Dr. Baumol Talks Health Care Cost
Continuing my recent fascination/attention to health care, an interesting post on the New York Times site about the economics of increasing health costs, based on the ideas of William J. Baumol, who developed the notion of “cost disease”:
Dr. Baumol and a colleague, William G. Bowen, described the cost disease in a 1966 book on the economics of the performing arts. Their point was that some sectors of the economy are burdened by an inexorable rise in labor costs because they tend not to benefit from increased efficiency. As an example, they used a Mozart string quintet composed in 1787: 223 years later, it still requires five musicians and the same amount of time to play.
Essentially, making the point that no matter how much reform there is, the cost of care will still outpace inflation. The article (and theory) focuses on people as the most significant bottleneck, though I haven’t seen anything showing that in the current setting, the excessive increase in costs from the last ten years (and why the U.S. is paying twice other industrialized nations, for only average care) is tied to salaries. Tests, insurance cost, overhead, equipment all seem like things that the market can fix, but then again, I’m not much for Economics. In the end, the post is light on details (it’s a blog post, not a full article), but is interesting food for thought.
(Thanks to Teri for the link)
