Save Fewer Lives or Save Lives More Efficiently?

Posted on February 15, 2010 by Dr. David Edward Marcinko MBA MEd CMP™

An Economics Argument

By Austin Frakt PhD

The Incidental Economist

Originally Posted: 14 Feb 2010 03:58 AM PST

Let’s say the cost per saved life due to providing an additional individual with health insurance is X dollars (Tyler Cowen says X = $9 million; I say that’s an overestimate). If one thinks X is too high, what’s the right policy response? One answer is to extend insurance to fewer people. The other is to try to reduce the cost of care so that X is lower.

The Differential

There is a huge difference between these two responses. I won’t go into all of them now. One important difference I want to highlight is that if we simply reduce the number who will become insured then the rest of us are still left paying exorbitant health care costs. Thus, two problems remain, many are left uninsured and health care costs are still too high.

Cost Reductions

On the other hand, if the policy response is to reduce the cost of care then we all win. More of the uninsured can be insured for some level of funding and the rest of us can benefit from lower health care costs. That’s a double victory.

Assessment

That health reform is too expensive is not a good argument for doing less of it*. It is an argument to do more. The provision of health care will not become more efficient under the status quo. And, the status quo (with perhaps minor tweaks to it) is what we will get if health reform does not pass this year. But, if reform does pass it sets the stage for more reforms, and ones that focus on costs.

*Note: I’m not saying I think it is too expensive. But if you do think it is I do not find that a convincing argument not to do it.

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Filed under: Health Economics, Health Insurance | 1 Comment »