NCPA - National Center for Policy Analysis

Medical Progress Has Been Worth the Costs

January 22, 2003

Nearly every direction one turns, one hears complaints about the high costs of medical care and pharmaceutical prescriptions. But there is abundant evidence that medical advances more than pay for themselves.

One has to assess the value of an extra decade or two of human life -- not an easy task. But here is how several economists sum it up:

  • "The benefits from just lower infant mortality and better treatment of heart attacks," economists David Cutler and Mark McClellan wrote in 2001, "have been sufficiently great that they alone are about equal to the entire cost increase for medical care over time."
  • In a 2002 paper, Yale University economist William Nordhaus argued that the value of increasing longevity over the past century could be as large as the value of growth in all other good and services over the same period.
  • Nordhaus observes that "the image of a tremendously wasteful health-care system is far off the mark."

But neither is medical care free.

  • The government -- meaning the taxpayers -- picks up 45 percent of the national medical bill.
  • And since most Americans get private health insurance from their employers, only 14 in every 100 health-care dollars come directly from consumers' pockets.

Small wonder, then, that medical costs are growing by leaps and bounds -- since the consumer no longer has any incentive to curb his or her medical spending.

Reforms could lower that bill. The tort system, for example, doesn't just drive up malpractice insurance costs -- but leads to perhaps $50 billion a year in needless tests and other defensive medicine solely to protect against lawsuits.

Source: Robert L. Pollock, "Americans Need a Market for Medical Progress," Wall Street Journal, January 22, 2003.

For text (WSJ subscription required)

http://online.wsj.com/article/0,,SB1043198505297759864-search,00.html

 

Browse more articles on Health Issues