A business school professor tells Michigan Capitol Confidential some surprising facts about the U.S. health care system
September marked the six-month anniversary of when the Patient Protection and Affordable Care Act became law.
Antony Davies is an associate professor of economics at the Palumbo-Donahue School of Business at Duquesne. Davies argues that much is left out of the debate on the rising costs of health care:
"The cost of insurance is frequently misrepresented because regulatory proponents quote prices for low- or zero-deductible insurance. According to America's Health Insurance Plans Center for Policy Research, the national average cost for individual coverage is $3,300 per year. This varies markedly by state . The highest cost states are New York and Massachusetts, where individual insurance averages over $6,300 (for New York) and $5,000 (for Massachusetts). The lowest cost states are Iowa and North Carolina, where individual insurance is around $2,500. The reason for the discrepancy is state laws that regulate insurance. For example, New York has "community rating" (meaning insurance companies are not allowed to charge more for people who are of higher risk) and "guaranteed issue" (meaning that insurance companies must insure anyone who asks for insurance). If we look at insurance costs across states, we see that much of the cost of insurance is due to existing regulation, which calls to mind the late Robert LeFevre's quip that government is a disease masquerading as its own cure.
"To put these numbers in perspective, the average American family spends $5,500 per year on vehicles and gas, almost $7,000 on food (eating in and out), and $3,500 on entertainment. By comparison and given that insurance coverage is integral to longevity, the cost of insurance is not overwhelming.
"Finally, lost in the discussion of the cost of health care is any reference to what the increased cost of health care has bought us. Fifty years ago, people routinely died from diseases that, today, can be treated with over-the-counter medicines. Yes, our infant mortality rates are higher than in other developed countries, but that is actually a sign of improved health care. Children who die in utero are not counted in the infant mortality figures because, to count as "an infant", one must survive to birth. Pre-natal care in the U.S. has advanced to the point that many children who would otherwise have died in utero (and thus not show up in the infant mortality figures), live to birth. Thus, when some of these children do die, they are now counted among infant mortalities and so make our infant mortality rates higher. What is important is that our infant mortality rates are higher, not because disproportionately more children are dying, but because disproportionately more children are surviving to birth.
"Regulatory proponents will tell us that what they want are the 1960s health care prices that were almost half of what they are today. But what they really want is impossible - they want 1960s prices at 2010 quality. If the US mortality rate today were the same as it was in 1960, 500,000 *more* Americans would die each year. That's what the increased cost of health care has bought us - half a million lives saved annually.
"One last thing: There is one price that has, historically, risen faster than the price of health care. That's the price of government. On a per-person and inflation adjusted basis, the price of health care has risen 2000% since 1954, but the price of government has risen almost 3000% -- and those are the people who claim that they can control the costs of health care."