Expenses in health care

When healthcare policy makers contemplate what makes healthcare expensive, they may do well to ask a related but less obvious question: what makes healthcare policy so expensive? A healthcare system of course pays both for healthcare and the added policy costs. In assessing the costs of healthcare policy, a few simple observations come readily to mind:

1.) Ideology is expensive. Certain types of reformers think that the healthcare system must not only address the provision of healthcare services, it must also "send a message" or provide symbolic declaration of some cultural value or other. These ideological accessories cost money.

2.) Unrealistic expectations are expensive. It is a fallacy that a possible outcome is achievable, no matter how unlikely, if only sufficient resources are spent to attain them. Policies that view particular outcomes from the perspective of entitlements perpetuate this fallacy, and it wastes a lot of money.

3.) Sentiment is expensive. When outcomes are assessed against their ability to cause emotional distress, rather than the practical likelihood of achieving them, expenditure decisions become emotional, irrational, and profligate.

4.) Corruption is expensive. The vast amounts of money spent on healthcare engender innumerable opportunities for fraud, misuse, rent-seeking and graft. This only seems to become apparent after the fact, despite the fact that it is inherent in human nature.

5.) Ignorance is expensive. Is it more expensive for an airline to have its aircraft engines maintained by trained mechanics or by people who have a few ideas about how they think the engines should operate? The difficulty with healthcare policy is there is practically no one with the depth and breadth of knowledge to maintain and design global improvement for such a complex, intricate, and expansive system, yet this seems to be no impediment to policy makers who are self-sure that they know the one or two things to change to produce a system that is fair, inexpensive, innovative, high quality, accessible, compassionate, etc, etc.

Limited politics

It is a fundamental principle of controls engineering that the number of outputs for a particular system that can be controlled independently can be no greater than the number of inputs. For example, in an airplane, the speed and rate of descent can be controlled, within limits, with the combination of the elevator position and the throttle. If the only control input available to the pilot is the elevator position, he can still control the speed and rate of climb or descent, but cannot control them independently. This is easily understood mathematically: if the control inputs are considered unknowns, and the relationships between the inputs and various outputs can be expressed as mathematical equations, the number of the number of inputs determines the number of outputs that can be changed independently. If there are three inputs and four outputs, one of the outputs will be dependent on the values of the other three. We will have four equations in three unknowns. The value of that fourth output may be something undesirable; it may be detrimental, or wasteful or expensive. For example, in the case of an airplane, the fourth output may be speed, which may exceed teh design envelope of the aircraft, etc.

The key point from the foregoing is that the number of outcomes that can be independently controlled depends on the number of inputs. If a system, mechanical, economic, political or whatever has more possible outcomes than the number of inputs that can be controlled, those excess outputs cannot be controlled. They may be, in the general case, unintended consequences.

In the political realm, mediocre politicians and policy makers often resort to only 3 inputs: banning things, mandating things and spending money. T

he number of outcomes affected by particular political fixes nearly always exceeds the three inputs to whi politicians an policy makers resort, and these are almost always unintended consequences. Ban something, and black markets will arise, and invite corruption. It will lead people to seek substitutes for the banned item that may be more detrimental. Mandate something, and people will devise schemes to feign compliance, and engender corruption, will a consequent skepticism regarding respect for the law and civil authority. Spend money on a problem, and opportunists will devise schemes to harvest the allocated funds, rent seekers and special interests will siphon what they feel they are entitled to, and again, engender corruption and skepticism regarding the law and civil authority. If you have policy makers whose only response to a problem is banning, mandating and spending, there is a high likelihood that corruption will result somewhere along the way.

If policy makers cannot think of a single solution to a problem that does not involve banning, mandating or spending money on something, they should probably not be policy makers.