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Fallacy Friday

We should make every Friday a fallacy Friday. Here is the latest from the Wonks:

This chart is amazing news for our health cost problem

By Sarah Kliff, Published: November 20 at 3:55 pmE-mail the writer

This just might be my favorite chart about health care costs as of late. And it’s one that contains billions of dollars’ worth of good news!

medicareoutlaysThe chart, from the Council of Economic Advisers, shows the Congressional Budget Office constantly revising downward how much it thinks the federal government will need to spend on health care costs over the next decade. That’s because health care costs have been growing a lot more slowly over the past few years than they typically do.

Ummm, no.

What this shows is that health care expenditures have slowed. Costs and expenditures are not the same thing, and I’d nearly go so far as to say they have almost nothing to do with each other. Does anyone out there actually know what a cost is? Well, I’ll tell you:

  • It is something that consumes resources
  • It has to be the result of some particular action. So, it makes no sense to say that “health care costs X.” What, exactly about health care (aside from the fact that there is no such thing as “health care” are we talking Advil or heart surgery?) costs X? Delivering it? Writing about it? Insuring it? Subsidizing it? In other words for something to be a cost, it must be tied to some action. It makes as much sense to say “health care costs slowed” as it does to say Wintercow slowed. Did my 40 time slow? Did my pages read per minute time slow.
  • That’s not all. Costs have to be costs to someone. I guess implicit above is that someone is “everyone” which then tells us very little, doesn’t it?

So to look at this picture and say that health care costs are growing slowly is a flat out lie. Or whatever we call lies now. I guess it’s not a lie, it’s just not what the chart shows and indeed you can’t say how costs have changed. They may be flat. They may be shrinking. They may be increasing. You cannot say.

What the heck am I talking about? Well, all we know is that P x Q, for those things that we actually measure and call “health care goods and services” has grown m ore slowly in recent years. This is not the same as knowing, for example, how many resources are used to perform the same heart surgery today versus years’ past. This is not the same thing as knowing if more resources are required to air-lift patients to different hospitals today. This is not the same thing as knowing if the resources used to make, market and deliver drugs are growing more slowly today than in the past.

Now, later in the article, the author does seem to try to rescue this, by showing us that Medicare Readmissions rates have fallen since a penalty was imposed on the practice.


But this chart again tells us almost nothing. Are patients being selected at the front end and not being admitted in the first place (remember, being not admitted is NOT the same as not coming to the hospital). So, are the hard cases simply being turned away? Or are the returns simply getting care at the hospital and not being sent “upstairs” so to speak? And what about the medical outcomes for these patients? Are they being seen elsewhere? Are they in just as good of health? And so on.  The incentive in play here is “prevent return trips” and this is not the same as “make sure patients are healthier.” Well, in the land of the elite planners these are the same things.

And by the way, if this is the benefit of Obamacare, then, well, why … I’m not in the mood to talk about it. Have a nice weekend folks.

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