The Thing About Healthcare...

Adam Davidson of The New Yorker had a good opinion piece about why healthcare is so important and unlike anything else and I thought I would highlight some of his points here. I struggle with healthcare spending and government policy because, on the one hand, healthcare is spiraling out of control and growing way beyond inflation or economic growth (not just in USA but in Canada and most of the developed world actually); but on the other hand, it is so important that as Davidson alludes to below, it should really be thought of more as an investment in the long-run future of the country rather than an expenditure per se.

Titled "What the G.O.P. Doesn't Get about Who Pays for Healthcare" (Mar 23 2017) and directly addressing the Republican Party in USA, Adam Davidson writes (as usual, bolds are by me):

In economics, when a person has some money, they can do one of two things: invest it or use it to buy something they want to consume. Most of the time, they consume. That can mean buying a slice of pizza, or “consuming” a vacation, a movie, or a new car. Health care is typically classified as a form of consumption. But if my relative spent some of his money with a back-pain specialist, who could teach him exercises that would prolong his working life by another decade, shouldn’t that be considered an investment? He would be choosing to forego paying for something that he actually wants today so that he can make more money in the future.

This is a very important point that is largely ignored in all the arguments and shouting matches: a big chunk of healthcare spending actually contributes to the economy in the long run. It's not like discretionary consumption spending whose benefits are very temporary.

In 1993, the economic historian Robert Fogel wrote an influential paper (it was his Nobel Prize acceptance speech) in which he demonstrated that improvements in health accounted for fully half of the economic growth in the United Kingdom in the first two centuries of the industrial revolution. Because of improvements in sanitation, food production, and medical treatment, people were living longer and spending much less time incapacitated by illness and hunger. Health was more important than railroads, electricity, mass production, and every other technology we more readily associate with economic success.

Wow! Until reading this, I never knew that half of the benefit of the industrial revolution was healthcare-related. It sort of makes sense when one thinks about it but it's still not well appreciated. I think things like railroads and mass production probably contributed to the improvement in healthcare (it's hard to isolate causes and effects of specific technologies and scientific advances) but, nevertheless, the main point that improvement in, say, sanitation, contributed mightily to the improvement in society is widely ignored.

If we deny someone care today, we will be paying that cost later, in the form of more expensive treatment or lost years of productive employment.

I think people who try to reform healthcare, often by blindly cutting costs, are completely ignorant of the point above. Namely, long-term productivity is sacrificed and completely ignored.

Having said all that, I think healthcare costs are spiraling out of control and need to be reigned in--this goes for Canada too even though no one is complaining yet (my province, Ontario, spends about 40% of its budget on healthcare, whereas 30 years ago, most of that was spent on building roads, airports, electricity grid, etc--no wonder there is no money for that now). However, I think anyone trying to reform healthcare shouldn't focus blindly on costs. Cutting healthcare has adverse long-term outcomes.

I think the reformers and politicians need to separate out the healthcare costs that prolong people's lives past 70 years (or whatever number you want to pick). This isn't going to be popular with Baby Boomers but the reality is that such healthcare spending has low (to almost zero) long-term societal benefits. I think people should try to cut those costs. Unfortunately that's not going to happen any time soon since the Baby Boomers control most of the voting power in most developed countries.