Could the marginal health care dollar be put to better use?

By e-mail, Brad Flansbaum focused my mind on this question long enough for me to respond as follows. It seems right to me at the moment, but it’s certainly worth debating.

1. Spending on health is not without value. It does improve our lives. (See Cutler.)

2. Yet in the US we spend a lot to get that value. So, price per QALY (or something) is very high. (See Aaron’s series on spending and his other on quality.)

3. Just staying within the realm of health,* the price per QALY on another “service” might be a lot lower (like nutrition, exercise, healthy habits).

If God were jointly designing all health-related systems and functions of society and government, He’d look at the marginal cost/QALY over all possible ways to spend the next dollar and pick the smallest. It’s not always going to be on health care services and it probably isn’t given what we’re already spending for those and what we’re getting for that spending.

That doesn’t make health care services worthless, just worth less. 🙂  Physicians and hospitals are doing good, but not as much good as might be done with the resources expended. As a health economist, I’m doing even less good, improving the health very, very few and by hardly anything. I probably make a lot of people worse off. (Stop reading. Go brush your teeth or take a walk. There, that’s better.)

This is a reason to advocate for lower spending on health services, but only if the dollars saved are put to better use. Tax cuts are not obviously better for health, for example.*

* One can certainly argue that health is too narrow. Some broader notion of “welfare” would widen the field to considerations of substituting anything for health services if they were more welfare improving. Maybe doubling the speed of the internet produces more welfare per dollar spent at the margin than health care, for example. However, to keep things simple, I’m just thinking about health here, not welfare in general.

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