The truth about health-care costs

Posted: Feb 07, 2004 12:00 AM
The rising cost of health care is making everyone mad.

Seniors are mad that they have to pay more for drugs than Canadians do. Conservatives are mad that President Bush's new prescription drug plan will cost $100 billion more than he said it would. Small businesses are mad about the incredible booming premiums that make it expensive to hire new employees. Patients are mad about the intentional barriers to care that HMOs and doctors erect to discourage expensive "overuse." Doctors are furious at unrealistic reimbursements and skyrocketing malpractice premiums. Consumers are angry that, even after shelling out for insurance, they are constantly asked to shell out more for "uninsured" expenses.

(Personal digression: When I was 22, I had a baby uninsured. The out-of-pocket cost was about $5,000. A decade later, I had another baby, with blue-plate insurance (my husband worked for Morgan-Stanley). My out-of-pocket cost? $5,000.)

Candidates for both parties have their standard stump spins on the health cost spiral. Democrats long for national health insurance and denounce big drug companies for making "too much" money. The Republicans call for market reforms and limits on malpractice lotteries to trim soaring costs.

Neither side will tell you the truth about health care in an election season. The reason health care costs so much is that a) we have better health care, b) we are living longer, and c) older people have more medical costs. That's the good news. That's the bad news, too.

A highly innovative medical system constantly creates new and better treatments that cost more money. Democrats who rail against the profits drug companies make for creating new drugs that save lives are threatening to kill the goose that lays such golden eggs. (How many new drugs come out of Canada?) Foreign governments negotiate good deals on these drugs, often because of the implicit threat: If you don't give us cut-rate drugs, we will manufacture similar copycat drugs of our own without paying you anything. Inventing new drugs is hard. Manufacturing them is often not.

Paying more for drugs for the seven years that they are under patent protection is the price we pay for progress. Cut into the drug company profits now, and you will reduce the pipeline of innovative, life-saving drugs down the line.

Now, if you happen to need a drug that exists now, maybe that sounds like a good trade-off: less innovation later, for more affordable drugs now. But if you have, say, Parkinson's and are five years from a wheelchair and a painfully debilitating death, you don't want anything to slow the possibility of a cure. Ditto for any number of other diseases: heart disease, cancer, diabetes, multiple sclerosis, AIDS. America's powerhouse inventiveness, driven by free enterprise (aka "profit-motive") is the last, best hope for millions of sick people around the world.

What about the uninsured? You've heard the politicians promise to do something about the insurance problem. Maybe you think that means more health care for more people at less cost. Uh-uh. The problem with the uninsured, who tend to be the young and healthy, is that they are not helping to pay for the health care of the middle-aged and old. As the population ages, the way to keep insurance costs down for everyone is to get more healthy young people paying into the insurance pool. But as the population ages, health insurance becomes an increasingly bad financial deal for young people, who have low risk of serious health problems and a Medicaid system available for emergencies.

The good news is that modern medicine will save our lives. The bad news is: It's going to cost us all a lot more.