I started by analyzing Gini's assumptions (I counted five assumptions)
1. We should try to save more lives - I will treat this assumption as an axiom.
2. Causes of death are medical - True.
Over 90% of the deaths are caused by disease. Of the non-medical causes, road accidents are the most frequent (6.5% of the total deaths.)
3. Money spent on healthcare extends life - Partially true.
Two examples validate the assumption.
3.1. The graph below shows (if you can ignore the curve-fitting line) that up to about $3000, higher healthcare spending is associated with increased life expectancy. Above that amount, the curve flattens.
3.2. Higher income level is associated with higher life expectancy. The top income quartile, lives eight years longer than the bottom quartile.
4. Health Care spending is not allocated rationally - Probably true.
When faced with a choice between spending to prevent the death of a loved one, and indirect efforts such as preventive medicine, I have no doubts of the outcome. Another anecdote, reinforces the assumption. Among the developed countries, the US, has the highest mortality rate for children under five. Conversely, it has the highest survival rate of people over 75. It seems that too much is allocated to saving old geezers like me.
5. There are areas that are more cost-efficient in savings life - Needs to be calculated.
Among the cost efficient areas that Gini mentioned are the following:
- Universal health insurance
- Preventive medicine
- Orphan drug research
- Road safety
- Water and air quality
- Aid to poor countries
Perhaps economists can prioritize these areas based on measures such as 'Lives saved, per dollar of investment.' and compare them to new life-saving efforts.
I concluded that the premise is plausible.
At this point, the path leads to high hurdle, How do we implement this vision? Who can make the hard decisions of shifting resources based on rational thinking? The path branched into three directions: Individual choice, the democratic process, or a benevolent dictatorship.
A. Individual choice (in a free market)
My libertarian tendencies tell me to let individual choice find the rational solution. (See I pencil)
The US is an approximation of such a market. Yet, despite healthcare expenditures of $10,000 per capita, the results are dismal. Life expectancy (79 years), is three years shorter than the average in the developed countries, and on par with countries that spend only $2,000 per capita. Within the population, there are large disparities based on race, income, and education level. These results can perhaps be explained by the fact that 20% of the population spends 50% of the healthcare money.
The free market may work for the top 20%, but the process is not efficient. I would hate to describe what could happen to society, if the trend continues.
B. Democratic process.
The Democratic process allows the majority to impose limits on the wishes of the affluent minority. For example, some democratic countries implemented universal health insurance. Can it also work to shift resources from emotionally charged areas, to more cost efficient endeavors?
Ç. Benevolent dictatorship
There are many examples of dictatorships in the world, but few can be considered benevolent. Two that might fit the term are China and Iran. I compared those to an unscientific sampling of five countries (*) whose healthcare spending is in the same range. I defined efficiency as the years of life expectancy divided by the health care expenses per capita.
Country Healthcare Spending[$/PC] Life expectancy[Yrs] Efficiency [Yrs per $100]
China 426 77.5 18
Iran 366 77.3 21
5-country average 350-450 77 19.4
It seems that authoritarian regimes do not have a clear efficiency advantage.
Conclusions
The Democratic process may be the preferable implementation approach. However, to achieve a rational resource allocation, we will need to become much more active politically.
* Armenia,Bosnia,Columbia,Malaysia,Romania.
