Controlling Health Care Costs by Controlling Access

One of the things I have argued in the past that one way for nationalized health care to control costs is to limit the access to the system. When most people look at the costs of something they look only at the monetary costs. How much did we spend. The issue of opportunity costs almost never show up.

What are opportunity costs? Those benefits that are forgone when you choose a specific action. Suppose you have an hour of free time. You could read a book, watch television, or take a nap. You decide to read a book. The costs of reading a book are not taking a nap or not watching television.

How does this relate to health care issues? Simple, if you want to control for the dollar expenditures you can increase the opportunity costs. Triple the wait times. Will you want to go see the doctor when you think you have bronchitis if it means a 2.25 hour wait vs. a 3/4 hour wait? I bet lots of people might just decide to wait and see if they get worse before waiting that length time. This will save you money in the end. You aren’t expending health care resources on that individual who just walked out of the waiting room who did not see a doctor, have his blood pressure taken, his weight recorded, and so forth. Further, he is not going home with a prescription. All these things will save you money.

But there are still costs here, just not monetary costs. The person who walks out with bronchitis might take longer to recover. Hence more time off from work and that translate into lost production. Also, the person is sick longer which lowers his welfare which is also a cost. This merely hides the costs by transforming the costs from costs that have a monetary component to costs without the monetary component (at least ones that are not easily measured).

Now, Robin Roberts may have found an example of this from Canada’s health care system. Canada passed a law prohibiting payment for eggs. The only eggs that can be used in fertilization techniques are donated eggs. The result is to dry up the already small supply of eggs for fertilization techniques.

While Americans very publicly head to Canada by the busload for cheap prescription drugs, a growing number of Canadians are quietly coming here for medical treatment.

They aren’t coming to save money. In fact, they spend much more here than they would at home.

Nevertheless, Canadians are coming to the United States – and Colorado – for help in making babies.

Clearly there is a problem. Some Canadians are willing to pay for IVF procedures, but because of the nationalized nature of Canada’s health care system people are being prevented from engaging in these transactions (in Canada). While it might be seen as an “unintended consequence” it might very well be a way to limit health care costs. By prohibiting payment to egg donors the entire IVF procedure is no longer available in Canada which saves the Canadian health care system money.

FILED UNDER: Economics and Business, Health,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. kappiy says:

    Is in-vitro fertilization really a “medical” cost? Sure, doctors are involved, but it is more along the lines of cosmetic surgery. It is not essential for individual or public health–as opposed to the bronchitis example.

    It seems logical for the Canadians to increase opportunity costs on lavish, non-essential procedures like IVF or plastic surgery.

  2. It is perfectly logical for Canada to create exclusivity for health care, and then drive costs of less politically important care to such extremes? My god, that I never adopt such logic.

  3. Harry says:

    The idea of improving health care by limiting access is one of the loonier ideas I’ve heard as a solution to any problem. One of the problems we have now is the lack of preventative care and the lack of early intervention. And you propose to improve the situation by doing something that will keep even more people away from medical care? This scheme woould work fine if you were trying to increase the chances of getting a ticket to a Redskins game – make all tickets single-game, and have a rule that says to get a ticket you first must swim the Potomac. But as a means of making health care more equitable, it’s absurd.

  4. Maggie says:

    There is another reason to limit IVF. Recent studies are showing IVF babies suffer continuing health problems. This does impact the Canadian health care system.

  5. Attila Girl says:

    Older and otherwise infertile couples will continue to seek IVF, because people want to be parents. Forcing them to go through a system that essentially refuses to provide this care is ridiculous.

    When we went through it, we paid out-of-pocket at a local clinic in Pasadena, California. Why can’t it be likewise handled privately in Canada? And where, exactly, does the Canadian government get off forbidding college students from making a little money by selling their eggs to older couples who can use them?

    Maggie, I’d be interested in seeing your links on the health problems supposedly experienced by IVF babies. In any event, your solution–that couples just give up on biological parenthood, la di da–strikes me as particularly heartless.

  6. kappiy says:

    It’s pretty clear that IVF is not a public health care issue. Limiting access to this procedure does not have any effect on anybody’s health.

    It is a non-essential medical procedure–it’s no different, qualitatively, from a nose-job.

    Because it is a medical procedure, the state regulatory structure on medicine expends resources on making sure facilities are safe, doctors are qualified, etc…Any governmental support that utilized to regulate such activity is a waste of public resources.

    A better solution would be to make IVF treatment entirely market based. Meaning, there would be no public moneys spent on regulation (for health and safety), and women would be free to sellf their eggs at will.

    It is important in this case not to equate all medical procedures with “health care.”

  7. Steve says:

    The idea of improving health care by limiting access is one of the loonier ideas I’ve heard as a solution to any problem.

    Harry, I’d agree with you if that was indeed what I suggested. What I am suggesting is that limiting access is how you’d go about limiting the costs.

    One of the problems we have now is the lack of preventative care and the lack of early intervention.

    Oh please, this preventive care argument is so much baloney. Why don’t HMOs do it? That is what they were designed to do, but they don’t do it anymore. The reason is that preventive care is expensive. It requires more doctors, more nurses, more staff, and more facilities because access has to be easier.

    This is a bromide that many “nationalizers” push and it is one I have not seen one iota of evidence supporting.

    And you propose to improve the situation by doing something that will keep even more people away from medical care?

    That is not what I wrote, proposed or anything of the like. I’d recommend a remedial reading course.

    There is another reason to limit IVF. Recent studies are showing IVF babies suffer continuing health problems. This does impact the Canadian health care system.

    Like I said, limit access to control costs.

    A better solution would be to make IVF treatment entirely market based. Meaning, there would be no public moneys spent on regulation (for health and safety), and women would be free to sellf their eggs at will.

    I don’t have a problem with this, but I bet Canada’s health administrators would. Can you guess why?

  8. Indeed, Harry, neither Steve nor myself is suggesting limiting access. We are saying that such “universal” single-payer systems like Canada’s always do this in some fashion. And its my opinion that advocates of such systems are either ignorant of this fact or deliberately hide it from their audience.

    kappiy, your comments are puzzling because Canada does equate these procedures as “health care” and regulates them into near non-existance. Canada, through their monopolization of health care system and resources and the mechanisms described, prevents any its citizens access to these procedures completely. They forbid “market based solutions” explicitly.

  9. ” I don’t have a problem with this, but I bet Canada’s health administrators would. Can you guess why?”

    Oh, oh, call on me Steve, call on me!

    The reason that Canada has monopolized health care, even of treatments they do not wish to provide, is so that there is no private system sucking up “resources” ( another word for people like doctors and nurses ) by offering them competitive wages.

  10. Harry says:

    “Will you want to go see the doctor when you think you have bronchitis if it means a 2.25 hour wait vs. a 3/4 hour wait? I bet lots of people might just decide to wait and see if they get worse before waiting that length time”

    This sure sounds like intentionally limiting access to try and get people to stay away.

    “You aren’t expending health care resources on that individual who just walked out of the waiting room who did not see a doctor, have his blood pressure taken, his weight recorded, and so forth. Further, he is not going home with a prescription”

    He also isn’t being treated. If all illnesses presented obvious symptoms, thsi would be fine. But how many people with high blood pressure know they have it? I don’t think I need a remedial reading class – maybe you need a remedial writing class? Seriously, maybe that’s not what youi meant, but it’s very, very easy to take that meaning away from what you wrote.

    “This is a bromide that many “nationalizers” push and it is one I have not seen one iota of evidence supporting.”

    It’s also something many of the doctors here push. They don’t enjoy the annual physical or wellness exam – which, incidentally, are now being covered by Blue Cross, who I doubt would do it if it wasn’t cost-effective – but they strongly recommend it. And I don’t think they’re “nationalizers”.

    “That is not what I wrote, proposed or anything of the like. I’d recommend a remedial reading course.”

    Well, you said: “Simple, if you want to control for the dollar expenditures you can increase the opportunity costs. Triple the wait times.”

    If you’re not trying to keep people away, by increasing the opportunity costs, and therefore apparently trying to tip the opportunity cost in favor of another activity (opportunity), then what is this part of your proposal attempting?

  11. Buying Health Care
    I’ve gotten embroiled in a mini-debate with Steve Verdon on Outside the Beltway over health care costs and access – well, it looks like a mini-debate from my side, anyway, I suspect from his perspective it’s more like a cat…

  12. Harry, you keep calling this Steve’s “proposal”. How many times does Steve have to point out that he is not “proposing” anything. He’s describing how costs are limited.

  13. Harry says:

    That’s true, “proposal” isn’t correct. And I’m not trying to argue with Steve, although it probably comes across that way. But making medical care inconvenient as a means of limiting expenditures could easily become counterproductive financially – the sicker you are, the less likely you’d be able or willing to hang around in a waiting room. So your condition worsens, and your eventual care is more complicated and more expensive.

  14. likwidshoe says:

    Harry wrote, “The idea of improving health care by limiting access is one of the loonier ideas I’ve heard as a solution to any problem.”

    Who said anything about “improving health care”? Steve’s article was about controlling health care costs.

    I don’t think I need a remedial reading class – maybe you need a remedial writing class? [to Steve]

    Really? You’re the one who misunderstood what Steve wrote. Maybe you do need a remedial reading comprehension class.

  15. Harry says:

    “Who said anything about “improving health care”? Steve’s article was about controlling health care costs.”

    OK, after going back and reading through the original post again, I was guilty of reading “controlling health care costs” and translating that as “improving health care”. Apologies to Steve, I’ll go look for that remedial reading class now.