Thursday, January 12, 2012

A Case Study in Rising Health Care Costs

This article tells an uplifting story of a man who had trachea cancer who has had a new surgery that may allow him to live a full life.  The article says that the procedure cost roughly $500,000.  The recipient is young and works as an electrical engineer.  A cold hearted economist might crunch the PDV of his earnings stream and conclude that this was a good investment to keep him going.  But what if he had been 84 and senile?   Are you a supporter of the "Death Panels"?   Without such technocrats how will the medical system's costs be reigned in as our great surgeons continue to make progress and innovation gives them the tools to do their thing? Once this procedure becomes more routine how much will it contribute to rising health care costs?  Have we over-innovated?

A cold hearted libertarian would say that individuals should be given the option to purchase catastrophic health insurance and if they fail to buy it and then get sick that they should make a strong You Tube video to raise the private funds they will need for the procedure.   Implicit in such an argument is a rejection of behavioral economic logic that people are myopic and not forming "rational expectations" of possible future events and planning for such scenarios.