Saturday, August 11, 2012

Be kind rewind

Chartist surrealism appears in online medical journals too! LeBron links to the following amazing chart of "excess health care spending growth".  The article in the New England Journal of Medicine defines "excess" growth as the difference between the growth of health care spending and the growth of potential GDP (no word if this is "real" potential or "nominal" potential GDP).




Sweet!

Just to summarize, they are taking a totally unobservable and made up variable and using it to define another unobservable and totally made up concept, that of "excess" health care spending.

Shouldn't excess spending be defined as wasteful spending, like unnecessary tests or surgeries or inefficient record keeping?

Doesn't health care have to be paid for out of actual GDP? Can you tell your doctor, look, the output gap is 13%, so I am only paying 87% of this bill.

How can anyone define the correct path of health care spending? Must it be a constant portion of GDP? Why? Why couldn't preventative care and lifestyle adjustment make health care shrink as a proportion of GDP? Or conversely, why couldn't some amazing but expensive breakthrough cause optimal health care spending to soar as a percentage of GDP?
 


4 comments:

B D Humbert said...

In answer to your question...

1. Preventive care does not have an impact on either health or spending.

2 lifestyle adjustments are way over rated - i a' still waiting for the data on the actual impact of less smoking on either health care spending or life expectancy. The numbers that i have seen are less than impressive and the cynic in me is not convinced that the loss of "happiness" that comes from not smoking ( or drinking) is worth the relatively small gain.

B D Humbert said...

Actually need to modify my first point...

Preventive care INCREASES costs significantly more than it reduces the cost of future carecor treatment.

Lance said...

The working assumption (it seems) is that an increase in the productive capacity of the economy should lead to a similar increase in the demand for health care. Any increase (as reflected by prices) is 'excessive'.

But, I don't think this is a good way to look at health care spending. If we assume diminishing marginal returns to consumption goods as wealth and age increases, and increasing returns to additional years of life expectancy as one ages, then it's not surprising to see the health care sector growing as a proportion of GDP, regardless of potential GDP.

jerry john said...

Just to summarize, they are taking a totally unobservable and made up variable and using it to define another unobservable and totally made up concept, that of "excess" health care spending. James Dreesen