at Cato Unbound in which he claims that Americans are not really being ripped off by anyone when they over-spend on health care, but that they are simply demanding too much of it.

Car inspections and repairs take a small fraction of our total spending on cars, gas, roads, and parking. But imagine that we were so terrified of accidents due to faulty cars that we spent most of our automotive budget having our cars inspected and adjusted every week by Ph.D. car experts. Obsessed by the fear of not finding a defect that might cause an accident, imagine we made sure inspections were heavily regulated and subsidized by government. To feed this obsession, imagine we skimped on spending to make safer roads, cars, and driving patterns, and our constant disassembling and reassembling of cars introduced nearly as many defects as it eliminated.

This is something like our relation to medicine today. Our public today is like a king of old whose military advisors spent most of their time and budget reading omens and making sacrifices, to gain the gods' favor, instead of hiring soldiers and talking battle strategy. These advisors knew omens and sacrifices mattered little, but they saw the king was comforted, and feared losing favor by talking of battle strategy. A truly loyal advisor would have told the king what he did not want to hear: "You are obsessing about the wrong thing."

I have said before that the main cause of our "health care crisis" is that we expect "insurance" to cover all health care costs. Car insurance only kicks in when we manage to inflict more damage on our cars than the deductible will cover. Most people go years between making an insurance claim on their cars, but use their health insurance many times a year. Hanson is claiming that demand for health care has increased to absurd levels, and that the best way to reduce costs is to simply cut back on how much of it we buy. He sites a number of studies that show that most medical spending results in no significant difference in actual health, and in many cases can cause adverse effects. I recommend reading the whole thing, even though it is rather long and detailed. No, in fact I recommend reading the whole thing because it is long and detailed.

Society has been placing more emphasis on health lately, insisting on healthy eating, healthy kitchen appliances, healthy exercise, healthy soda. All this has apparently changed our priorities enough that we now spend one sixth of our income on health.

Personally, I prefer to spend my money on things that don't involve pills and needles.

UPDATE: EconLog is saying that Hanson is more mainstream than one might think.


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