Why Health Care Costs Exploded After World War II

Before that, with the notable exception of surgery, they could only give a prognosis and hope for the best. Now they can prescribe pills that do work. There was a reason that Hitler promoted homoeopathy and all sorts of natural healing stuff - he could claim his Germanic naturopaths did not perform worse than the (traditionally Jewish) medical faculties of the time. [1]

[1] Before anyone throws about accusations of antisemitism - this is the thesis that Viktor Klemperer makes in this "Lingua Tertii Imperii". It's recommended reading about the insanity of Nazi Germany.

What were the real reasons for the return of medical price inflation?

A: Undoubtedly, moral hazard.... There are two aspects to moral hazard that are at play in health care. [...] The [second, more important] aspect of moral hazard stems from the fact that every single medical encounter or medical act can be said to be ordered toward the preservation of life or toward the well-being of the person.This by itself presents a strong incentive to use medical services, and the behavior should not have the same negative connotation as in the first aspect of moral hazard. In fact, economist John Nyman has argued that the behavior by which insured people would use more health care is a social good.

The bottom line is that one does not need to be sick to utilize medical services and that all that is needed is a plausible argument that if a medical action is taken, life may be prolonged or enhanced. Such plausible arguments are not hard to come by, especially in a health care system where doctors and hospitals are largely paid on a fee-for-service basis. There is no objective limit on what can be considered “desirable care,” and if cost is not a consideration, more medical actions will be taken.

The US has much less doctor consultations per person per year than other OECD countries which is an indication of the contrary:

Page 101: http://www.oecd-ilibrary.org/docserver/download/8115071e.pdf

Now, we will expend enormous efforts, all available options, just to trivially extend the life of anyone and everyone with health problems.

In general, human needs are boundless, and as long as the people who make decisions about healthcare use do not bear the associated costs, health care costs will keep increasing.

The costs are two-fold : the financial cost of the medication, the doctor’s visits or the procedure and the moral or existential cost to the person who receives the care.

I argue that even in a fully subsidized, “free” healthcare system costs would not rise as fast as they are now in the USA (and elsewhere in the developed world) as long as healthcare use was only decided by the patient, who is the only one to suffer during futile procedures.

It is not surprising that care is most expensive in the ICU and the long-term facilities for the demented or otherwise disabled — in those setting the patients themselves do not decide, and their families bear nor the actual costs nor the sufferings incurred.

Anecdotally, those family members who care the least in everyday life, who never come to see the patient, are those who push the most for expensive, pointless care, who demand that “everything be done”. Every day, demented patients are shipped, alone and frightened, to emergency rooms, where they are put into restraints and treated for their tenth episode of aspiration pneumonia while their next of kin stay home watching TV and never bother to come.

[1] https://en.wikipedia.org/wiki/Tragedy_of_the_commons

People do not pay less attention to their health because they know they are insured. Nobody wants to be sick or obese, and it is an absurd, academic, and out-of-touch to argument. It makes sense to apply the moral hazard concept to something like a car (driving recklessly if insured) but not something so integral as personal health.

Health care costs exploded because people (myself included) are weak-willed and uneducated, and will satiate their cravings for sweet/salty/mind-altering without a strong government to provide adequate health education, curb the bombardment of junk food/tobacco/alcohol/drug advertising, subsidize healthy lunches in school, and keep pharma regulatory capture in check.

Does anyone think: "I'll eat McDonalds twice a week, smoke a pack a day, and drink all I want because I'm insured." Come on...

[1] "the tendency for insured persons to utilize medical services more than they would if they did not have insurance"

The cost problem is almost entirely due to myth, paranoia, and authority worship, which means innovation that would drive down costs comes very slowly and painfully. These are the wages of refusing to question dogma.