Robert Latham

In a previous column, I made some comments about who should pay for health care costs, especially those for us Certified Old Duffers. I got some guff from my COD friends about those comments. They refuse to debate who should pay — uniformly they think it is Sumbah D. Eltz (somebody else). What they questioned was how much Mr. Eltz should pay. I had failed to address the cost-escalation issue.

Now, it is true that the rate at which health care costs are growing is some multiple of the general rate of inflation. And that should concern us. My COD friends think that the government should simply put a stop to this escalation of costs for doctors and hospitals and pharmaceuticals.

My response is: You think that elected politicians and government bureaucrats can and will actually do that? That the underlying economics can be summarily overruled by government fiat? What have you been smoking?

Attempting to predict future trends in health care costs, of course, is chancy business. The future is always unknown. The past can be known and, perhaps, understood. Maybe looking backward can offer some useful ideas. Consider the following.

Eighty years ago, when my farmer grandparents or their kids needed medical care, they went to the local doctor, he did what limited things he could do, and they paid him with green U.S. money. Simple, clear, honest, straightforward. They made the tradeoffs that were appropriate for them. And you can bet that they squeezed the maximum services out of old Doc Hayes, for the least fee possible.

Fifty years ago, after my parents had made the transition to the city and a salaried job, and they or their kids needed medical care, they also went to the local doctor and paid from the pocket. They understood that the more modern medical services could sometimes run up catastrophically large bills if something major happened, so they bought insurance against that possibility. But they mostly paid for regular care. And they paid attention to costs, both for the fees and for the insurance premiums.

Thirty years ago, when the working adults of my generation needed health care, they had at least two different ideas in their head: 1) all health-care costs, rather than just the catastrophic costs, should be covered by “insurance,” and 2) their employer had a moral responsibility to pay for their insurance premiums. On close examination, both of those ideas seem remarkably foolish, but both were clearly pervasive. Consequently, the consumer began to pay less attention to costs for both small and large health-care items.

Now fast forward up to today’s health-care consumers. They believe not only that Sumbah D. Eltz should pay for their costs, but that everyone should enjoy unlimited health care. And that everything wrong should be fixed — now. There should be no tradeoffs required and no limits on consumption. Expectations run amok.

And our politicians are now actually going to try to make it happen. If one projects the current plan out for a few decades, it appears that it will likely bankrupt the nation. But the voters in the next election seem to be smiling.

The central theme in the little chronology described above is the stepwise disconnect of the consumer from the cost of health care. The consumer no longer has any skin in the game. No one has to reach for his or her wallet. We all expect to have the latest and the greatest cure for everything — paid for by Mr. Eltz.

Why are we surprised at the wildly escalating costs? We have abandoned the most effective cost-control mechanism known to man. Is it any wonder that we are overtreated and overcharged?