Matthew Harris (glowing_fish) wrote in damnportlanders,
Matthew Harris

My guide to health care economics: I promise you might actually like this

I wanted to point out two things about health care and why it is so expensive. I promise this will probably make a little more sense than what I usually write. It still might bore some people, being about serious community issues and what not, in which case you can scroll by, or you can post and say it was too long for you to read.

There are two things that make health care more expensive than other things you might buy.

The first has to do with "Diminishing returns", which in economics means that at a certain point, you get less utility (enjoyment or use) out of spending more money on something. As an example, I will use batteries. There are different brands of batteries, and most of them work just fine for for what people normally do. If you had one pack of batteries that cost $1 for a pack, and worked 99.9% of the time, and another that cost $10 a pack and worked 99.99% of the time, you would probably buy the first. The marginal utility of only having a 1-in-10,000 chance of the battery suddenly failing isn't worth paying 900% more. This is how people do their normal calculations on purchasing. The problem is, when it comes to health care, people will not settle for second best. Say you are going to be hooked up to a respirator, what percentage of the time is an acceptable failure rate? How much more money are people willing to spend for a battery that never fails? Everything involved in health care is built to be that much more fault tolerant and specific to the conditions, and because of that, it is much more expensive.

The second point is that most of what people are paying for in health care is not related to the marginal cost. Most of the cost is part of the initial capital construction, and if you are unlucky enough to use it, you end up paying. Think of the massive architecture that most hospitals require. (Especially if you look at Doernbecher's, which is floating over a canyon). And then look at the specialized equipment inside of a hospital. And then think about the education and training needed for everyone involved. A hospital room might have $100,000 worth of equipment inside of it and a Doctor might require a half million dollar worth of education to treat you. If you are in that hospital room being treated, you aren't actually causing any new costs, beyond whatever small consumables you are using (such as medications, food, syringes, etc.), but you are still going to be expected to pay the costs of manufacturing all that equipment and training that doctor...but if you weren't there, the doctor would still have to be paid to twiddle his thumbs, because he has several hundred thousand dollars in student loans to pay off.

So that is my basic ideas on the matter, I think they are things that need to be considered.

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