The Economics of Health Care

In 1983, as part of my executive MBA at the University of Rochester, a senior economics professor explained how the dollars associated with health care were spent. He said, "On average, 90% of all health care dollars are expended on patients in their last year of life, and, of those dollars, 90% are spent in the last month of life". He then made the point that millions of American children had no preventive medical or dental care because our system provided no way to pay for it. This was an example of "allocation of resources" - it is what it is, and you make the value judgment.

Things have changed since 1983, so perhaps the spending happens a bit earlier than it did then. Drugs, for example, are far more numerous now than then, and they are not cheap. Also, many people are getting knee or hip replacements, or heart surgery, or other life-extending procedures that were not available 26 years ago. Yet I'd bet that a large percentage of U.S. health care costs continue to be incurred in the last year and month of the average patient's life.

With health care now costing America close to 15% of our gross national product, with estimates that it could go as high as 25% as our population continues to age and more and more costly treatments are developed, many analysts are convinced that our economy would collapse if this burden rate comes to pass. Costs must be reduced, and this one of the two primary reasons why President Obama is so focused on health care - the other reason being that many millions of Americans, including my 49 year old unemployed son, have no health insurance.

Most Americans support the idea of everyone having health insurance, and they subscribe to the idea that total costs must be reduced. But few Americans like the idea of rationing health care for terminally ill people. Consequently, we will continue to spend enormous sums to care for people who will die without benefitting much or at all from the care. Sooner or later this practice will have to change, simply because we will not be able to afford it. But, nobody in power is willing to open the discussion.

I feel the same way now as I did in 1983. Even the best life has a natural end. For those whose ends are long, often painful, and even semi-vegitative, hospice care should be the standard and costly, usually futile medical interventions should be prohibited. The savings should first be put toward giving every child the medical and dental care they need. If I'm the one who faces a lingering end, I'll choose to go the inexpensive way, with my family at my side. It's just better for all concerned.