On Monday, Federal Reserve Chairman Ben Bernanke addressed the Senate Finance Committee's Health Reform Summit (full transcription here). Bringing his financial acumen to the table, he reframed the question of health care cost, putting into a perspective of "What are we gaining from these expenditures?" rather than the usual absolute and simplified "What does it cost?"
From the economist's perspective, the question of whether we are spending too much on health care cannot ultimately be answered by looking at total expenditures relative to GDP or the federal budget. Rather, the question, whatever we spend, is whether we are getting our money's worth. In general, good information and appropriate incentives are necessary to allocate resources efficiently. In health care, the necessary information should include not only the clinical effectiveness of certain tests or courses of treatment but also their cost-effectiveness. As the regional comparison of health-care costs illustrates, cost-effective approaches may be at least as useful as more costly approaches in delivering good health outcomes.His remarks were tightly focused on health care cost and its impact on the U.S. financially. Monetary policy and overall comments about U.S. economy were not addressed other than as they affect health care. He also declined to make any solid policy recommendations.
Among other issues, Bernanke pointed out that rising costs of health care are quite liable to reduce access to health care as the lower income elements of the U.S. are priced out of both care and insurance. Hardly an earth shattering observation, but one that is lent weight by his bringing it up in this particular forum.
"The best way to reduce the fiscal burdens of health care is to deliver cost-effective health care throughout the entire system"Hopefully this will turn some attention towards the inadequacies of the "pay per procedure" methodology that has driven American health care for decades.
SOURCE: "Chairman Ben S. Bernanke At the Senate Finance Committee Health Reform Summit, Washington, D.C. Challenges for Health-Care Reform" 06/16/08
photo courtesy of Ashley Pollack, used under its Creative Commons license