Is the Health Care System Too Expensive to Fix?

Tyler Cowen is not impressed with his best estimate of the cost per life saved of health reform.

If the Obama plan spends $90 billion extra a year on coverage and saves/extends 10,000 lives a year (a plausible estimate, in my view), that is $9 million a life, a rather underwhelming rate of return.

I agree that is an underwhelming return. But I don’t agree that 10,000 is necessarily the right number of lives saved. Roughly two to four times that value seems plausible. Nor do I agree that we should dismiss all the value of all the other returns. Those potentially include cost offsets due to better health, quality of life improvements, financial security from high health care expenses, reduction in the degree of job lock, among others.

However, even if considering all that one is still underwhelmed by the resulting net cost per life saved, whatever that may be, I still don’t accept that as an argument for not implementing reforms of the insurance market. (To be clear, I don’t think Cowen thinks so either.) Instead, I’d view that as an argument that we should reform the insurance market and work harder at efficient provision of care. Put another way, I don’t believe the uninsured should suffer the burden of high costs of our system. They should be insured and the high costs of our system should be addressed. Accepting defeat of the latter as an excuse for not addressing the former would be a double tragedy.

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