Bryan Caplan  

Boudreaux's Bet

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My colleague Don Boudreaux has proposed a clever bet on health care spending with Peter Orszag and Nancy-Ann DeParle:

If the House passes a health-reform bill this year and the Senate adopts that bill through reconciliation, pick any year in the future between 2021 and 2046.  Then tell me your official (that is, the administration's on-the-record) estimate today of how much Uncle Sam will spend on health-care that year.  I'll bet each of you $5,000 that Uncle Sam's actual, CPI-adjusted expenditures on health-care in that year will be at least 25 percent higher than your estimate.

If Uncle Sam's health-care expenditures in that year are less than 25 percent higher than you project them to be, I'll congratulate you as I mail you your checks.  If these expenditures are 25 percent, or more, higher than you project them to be, I'll contribute my winnings to a private health-care charity, as I predict that the need for philanthropic contributions along those lines will be great.

Notice: If the targets of Boudreaux's bet weren't public figures, they could painlessly win $5,000 with certainty.  If they announce that CPI-adjusted expenditures on health-care in 2021 will be one quadrillion dollars - that's $1,000,000,000,000,000, they'll win hands down.  But obviously Orszag and DeParle can't publicly say that.

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COMMENTS (7 to date)
Swimmy writes:

I'd make a similar bet about the private cost of health insurance. I expect 1) the "waste, fraud, and abuse" cuts to amount to absolutely nothing, and 2) the adverse selection problems they're riddling the bill with to increase health insurance prices significantly. I would gladly make such a bet with Ezra Klein, had he the same reputational concerns as Orszag and DeParle.

bjk writes:

It's funny that people believe in deflation for nearly every other good and service but not health care. In fact, health care costs are going to come down as a percentage of GDP because the market is going to be reintroduced sooner or later to the health care sector, and the cost savings from the introduction of market prices are going to be phenomenal. Today people are spending far more on health care than they want to -- and when given the choice, they will pay far less.

floccina writes:

I have a hope that medicare spending per person is approaching the point of topping out. After all how much more surgery and expensive stuff can you do?

Bob Murphy writes:

Bryan wrote:

If they announce that CPI-adjusted expenditures on health-care in 2021 will be one quadrillion dollars - that's $1,000,000,000,000,000, they'll win hands down.

You have more faith in the Fed than I do.

Bob Murphy writes:

Oops I missed the "CPI-adjusted" clause.

Colin K writes:

I am less optimistic than you that cost growth will slow down. My impression is that the healthcare system in the US keeps creating ways to spend more money to get better outcomes, but not to get the same outcome for less money.

I think medical tourism highlights the issue in some interesting ways. I suspect that today's cost for surgical procedures that were routine in 1980 is considerably higher in real terms, while outcomes have gone from say 99% to 99.5% successful. Medical tourism allows one to choose "good enough" care in a way that doesn't really exist domestically. Arguably the inverse of this is the phenomenon of Canadians coming to the US for critical procedures.

Likewise, I feel as though we're not going to make real progress until we get a lot more serious about replacing labor with capital. In particular, I feel like the whole Primary Care Physician system is like having a guy with a Ph.D. in mechanical engineering doing oil changes.

I think we are at or beyond the point where computing power is sufficient to provide excellent diagnostic and therapeutic outcomes. The problem is that the present regulatory environment works very much against the development of such technology. The only circumstance in which I'd see the US doing it would be in the context of a Mars expedition. Perhaps the Japanese will do it in order to support their coming vast population of octogenarians?

liberty writes:

Colin K, excellent point! The Japanese seems less averse to using robots anyway, so they might realize before us that a computer for a GP makes sense.

It is absolutely a travesty the way we waste doctors' time both in the US and the UK. The worst is the mandatory referral: You need a half hour or an hour of a doctors time for him to tell you that, it having been six months, you should see your neurologist or orthopedist or what-have-you again, as your neurologist or orthopedist already recommended?

That kind of thing is pure waste and would certainly not exist barring regulations that make it possible to enforce. It wastes the patient's time and the insurance/taxpayer's money -- without a half-public or public system and regulations enforcing rules like this (whether for private cartel or for public system) the patients would choose doctors that do not waste their time and money, and doctors would through competition be forced to spend their time wisely, and prices would fall.

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