Monday, May 07, 2007

We Said, He Said

It is true that health costs are rising faster than the inflation rate. But rising costs, even of "essential" products and services, such as food, health care, and national defense, do not necessarily demonstrate the existence of a problem. Costs may be rising because quality is rising, which is true of health care (new and better therapies and diagnostic tools), or because demand is rising (and average cost is not flat or declining), which is also true; as people live longer, their demand for health care rises because more health care is required to keep people alive and healthy the older they are. In addition, much health care is in fact discretionary (cosmetic surgery is only one example; others are treatment for mild depression and other mild emotional or cognitive problems and treatments designed to enhance athletic ability), and demand for it can be expected to rise if quality rises relative to price.

Wonder if Mr. Posner reads InsureBlog?

It is also true that Americans spend much more on health care on average than the people in other wealthy countries do, without greater longevity to show for these expenditures. But health care does much more than extend life; it alleviates pain, discomfort, disfigurement, limited mobility, visual and hearing impairments, and mental suffering, and it is not clear that foreign health systems, which also involve considerable costs in queuing, do these things as well. In addition, the better a nation's health care is, the riskier the population's life style is likely to be, because the cost of obesity and other risk factors for disease is less.

Sure seems like it.

Also misplaced is concern that the United States is becoming less competitive because employers pay for their employees' health insurance, rather than the government. Employers do not really pay for their employees' health insurance; employees (and the taxpayer, who subsidizes employee health insurance) do, because by raising labor costs employee health insurance reduces the wages that employers are willing to pay. Employers who committed themselves to assuming open-ended obligations for employees' (including retired employees') health costs have only themselves to blame for having assumed a risk that has materialized because of the rapid growth in those costs.

Maybe Mr. Posner is really John Fembup?
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