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6 March 2012updated 26 Sep 2015 8:16pm

Is healthcare spending doomed to increase forever?

Does healthcare spending suffer from an inevitable escalation in costs? Can it ever be reduced?

By Alex Hern

Matt Yglesias has a good post up over at Slate, detailing the problem that all wealthy countries have when it comes to healthcare expenditure: Demand for health is, quite literally, insatiable.

Yglesias writes:

It turns out that electronic medical records may not reduce health care spending (see Lohr & Kliff) for the very sensible reason that when you make it cheaper and easier to order and analyze tests, medical professionals grow more inclined to order tests. It’s kind of a health care version of the energy efficiency rebound effect, when you make it cheaper to keep your home comfortably warm in the winter people grow more inclined to crank up the heat rather than wear a thick sweater inside. The difference is that once you reach a certain level of affluence your house is warm enough and you find yourself sated. The crux of the matter with healthcare is that we’re never really sated. Once you’re talking about a middle class family in a developed country—a family that’s not worried about starving to death or freezing on the streets or being unable to afford shoes—you’re talking about a family that’s going to plow what resources it has into attempting to address the potentially limitless health care needs of its members.

It is a real concern for anyone trying to improve the efficiency of health services; and yet, at the back of my mind, I couldn’t get this out of my head:

Healthcare: Chart One

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It clearly is possible for the US to reduce spending on health – possibly even halve it. So what’s missing from Yglesias’ analysis? It may be as simple as saying ‘no’.

For all the hysteria over the accusation that Obamacare would lead to a network of “death panels”, the problem with the claim is more style over substance. Health systems necessarily involve an element of rationing (we do not live in a post-scarcity society quite yet); but whereas NICE attempts to do that in a way that guarantees the most efficient use of resources for the nation as a whole, the US system follows the path which ensures that those who can afford to spend ever-increasing amounts of money, to secure ever-decreasing returns, do so.

In the long term, we may hope for a change in attitude to that demonstrated in Ken Murray’s wonderful piece from January, but for now, it seems that the best response to the infinite demand for health may be gentle pressure in the opposite direction.

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