Health care and economics

There are essentially four methods of financial transactions:

1. Using your own money to buy something for yourself.
2. Using your own money to buy something for someone else.
3. Using someone else’s money to buy something for yourself.
4. Using someone else’s money to buy something for someone else.

It doesn’t take a degree in economics to see which transaction will result in the best return on investment. Transaction #1 represents the situation where both sides of the transaction will be informed by your own self-interest. It’s your money so you will naturally want to minimize the expense but also maximizing the quality of what you will be buying for yourself.

In each of the other 3 transactions, however, there is a scenario whereby there is no incentive to act in one’s best self-interest in at least one end of the transaction. Either you are using someone else’s money (no incentive to rein-in the cost) or aquiring for someone else (no incentive to maximize the quality of the purchase).

And it doesn’t take an econ degree to realize under which transaction model the government operates. If you guessed #4, then move to the head of the class.

Now, check out this video and see how things get skewed a tad.

Unfortunately, the video has been diabled but here is the jist of the scenario:

After weeks of bad news, things turned Barbara Wagner’s way this week.

Last month her lung cancer, in remission for about two years, was back. After her oncologist prescribed a cancer drug that could slow the cancer growth and extend her life, Wagner was notified that the Oregon Health Plan wouldn’t cover it.

It would cover comfort and care, including, if she chose, doctor-assisted suicide.

Wow. When it comes to health care, the government has a sudden change of heart and the transaction goes from a #4 to more along the lines of #2. And when one’s own self-interest becomes involved on the outlay end but is not coupled to one’s self-interest on the purchase end, the quality of the product being purchased will undoubtedly suffer. And you don’t get much lower on the quality scale than dying.

(The chemo medication being offered by Genetech was more expensive than the doctor-assisted suicide by order of magnitude. There is somewhat a happy ending as Genetech offered Wagner the meds for free. There’s your greedy Big Pharma for you. Keeping customers alive only so that they live to pay another day. Same Transaction #2 but with a totally different outcome. Besides perhaps some compassion, Genetech also has an economic self-interest in keeping people alive. The Government?)

In a sense, we’re glad that the video is diabled. We wanted to, for a moment, decouple the emotion of this case from the rational aspects of economics and rationing because watching the video enraged us. Barbara Wagner is our Mom. She’s our Dad. She’s a loved one or a friend. She is someone who is at the mercy of a system that is acting only in their best interest, not hers.

Only when our health care system moves more towards Transaction #1 will it be more empathetic and affordable.

H/T: P.J. O'Rourke