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Costs of a Culture of Life

April 25th, 2005 · 21 Comments

As someone who’s generally disposed to favor free-market solutions to a wide variety of problems, I’ve always been a bit troubled by the observation, often touted by progressives, that here in the U.S. we manage to spend a hell of a lot more per capita on healthcare than various countries where it’s socialized to some degree or another, without much of anything to show for it in terms of health outcomes. Yeah, I’m familiar with all the libertarian critiques of the far-from-laissez-faire status quo in the U.S., such as the way tax incentives have inefficiently tied health benefits to employment, and I find much of that plausible. And obviously there are differences between the relevant populations: If Americans eat more twinkies and exercise less than Swedes, they’re going to be less healthy however good our healthcare system is—and to the extent that’s a tradeoff people make knowingly, I’m disinclined to consider it a problem, as such.

Still, all that never struck me as totally satisfactory. Even after accounting for those factors, if socialized medicine is such a bad idea, how come it often seems to achieve as-good-or-better outcomes at lower cost? So over dinner with Dr. Dad in Chicago last week, I posed him just that question.

His answer was something I hadn’t thought of: “People in America think death is an option.” He meant that we spend huge amounts of money in the last few months of life on futile care—”where there’s life there’s hope” and all that—buying a few more weeks or months of bedridden survival at an enormous cost. Because of the dreaded “rationing,” countries with socialized healthcare don’t approve that sort of expenditure. But it doesn’t end up showing in the statistics, because for the most part it’s money wasted—all the pricey pharmaceuticals and high-tech treatments aren’t going to transform death into a lifestyle choice.

To say it’s “wasted,” of course, assumes it’s not the case that people really value the actual benefit they get from that “futile” care (or even the expected benefit given the chance of rare spectacular results) at the level their “revealed preferences” seem to indicate. But I think that’s highly plausible for a variety of psychological as well as institutional reasons I’ll assume readers can flesh out for themselves.

So here’s a puzzler. On the one hand, we want to create a culture in which people take a slightly more sane attitude toward death, acknowledge that (so far) they are not gonna live forever, whatever Oasis says, and let go when the end is sufficiently obviously nigh. But we also want to avoid the scenario assisted-suicide opponents worry about, where this mortal coil gets coated in Crisco, and the end’s not so much a shuffle as a slip and slide that begins with a solicitous nudge. Thoughts?

Tags: Markets


       

 

21 responses so far ↓

  • 1 Robert // Apr 25, 2005 at 11:57 pm

    There seems to be a trans-generational desire to deny the immutable fact that the death rate is still one per person.

  • 2 M1EK // Apr 26, 2005 at 10:50 am

    I don’t know if Dr Dad is going to be an unbiased commentator on the subject, seeing as how doctors in socialized medicine aren’t Even Rich.

    Anyways, my crappy health care plan isn’t going to spend heroic dollars on my end-of-life care, and yet I still get dinged for hundreds of dollars of premiums per month (and so does my employer) for the privilege of a 25 dollar copay + 30 dollar prescription for a lousy ear infection.

    Disproving the old adage, I’ve become more of a socialized-medicine guy as I’ve earned more money (this year, though, my pay was effectively cut by benefits changes). Join Matt Welch on the dark side, Julian.

  • 3 Kevin B. O'Reilly // Apr 26, 2005 at 11:10 am

    I think the problems of our third-party payer system are especially exacerbated in end-of-life scenarios. If the money coming to pay for end-of-life care were coming out of a medical savings account that could be cashed out instead of the insurer’s pocket or government’s treasury, the decisionmaking would change a lot. I suppose this could result in a situation where greedy family members want grandma to refuse anymore care so they can get their hands on her medical savings, but the current regime is not without its own perverse emotional effects.

  • 4 Grant Gould // Apr 26, 2005 at 11:32 am

    The last thing we want in thinking about death is rationality. A rational oldster would take up suicide-bombing as a hobby. After all, if the expected utility of the rest of your life is smaller than the expected utility of ridding the world of some pestilential prick, there’s no reason not to hand-deliver a dynamite bouquet.

    Consequential reasoning hits a divide-by-zero error at the point of death; it’s probably best to just accept that and let it be.

  • 5 Julian Sanchez // Apr 26, 2005 at 3:24 pm

    Yes M1EK, nothing makes me quite so disposed to take your position as leading off by gratuitously insulting my father.

  • 6 bystander // Apr 26, 2005 at 3:27 pm

    Shouldn’t that be: “People in America think death is NOT an option”? We do indeed spend a lot more than other countries on beginning-of-life and end-of-life medical technology, which is why you don’t want to be in Great Britain if you’re over 75 and need kidney dialysis (hint: you won’t get it). One of the reasons our infant mortality rate is slightly higher than some countries w/ socialized medicine is that we go to great lengths to save preemies, even if they only live for a day/week/month outside the womb. No one can honestly point to the Cuban health care system and say it’s better because its infant mortality rate is lower—that could very well mean that their high-risk infants simply die in the womb, while ours don’t, thanks to technology.

  • 7 Brian Hawkins // Apr 26, 2005 at 6:18 pm

    I think this also begs the question of whether our willingness to spend money on basically futile care at the end of our lives is in any way a result of our not-completely-socialized system. Perhaps the demand curve for life takes a sharp turn upward at the end in a way that we can’t really fathom until we’re there.

  • 8 fling93 // Apr 26, 2005 at 11:01 pm

    I recall hearing some discussion of the health care cost issue that made a similar observation that much of the money spent on health care in our country is on the “flat of the curve” where you don’t get as much bang for the buck.

  • 9 J. Goard // Apr 27, 2005 at 2:42 am

    That’s funny. Of all the funerals, gravestone engravings, obituaries, and family discussions of the “naturally” deceased elderly, I’m still waiting for just one person other than myself to echo Millay’s “Dirge Without Music”. Clearly Julian’s dad will have a much larger sample size, so I’d be very interested to know how many loved ones have expressed the sentiment that to irretrievably lose eighty-odd years of unique wisdom, memory, and personality is an unfathomably terrible thing.

    I don’t believe even the very wealthy are signing up in droves for full-body cryonic preservation, or radical hormone-replacement treatments with a nonzero chance of significantly forestalling the aging process (even while they are blowing absurd amounts of money on cosmetic products and services). What does that suggest about Americans and death?

    I suspect that the culprit is not failure to accept death so much as 1) deference to doctors, 2) an inflated sense of their powers, and 3) a disposition to believe that they owe us whatever powers we can imagine them to possess.

  • 10 Brian Moore // Apr 27, 2005 at 11:58 am

    Well, the way I look at it is that if people want to spend lots of money trying to save their life (or quality of life) near the end, then they should be allowed to.

    They should not be allowed to spend my money doing it, and they should not be put into a system that is forced to triage them out of treatment. That’s disgusting in a way I can’t bear to say.

    Who’s seen “Barbarian Invasions?”

    “There seems to be a trans-generational desire to deny the immutable fact that the death rate is still one per person.”

    Not for much longer. :)

  • 11 Javier // Apr 27, 2005 at 3:19 pm

    I have libertarian sympathies and your point about the superior performance of single payer systems troubles me as well.

    The problem is that while libertarians can point to the various distortions in the US health care market and claim that free market health care would do much better, the fact of the matter is that proponents of single-payer systems have real examples of single payer systems that seem to deliver superior outcomes. Real world examples go a long way.

  • 12 Barry // Apr 27, 2005 at 5:36 pm

    Not really. How many Americans do you encounter who blithely assume that the US system is (of course!) vastly superior to any other in the world? Even if they don’t have insurance, or just found out that their insurance coverage is a smaller, more moth-eaten blanket than they had assumed?

    Big lies, repeated a lot, persuade people.

  • 13 Nicholas Weininger // Apr 27, 2005 at 9:41 pm

    Julian, FWIW, my doctor father said that same thing to me, in *exactly* the same words.

    For a slightly less anecdote-driven perspective on this issue you might check out Richard Epstein’s _Mortal Peril_, which is a decade old but still very relevant.

    Also, don’t concede the “we don’t have better outcomes” talking point to the socialists. The stats everybody repeats to back this one up are infant mortality and life expectancy at birth. The former, as bystander noted, is skewed by measurement diffs, and is in any case a very, very bad proxy for anything more general. The latter is basically unaffected, to any extent large enough to discern from noise, by differences in health system quality once you get past the third-world level. See Arnold Kling’s article:

    http://www.techcentralstation.com/032105B.html

    And see also:

    http://www.portal.telegraph.co.uk/news/main.jhtml?xml=/news/2002/01/18/nhs118.xml&sSheet=/news/2002/01/18/ixnewstop.html

    for evidence that at least some private insurers, and not ones limited to the rich either, can provide better coverage than at least some first-world socialized systems for not significantly more money.

  • 14 Marie // Apr 28, 2005 at 7:41 pm

    I’m not sure that the idea that death may one day *become* an option, due largely to current arguably excessive R&D expenditures driven by exactly the attitude you criticize, should be laughed out of court. Perhaps the current elderly are fooling themselves, but their determination may fund an effort that will one day lengthen life dramatically.

  • 15 Cindy K // Apr 30, 2005 at 8:11 pm

    If I get your (or Dr. Dad’s) argument, you seem to be saying that we have more or less the same health care delivery as countries with single-payer systems, PLUS the add-on costs of these grasping old folks who want to live for a couple more months, and that’s why our system is more expensive. Maybe there’s some merit to this argument, and maybe not, but it seems to be missing a big point: we spend vastly more on health care than these other countries do, yet there are millions of Americans with NO access to care. Let’s say access to extra-heroic medical treatments were restricted, and this made costs come down so they were the same as single-payer systems (I don’t think this would happen, but let’s just say): you still have all those uninsured people, so we’re still paying more for less.

    I think the problem is that we have a for-profit system in which there are so many more people who have to get paid — not just the care providers, but all the insurers, administrators, marketing people, etc. And the free-market model of competition lowering prices doesn’t really work for medicine. For instance, drug companies benefit from taxpayer-funded research at universities (not to mention training of scientists) but enjoy patent monopolies that allow them to charge exhorbitant prices. That power to charge what the market will bear might be checked a little bit if there were more big health care providers that could negotiate lower prices, or if the companies faced competition from drugs re-imported from lower priced markets like Canada. But the extraordinary profits of the pharma industry gives it enormous political clout to squash potential competition. Think of the Medicare bill — the industry successfully lobbied to prevent drug importation or negotiation of lower prices by the government.

    Or take malpractice insurance. Texas passed a state law limiting the size of medical malpractice damage awards, but malpractice insurance premiums for Texas MDs have continued to climb, even though the legislation was successful in limiting the insurance companies’ liability in lawsuits. You might think that insurance companies would compete for doctors’ business by offering lower premiums, which they could better afford to do if they weren’t paying out as much in claims. I’m sure that’s how the legislation was supposed to work, but instead the insurance companies used the opportunity to boost their profitability.

    I think what it all boils down to is, where are the opportunities to make money in health care delivery? The drug companies and insurance companies are behaving as well-run businesses should, they’re protecting their bottom lines. They take advantage of the fact that the demand for what they have to sell is not very elastic. If you’re a doctor, you HAVE to have malpractice insurance. If you or someone in your family is sick, you’ll want the best possible treatment and you’ll be willing to sacrifice a lot to get it. So to make money in health care, you charge the most money you possibly can while delivering the minimal amount of service. For third-party payers, it means competing with each other for the healthiest patients, and dumping the sickest ones (or not covering the procedures they need, or charging them an arm and a leg). This “competition” is not the kind that produces pressure to lower prices or expand coverage.

    I think we need to acknowledge that while the “free market” model works wonderfully in many areas, it’s not necessarily the best or most efficient approach to every problem.

  • 16 Javier // Apr 30, 2005 at 11:44 pm

    Cindy, you make good points, but I think you’re wrong. I can’t show that you’re wrong in a single post, but I’ll point out a few errors I think you’ve made.

    You say “we spend vastly more on health care than these other countries do, yet there are millions of Americans with NO access to care.” This is false. Uninsured people almost always have access to health care through free clinics, emergency rooms (which are legally required to admit such patients), and other forms of subsidized health care. While it is true that the uninsured get less medicial care than the insured, they do usually get it. As a side note, did you know that about 30 percent of the uninsured make more than 70,000 a year?

    You say “the free-market model of competition lowering prices doesn’t really work for medicine.”

    You’re both right and wrong here. The model doesn’t work well when third parties dominate and the government intervenes frequently. However, in certain areas of medicine, we’ve seen the benefits of free markets. Specifically, laser-eye surgery and plastic surgery have both fallen in cost in the past decade (and improved in quality) because they are procedures sold in a free market with price advertising, competition and consumer driven purchases. The lesson, I think, is to try to make other areas of medicine mimic the structure of these markets.

    You’re right about one point: we still haven’t quite figured out how to make free market medicine work well. I personally believe that it is possible to make such a market work well, although it will require considerable institutional innovation. Health saving accounts are a big step in the right direction. Eliminating the 141 billion dollars in subsidies for employer-based insurance would be another.

    Singapore offers a nice example of how it could be done: Singapore makes extensive use of health savings accounts (everyone is required by law to have one) and government generally refrains from interfering with the market for private insurance. The result: not only have Singapore’s health care costs been rising at a rate below that of most other countries, but, measured as a proportion of total private consumption, health care expenditures have actually declined since 1986. What other developed country can claim the same?

  • 17 Nat // May 1, 2005 at 12:41 am

    There are some interesting assertions above. I would love to see some supporting links.

    First: your father implies we spend 50% more than France on healthcare and the difference is all in the end game. Actually it is more than that because they have a fraction of our administrative costs. So, the French don’t have ICUs, heart surgery, cancer treatment and trauma centers???? I just don’t buy it, not to that degree. This sounds just too self serving.

    And the assertion that 30% of the uninsured make over 70K per year. So lack of insurance is a middle class and upper middle class problem? Again, I think not. Show me a link. I work in public sector health care and the folks who are using the clinics are definitely not the 70K+ crowd. I actually know an uninsured individual who makes more than 70k, but he is uninsured because he cannot get insurance. And they will not tell him why…

    One last point: I have another acquaintance who is also uninsurable due to an industrial accident about 15 years ago. Fortunately, he is well off due to a settlement. Recently he had a tumor removed, thankfully benign. He needed an MRI. He was told that the cost was $1500 since he was uninsured. When he said he was paying cash up front, the cost dropped to $325.

  • 18 Javier // May 1, 2005 at 4:28 am

    Nat, I don’t have a link, but the statistic about the uninsured comes from the book Lives at Risk: Single-Payer National Health Insurance Around the World, by John Goodman, Gerald Musgrave, and Devon Herrick. And the rich uninsured may not necessarily use free clinics–like you suggest, they often pay for health care out of pocket and this tends to reduce administrative fees.

  • 19 Javier // May 1, 2005 at 4:32 am

    Actually Nat, here is one link that supports my assertion:

    http://www.marginalrevolution.com/marginalrevolution/2003/12/who_are_the_uni.html

    The money quote:

    15 million of the uninsured have incomes of $50,000 or more. The fastest-growing population of uninsured has incomes exceeding $75,000. About 14 million are eligible for Medicaid or the State Children�s Health Insurance Plan but are not enrolled.

  • 20 RKM // May 1, 2005 at 4:40 am

    If France had socialized medicine costing twice as much as the US, higher infant mortality rates, lower life expectancies, and scads of uninsured faced with crippling medical bills, anyone who tried to argue that, looked at just right, France had better health care than the US would be seen for what he was: an ideological blowhard.

    Next installment: how Sweden’s military is actually better than the US’s, if you look at the statistics in the right way.

  • 21 Susan R // Jan 19, 2006 at 2:09 am

    In my view the Rich democracies also provide other countries on beginning-of-life and end-of-life medical technology.