Health care must not be driven by efficiency

1e7c5d64f86a6a26daeebf137364d4baI really like systematic, logical reasoning, especially when it puts the figures into trenchant laws or formulae and expresses them in wonderful graphics. The simplicity, the elegance, the sheer beauty of it! Something to really enjoy! That’s why I’m a big fan of Gossen’s Second Law. You probably don’t know it, but because it is important for health care as well, I’ll explain.

The law looks at the benefit we derive from the last cent we spend – the marginal benefit. If the last cent we spend on coca-cola gives us more pleasure than the last cent spent on wine then rational people will buy less wine and more coke until the marginal benefit is the same.

The same applies to how we spend money on health care. Does extra money spent on giving patients information lead to better health than more investment in new techniques? Then, as a rational person, government, health insurance company or institution, you should put money into new techniques or patient information.


Sadly there’s a snag to all this: what is the health yield of an investment? Is it the number of lives we save?

And the increased number of healthy people? Yes, you could say that, but is saving a centenarian just as important as saving an eighteen-year old? No, probably not. So – saved lives x average life expectancy + people made or kept happy x expected years with a good quality of life.

Here comes the first nasty problem: people with a relatively low life expectancy due to having a lower income count less than people with a high income and a higher life expectancy. This is all the more poignant when – being very rational – we look at what is called ‘payback effects’. Someone who can continue to be productive and add to the tax revenue pays society back for at least a part of the medical costs. So somebody doing paid work has a higher priority than somebody disabled or long-term unemployed. And somebody with a high income then has more priority than somebody with a low income.

These are consequences that society is not prepared to accept– so no Gossen’s Second Law, and no rational choices. We have to accept irrationality and inefficiency in the spending on health care – alas!

What can we do?

But how do we, as society, decide how we spend out health euros? If we look more closely at the choices between individual patients there are various possibilities, such as:

1. Age limits. Above a certain age we don’t perform certain costly interventions.
2. Life-style. For example, certain treatments for non-smokers only.
3. Being a donor. Organ transplants only for people who are themselves organ donors.
4. Doctor’s decision. The doctor decides whether a particular intervention is worthwhile.
5. By lot.
6. Everyone must have insurance.

Of course combinations are possible, and variations and all sorts of other ways. And every method has its own – often big – advantages and disadvantages, so it is only reasonable to prepare ourselves for disappointment now. There aren’t any simple solutions and there won’t be any. And society will probably change its mind regularly.

Without the simplicity and elegance of, for example Gossen’s Second Law, making painful choices is difficult, and will remains so – even bungled in some people’s experience, including mine – but that’s life.


A blog by Frank Geene