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Monday, September 21, 2009

Death Panels!

One of my favorite fnord phrases surrounding the healthcare reform debate is "Death Panels". Allegedly, Obama's healthcare reform plan includes a committee of State bureaucrats that decide which people qualify for medical treatment. This committee has the power to deny people medical treatment, making it a "Death Panel".

Most of the medical expenses that you will incur over your entire life occur over the last 3-6 months of your life. Suppose your lifetime medical expenses are 200 ounces of gold. About 100-150 ounces of gold will be spent in the last few months of your life. Why is that?

Suppose your grandmother is very old and sick. She has medicare or another health insurance plan. Suppose she is hospitalized and is going to die soon.

Keeping someone alive on a respirator is *VERY* profitable. The hospital collects $2k-$5k per day. The hospital doesn't have to do anything except hook you up to a machine that keeps you breathing and keeps your heart beating.

One problem is that the hospital is paid based on "# of days patient is in hospital". The hospital doesn't get paid extra if the patient recovers. The hospital doesn't have to give the money back if the patient dies. The interests of the hospital bureaucrats are not aligned with the interests of the patient.

Lawyers and doctors get paid by the hour. They don't get paid based on whether they actually help their customer or not. If you die in a hospital, you doctor still gets paid based on the work he actually performed.

Suppose the hospital keeps someone alive for 100 days at a cost of $3k per day. That's $300k! That's a very profitable scam! Your grandmother is kept alive on a respirator, but she's barely conscious or unconscious and unable to do anything. Her odds of recovery are practically zero.

Your grandmother isn't spending her own money. She's spending the health insurance corporation's money or medicare's money. There's no incentive for her to say "Forget it! This is a waste!"

Suppose your grandmother were spending her own money. Then, she might make the rational decision "$300k just to be stuck on a respirator unconscious for 3 months! Forget about it! I'd rather give the $300k to my children!"

The current system denies old and sick people the right to make rational economic decisions. They aren't paying the cost of their own medical care directly. They can't choose to die and pass the savings on to their children.

The hospital is making the decision whether to unplug the life support system or not. However, the hospital is getting a couple of thousand dollars per day! The economic incentive is for the hospital to drag out the dying person's life for as long as possible.

Obama's reform proposal is that a State committee will make the "unplug life support" decision, and not the hospital. This committee saves money by denying medical care to people who are nearly dead. However, what happens if the committee makes a mistake and denies treatment to someone who would have recovered?

There is no "free market" choice in the current system or in Obama's reform proposal. Someone who wants to be kept alive on life support should be able to pay their own money and get it. Someone who wants to pass the savings on to their children should also have the choice.

In the current system, the "unplug life support" decision is in the hands of hospital bureaucrats. With Obama's "Death Panels", a State bureaucracy will be making the decision. It isn't a substantial difference. A hospital bureaucrat is effectively a State employee.

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