Rising Health Care Costs

Access to health care is a basic human right. How that care is ensured to everyone is up for discussion. As always, the ends do not justify the means, and for a program to be morally acceptable it must be effective at delivering what it promises.

Extending health care insurance to more Americans is estimated to save 40,000 lives a year. As followers of Christ, we are bound to work toward providing people more access to quality healthcare.

Part of that commitment entails working to keep the cost of healthcare and insurance premiums within reach of more Americans. The current administration is correct to note that healthcare costs, which grow at a much faster pace than other costs, siphon off funds that would otherwise be used by households to buy food, make necessary home repairs and contract other services which keep the economy humming.

But can government involvement effectively bring down the costs of healthcare and health insurance? I must admit that I am highly skeptical.

A case in point from my own experience as a real estate appraiser.

A year or so ago, before the current crisis in the financial markets "hit the fan", my company charged $295 per appraisal. In April of 2009, Fannie Mae, now run by the US government, required all appraisals to include a new form detailing market trends including median sales price, marketing times and absorption rate. Our fee per appraisal went up to $345 to cover the upgrade to our software and the time involved in completing the additional research. This amounted to an increase of 16.9%.

Appraisals for homes whose mortgages would be insured by the Federal Housing Administration (FHA), another arm of the federal government, require more detailed inspections because the appraiser must verify that the heating, plumbing and electrical systems are in working order, that the septic system complies with state regulations, and other items which we would otherwise assume in a conventional mortgage or rely on a home inspector to verify. For our trouble, we charge a modest $50 fee, raising the cost of the appraisal to $395.

This year, FHA has required that any home whose mortgage it insures undergo a second appraisal, again at a typical cost of an additional $395.

So the appraisal which originally cost $295 now costs $790, a 168% increase! And I've not mentioned the additional costs involved in their mandate that one out of ten of those appraisals undergo a review by another appraiser at the cost of an additional $250 each. This has been a boon for appraisers, but a burden on consumers and lenders.

Perhaps government involvement will have the opposite effect in the field of healthcare. But I seriously doubt it.

The Cost of a Human Life

I read an interesting opinion piece in the Boston Globe on Saturday ("The Cost of not enacting health care reform", by Linday Bilmes and Rosemarie Day 10/07/09)

The authors argue that we work under the erroneous assumption that we are saving money by not insuring more Americans. However, sick and dead people do not work and do not spend money. By insuring more Americans we both save and extend their lives giving us more workers to increase our productivity and more consumers to boost our economy.

It turns out that the government estimates the value of each human life in terms of its contribution to the overall economy to be 7 million dollars. This is important to the cost benefit analysis of government programs. For instance, if a government program costing 100 billion dollars were estimated to save only 100 lives, it would not be considered worth the expense.

The authors apply this cost benefit analysis to the current health care proposals assuming that it will save 40,000 lives a year:

US government agencies typically use a figure around $7 million to represent the lost economic output from each death. If we conservatively use only half the government figure, or $3.5 milllion, it suggest that the annual cost to the US economy of 40,000 deaths is about $140 billion. That adds up to a cost of more than a trillion dollars over a 10 year period - even taking future inflation into account - well above the cost of enacting a health care package.

I find this a compelling argument. But I wonder if these authors would consider applying the same calculus to abortion. If so, we would find that the cost to the economy of ending 1.5 million unborn lives annually is a staggering 5.25 trillion dollars. If we were to multiply that over the 36 years since the legalization of abortion in the US, we would have a sum requiring exponents to calculate. If the price of doing nothing to provide healthcare to the 40,000 people who would otherwise die without it is too high, what is the cost of allowing millions of unborn children never to see the light.