Health Costs Rise as Health Care Improves

One of the most prominent arguments today is that health care costs have risen faster than the rate of inflation. That statistic alone is cited as an indicator that costs are out of control. But the other half of the equation is missing.

Cost and value should both be considered. In nearly every other endeavor, we consider both. When we buy anything, we consider the cost of the item and the value it brings us. A larger TV may provide a better viewing experience, an intangible value. A hybrid car brings better gas mileage, and may be a better value depending on the cost differential between it and a standard car (adding in your assumptions about the future price of gasoline, resell value, etc.)

When adjusted for inflation, healthcare costs have increased from $1,851 per person in 1970 to $7,026 in 2006, a substantial increase, as noted by Cato.org, in an article comparing the value received from increases in education spending and healthcare spending. The author, who is mostly concerned about education spending, ticks off several areas where we have received more value from our health care dollar increase:

• Neonatal mortality was cut by 2/3 between 1970 and 2005, from 20 to 6.87 per 1,000 births
• Fetal mortality rate (miscarriage) was cut by more than half: from 14 in 1970 down to 6.2 in 2003 (per 1,000 live births plus fetal deaths)
• Life expectancy at birth was raised by 7 years
• Limitation of activity caused by chronic conditions: 13.3 % in 1997, 11.6% in 2006
• There’s now a nearly 90% cure rate for a childhood leukemia
• Depression is far more treatable
• Fertility treatments are greatly advanced
• Prosthetics are dramatically better
• Lasik eye surgery was invented
• Gastric bypass surgery is now available for the morbidly obese
• Joint replacements are far more common and effective
• Reconstructive surgery is greatly advanced
• We now have vaccines for rubella, pneumonia, hepatitis A and B, chicken pox, lyme disease, and meningitis
• Smallpox was eradicated
• Numerous technological advances have made diagnostic and surgical procedures less painful and easier to recover from, including: arthroscopy, laparoscopy, MRIs, CTs, SPECT and PET scans

I’m sure there are more benefits derived from increased spending on health care. Suggestions can be added to the comments.