from Megan McArdle:
1950s health care isn’t expensive; this same regimen would be a bargain at today’s prices. What’s expensive is things that didn’t exist in 1950. You can say that “health care” has gotten more expensive—or you can say that the declining cost of other things has allowed us to pour a lot more resources into exciting new health products that give us both longer and healthier lives.
In Crisis of Abundance, I wrote,
The American middle class can still afford the wonderful health care that was available in 1975–easily. . .as a thought experiment, a return to 1975 health care standards would completely resolve what is commonly described as America’s health care crisis.
You know, that book was written 10 years ago (it came out in 2006), and at the time I said it would have a shelf life of ten years, meaning that I thought that it would still accurately describe the issues for another decade. In fact, it is looking like it will be valid for another ten years. I would say that the majority of popular books on politics and economics expire much more quickly.
Four forces watch: In addition to the New Commanding Heights, McArdle’s essay also touches on the Demographic Divide.
while the college educated class seems to have found a new equilibrium of stable and happy later marriages, marriage is collapsing among the majority who do not have a college degree, leaving millions of children in unstable family situations where fathers are often absent from the home, and their attention and financial resources are divided between multiple children with multiple women.
Other sentences are reminiscent of The Reality of the Real Wage. There, I recycled a bit from my book.
My guess is that if you could find a health insurance policy today that only covered diagnostic procedures and treatments that were available in 1958, the cost of that policy would not be much higher than it was then. Much of the additional spending goes for MRIs and other advanced medical equipment, as well as for health care professionals with more extensive specialization and training than what was available 50 years ago.
I recommend McArdle’s entire essay. Brink Lindsey adds more statistics, such as
In 2011, 87 percent of kids who had at least one parent with a college degree were living with both their parents. For the children of high school dropouts and high school grads, the corresponding figures were 53 and 47 percent, respectively.
Finally, on this same topic, a reviewer (Francis Fukuyama) of an about-to-be-released Robert Putnam book writes,
One of the most sobering graphs in Our Kids shows that while the proportion of young children from college-educated backgrounds living in single-parent families has declined to well under 10 per cent, the number has risen steadily for the working class and now stands at close to 70 per cent.
Pointer from Tyler Cowen.
Arnold:
I agree with you that your Crisis of Abundance may be as relevant today as it was 10 years ago. I read it then, and even cited it in papers I was writing in grad school, and I’ll be re-reading it soon.
But are there parts of it that you would re-write or re-state given “new” information that has evolved in the intervening 10 years?
Nothing significant. Unless you can think of something that needs re-thinking.
Nothing specific as I recall, but I’m in the process of re-reading Crisis of Abundance.
Back in the day (early 2008), you made another post on a McArdle article. I commented on that (as: ‘shayne’) at the time, and referenced some elements of your book.
And my comment then is still relevant now. The U.S. health care system is to an even greater extent being financed to grow (build-out mode) rather than to just maintain.
Again, back in the day, the metaphor that was being applied was the “pig through a python” – with the aging ‘baby-boomer’ generation being the “pig”, and the U.S. health care system being the “python”. It seems there is no end to how large the “python” is going to get, to the point the “pig” is nothing more than an appetizer. And the python is still going to be hungry.
I’m a little surprised and disappointed at the discussion of healthcare here. If the current system was capable of setting limits or market prices for coverage or payments based on today’s capabilities, there would be no problem to discuss. We don’t have a problem drawing the line in the wrong place. We have a problem drawing the line anywhere.
What part of this isn’t explained by “3rd party payers”?
I agree that the type of 3rd party payer structure we have in healthcare does mostly explain things. But that is an explanation that recognizes there isn’t anyone allowed to or incentivized to set a standard of care or any spending limits. Spending just goes up and up, and 3rd party payers happily just tack on their profit. Pointing out that if we just consumed less, that it would be cheaper really isn’t very helpful. Its like the joke about the economist stuck in a hole, who decides to assume a ladder.
While I have no doubt that it would be much more affordable in terms of average aggregate healthcare expenditures if we stuck to to 1950’s or 1970’s treatments, I’m not so sure that the same treatments are ‘just as cheap’ as they were back then. M
y impression from the bills (always a indicator fraught with danger due to absurd medical accounting) is that a simple doctor’s visit or procedure such as, say, an appendectomy, is a few times more expensive than it was a generation or two ago, even adjusting for inflation.
One could make the claim that there should also be a ‘hedonic’ adjustment for quality, but the fact that these procedures in the US also cost a multiple of what they cost in other countries with similar standards of care and quality leads me to think that’s not what’s driving the above-inflation rise in costs.
An analogy could be made to the other ‘commanding height’ of education, which has also seen tuition soar far above the rate of inflation for an extended time. Does it really cost ten times more to provide, say, an ordinary liberal arts education or a major in the humanities than it did two generations ago? Again, one can make some appeals to Baumol cost disease, but that doesn’t seem to cut it. One can also say that one should make hedonic adjustments for all those fancy facility and new buildings and IT infrastructure, but I think the cost residual is still larger than the portion explained by such factors.
Even a simple doctor’s appointment or appendectomy, however, involves more equipment than a typical place would have had in 1970. How much value that equipment adds is, of course, always open for debate.
Don’t measures of health care inflation look at changes in a constant basket of goods and services? And yet we still get health care inflation greater than the overall CPI, right? I mean, I get that just looking at increase in insurance prices is wrong, wrong, wrong, but are there really problems with the government’s official measures of health care inflation that are known to bias it upwards?
Evidently, I am one of the few owners of the widely unread “Crisis of Abundance”. I’ve read it twice. I should read it again.
If Robert Putnam and Charles Murray agree, it must be true, right?