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Why Expensive Health Care Is Ok--except It Isn't

During a panel discussion the other day, I mentioned that health care is going to bankrupt our society if we keep spending more and more money on it.

It's a familiar refrain. Almost everybody involved with the health care debate says similar things. And yet, as I heard the words pass my lips for the gazillionth time, I couldn't help but think they weren't quite true.

There is no iron law of economics that holds we can't spend 20, 30, or even 40 percent of our wealth on medical care. In the aggregate, it's a matter of choices and trade-offs. If we pay more for health care, it simply means less money left over for other things. And, on the whole, there are surely some luxury goods that we could do without.

Think of this way. If you could live in a world where nobody died from cancer, but flat-screen televisions cost $20,000 a piece--in other words, beyond the reach of all but the richest Americans--would you take that deal? I sure would.

The real trouble with health care is that we're not getting our money's worth. You can see this most clearly in the famous studies by Dartmouth's John Wennberg, who has demonstrated that the intensity (and cost) of medical care in the U.S. differs wildly by region but without any corresponding difference in results. Senior citizens in Miami famously get more care, for more money, than their counterparts in Minneapolis. But they don't seem to be better off. International comparisons of health care show more or less the same thing.

So the choice isn't between curing cancer and having flat-screen televisions. It's between paying for a lot of unnecessary, unhelpful medical care and having flat-screen televisions. That's a little different.

This matters because, truth be told, it's not clear how well--if at all--many reforms designed to reduce the cost of medical care will actually work. That point comes through in a new paper from the Annals in Internal Medicine, written by Ted Marmor, Jonathan Oberlander, and Joseph White. The authors are skeptical that improving information technology, basing treatment on evidence, and other innovations will really make a difference on cost--as the Obama administration, among others, is hoping.

I've yet to study the paper that closely, but the argument is certainly plausible. And the authors are experts who should be taking seriously. (Treatment readers will recognize Oberlander from past posts.)

But even if the paper is correct and those innovations didn't reduce costs, they would still make a difference: They would produce better, more effective medical care. Ten or twenty years hence, we might find ourselves spending far more money on health care. But we'd at least have the knowledge that the money was being put to good use. That alone makes these initiatives worthwhile (as the writers readily acknowledge).

Of course, there's one other problem with spending a ton of money on health care. For an upper-middle-class professional, spending an extra few thousand dollars a year on health care might mean giving up a big television or other luxuries. But for everybody else, it would mean giving up more essential purchases--even basic necessities.

If, as a society, we think it's ok to spend an ever-increasing share of our wealth on medical care, we also have a responsiblity to make sure everybody can afford that care on an individual basis. That's going to mean creating a universal health care system in which all Americans have access to affordable and high-quality treatment. And the more expensive health care is on the whole, the more such a system has to distribute money from the haves to the have-nots.

--Jonathan Cohn