• You say pot-a-to, I say pot-ah-to

    I’ve said it before, but it’s worth repeating over and over.  Matt Ygleasias:

    Like suppose scientists did come up with a pill that grants you good health up to the year 100, at which point you quickly and painlessly drop dead. I’d take a pill like that. and I bet most everyone would join me. The short-term result would be . . . catastrophic economic collapse as the bulk of the health care sector is rendered obsolete.

    Which in turn is a reminder that while it’s easy to talk about “controlling health care costs” in practice these “costs” are also known as “income” for a lot of people. The Internet has allowed for a revolution in reducing newspaper article distribution costs, also known as the collapse of the bulk of the American newspaper industry. Anything that works in a really radical way to make health care cheaper would create serious problems for lots of people and lots of firms and thus prompt fierce resistance.

    We (by which we mean I) always talk about the fact that health care costs are too high, and that we need to get them under control. But it’s worth remembering that all that health care spending doesn’t go into a vacuum; it’s going into people’s pockets, and then back into the economy. Even the “waste”. Even the “fraud”.

    Yes, we need to bring those numbers down, or at least slow their growth. But that spending is how many, many people make their living. They are going to fight it. I’m not talking about big businesses only. Doctors, nurses, hospital employees, insurance agents, insurance employees, and more. They all depend on that money.

    Don’t underestimate the effect on the economy as well. As those people earn less, they will spend less, and all the various industries that depend on that money will suffer, too. It will hurt.

    I’m not saying we shouldn’t do it. I think we’re wasting a lot of money, and that money could be better spent. It reminds us, though, that cost containment will be hard, and will likely go slowly. It may have to.

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    • You mean if, instead of paying a facility some totally crazy amount* for an outpatient procedure, I kept the money myself to spend on things I want instead of what the facility’s executives want, the economy would suffer?

      Every time I see a comment from some organization going on about job losses (e.g. the US Chamber of Commerce talking about Dodd-Frank), I think to myself: What if we changed the name of the affected industry to “armed robbery”? Would the same argument still apply? Won’t the economy be damaged if we put all the armed robbers out of work?

      * Which my insurer recently did – 85K for 7 hours, and that doesn’t include the surgeon’s fee.

      • @Foster Boondoggle – Yes, there could be short-term economic damage. Transition costs (or hit to GDP) due to structural unemployment are not trivial. Long-term we could be better off, depending on why the industry in question was wiped out and what workers who would have otherwise been in it do.

        Having said that, I do not consider this a good argument for corporate welfare. Nevertheless, one should be aware of all the consequences of policy change. Interest groups won’t let us forget though!

    • Foster Boondoggle,

      I’m not saying it’s right. I’m pointing out the facts. I agree with you that there are better uses of our money, but it won’t be easy to change things, and there will be unintended consequences.

    • While correct, it is instructive to reduce the argument:

      We are currently paying people billions of dollars to dig holes, and then fill them back in. Therefore we should keep doing it because if we don’t, the economy will suffer as those people stop spending money.

    • @ Foster Boondoggle– The multiplier effect on the 85K that you supposedly spent on the outpatient procedure for your back problems would likely be significantly higher than if you had kept that money for other manners of consumption. Though there are some transitional losses, the divergence of sums into smaller amounts amongst greater numbers of people increases the Marginal Propensity to Consume on average. Thus, the economy would indeed suffer in the short term. However, I do however agree that there are some major reforms we could make on this system which blatantly overcharges and wastes in many categories. Sadly, it holds extremely difficult to pass any progressive legislation in said area.