Health Care Summit Pre-Mortem
By Arnold Kling
By the way, Cato will be having a live blog (link now fixed) of the health care summit, and I am invited to participate in the live blogging. My views on health care have not really changed since I wrote Crisis of Abundance or this essay three years ago. Either of those works will contain more useful information than is likely to come out of the summit.
As the graph shows, the aging of baby boomers is not the main factor in the growth in health care costs, the effect of the demographic change due to aging baby boomers is minor relative to overall cost growth.
That is because the graph goes to 2080. Certainly in the second half of the 21st century, the increasing share of health spending relative to GDP is a much bigger problem for Medicare than is the aging population (at least under standard projections).
But that talking point is misleading. My counter-talking-point is that the second half of the 21st century is not relevant. We cannot make it to 2030, much less 2080, if we stay on our current course for Medicare and Social Security. That is because between now and 2030, the number of people aged 65 and over will double. Even if health care spending per capita stayed even with GDP, we would have to cut benefits nearly in half just to keep the Medicare budget under control. So chop off the right-hand two-thirds of Mark’s (the CBO’s) graph. Better yet, stare at the table.
Thoma comes very close to saying that in Medicare we need to cut costs, not benefits. That would be wonderful. Don’t reduce consumption of medical services, but make costs magically disappear. That is not going to happen. There are certainly ways to improve efficiency, but there are no big free lunches out there. The only way to significantly slow the growth of health care spending is to make less use of procedures with high costs and low benefits.
There are two ways to approach reducing the use of high-cost, low-benefit procedures. You can have the government tell people what they can and cannot have. Or you can have individuals pay for a larger fraction of the medical procedures that they consume. It really comes down to those choices.
Advocating either one of those is political suicide, and talking about anything else is a waste of time. The Democrats will not advocate government rationing, and the Republicans will not advocate scrapping most of our current system of third-party payment in medicine. Instead, the summit, like the entire “health reform debate” this year, will be a waste of time.