An Interesting Point on Cost Control From Brad DeLong
The problem, I think, is that the CBO has a category for cost control but no category for getting system incentives right. It is a budget office, after all, not a philosopher-king office. The problem, however, is that it is the only arbiter out there. And there appear to be a lot of members of congress who think controlling costs = getting system incentives right.
I don't think we should care much about costs: it might be in the future we want to spend a lot on health; it might be that in the future we develop magic treatments and so want to spend a lot less. If we get the system incentives right, then whatever we spend on health will turn out to be the right thing to do.
To translate that a bit, if the health-care system worked efficiently, then it would presumably deliver good returns on our dollars, because otherwise, rational agents like ourselves would stop spending more dollars on health care. I'm not sure how well that approach works for health care. But it could certainly work a lot better than it is right now. And it brings up another important distinction: We talk a lot about cutting costs in the health-care system. We would do well to also think about increasing value. Spending fewer dollars is important, but so too is getting more health for the dollars we do spend, and there's case to be made that, in the short-term, we could increase value a lot more quickly than we can decrease cost.
July 23, 2009; 10:08 AM ET
Categories: Health Economics , Health Reform
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