Whose Costs? Which Health Care?

One issue with a lot of health care commentary (Michael Kinsley’s correctly maligned column for example) is that the concept of “cost” is somewhat ambiguous in a lot of these contexts. For example, on one way of looking at things, an initiative that raises $90 billion in tax revenue, reduces private health expenditures by $100 billion, and then provides equivalent services for $90 billion is very expensive. It costs ninety billion dollars! From another way of looking at it, though, it’s an initiative that saves $10 billion.

That’s the question of whether we’re talking about cost to the government, or cost in some more general sense.

Another issue has to do with value. If we cut $1 billion worth of regular pediatric care for poor children, that will “save money.” But that’s not the same as cutting $1 billion worth of unnecessary treatments for senior citizens out of Medicare. The latter would be a genuine saving; the former would just be denying useful services to people.

Pure fiscal cost to the government is an important thing to keep our eye on. Among other things, we need tax revenues to be adequate to cover the pure fiscal cost. At the same time, I think it’s a little perverse to view it as the main thing to worry about. If you have a system that has a high fiscal cost because it’s providing a lot of genuinely valuable services to people then the thing to do is to pony up the necessary tax revenue. The thing to really be worried about is the prospect of spending money on health care services that aren’t delivering the goods in terms of health outcomes. And that’s just as worrying when it happens in the private sector as when it happens in the public sector.