Why Medical Costs Don't Go To Infinity: Connection Between High Medical Prices, Per Capita GDP And US Productivity: Reprint Of My 11 Year Old Blog Post

A reprint of my September 21, 2011 blog post about the Connection Between High Medical Costs, Per Capita GDP And US Productivity:

Wednesday, September 21, 2011

Connection Between High Medical Costs And US Productivity

Posted By Milton Recht

A comment I posted on Code Red, "Why Aren’t Medical Prices Infinity?" by dranove:

Potential productivity and per capita GDP loss to the household measured from the onset of the medical condition's negative impact on production, and not first doctor visit, set an upper bound on the value (price, opportunity cost) of the medical service.

For example, suppose a member of a household has a bad knee, which would improve with proper medical care. The bad knee either directly negatively affects the worker's output or if it occurs in a non-working family member, requires a working family member to lower his/her productivity by devoting time to the ill family member for care, transportation to doctor, etc, as would be the case for a child, elder parent, severely ill family member.

The opportunity cost of the lost production starts from the onset of the condition, and not from time of first doctor visit, and ends when the condition is sufficiently resolved to allow productivity to go back to its pre-symptom level.

The US has high productivity and GDP per capita.

Delays in getting doctor appointments, delays in diagnostic tests, delays in accurate diagnosis, delays in EFFECTIVE treatment (specialists), need for retreatment and long recovery times are opportunity costs to the affected worker.

Comparative medical access and recovery times are shorter in the US than in other countries. You cannot have short access times to medical care without excess capacity.

In other countries, the costs of delayed doctor appointments, diagnoses and treatments are not captured in the prices paid for medical services. In the US, the costs of avoidance of the social costs, the opportunity costs of delayed or incorrect medical care is captured in US medical prices.

Even if other countries captured these costs in their medical care prices, the higher US per capita GDP and productivity would still make the US medical services prices higher.