Great topic, Sophia, and one that affects us all, without us even knowing it. It’s part of the hidden cost of the socialized health-care. Someone has to decide the kinds of things that they’re trying to decide with those calculations; the problem is that the individual health-care consumer’s valuations are not the root of the calculation. I agree with GB’s analysis. Ludwig von Mises said something to the effect that calculation is impossible in such a system.
My own first experience with this was when my wife was pregnant. There was some test that could be done on the fetus, but it was not covered by insurance, and was not cheap. I found a paper by some researcher, addressing the issue of whether one ought to do the test. I think it listed risk factors in some form: e.g. if one of the parents is Asian then the probability of the child having this genetic defect is x%. It also listed cost information noting how much extra one would have to pay taking care of a child with the medical condition. Using the cost information and the probabilities, it worked out the types of situations where one would break-even and profit from the test.
What was eye-opening to me was that nowhere in the paper did it take into account the fact that this condition (some type of mental retardation) would almost fully destroy the reason any rational person would have a child in the first place. So, while it was adding up costs in the few thousands of dollars, it was ignoring the million-dollar (of “million-value”) question. This was an expensive test, but not super-expensive. The math was being done on the wrong input. Instead, the consumer should be asked: would you spend $2,000 to tell if this fetus has a high likelihood of growing into a mentally retarded child?
The answer to that question might seem obvious, but only if one were willing to abort the fetus. In our “parents’ pre-natal class”, there was at least one pair who spoke up proudly, saying that they thought it was a waste of money, because they did not believe in abortion. Fair enough… it’s their life. It would be highly immoral for a government bureaucrat to decide such matters for individuals, based on costs, and his estimate of what others should and should not value.
Under capitalism, both types of parents would be taken into account. The mix of both types of parents, and their buying power, would be aggregated in a calculation done by medical companies and their researchers. However, when people have to make such a decision in the absence of the profit motive, there is literally no way to do it without ascribing some of their own values to the consumers. This is what the communist bakery has to do when it decides what mix of brown and white bread to bake, and this is what administrators have to do under socialized medicine.
aEqualsA , You ask whether there is an objective basis to measure the quality of life. Sometimes people have to make decisions where they have to implicitly assign a value to an extension to their life. People will be told for instance, that they can undergo a particular medical procedure and that it will not solve their problem, but will extend their life for a year; or, they may be told that they will live but they’ll be paralysed and in bed forever. In such instance, people do weigh the value against the cost. It isn’t easy, but as long as the individual is doing it, there’s no fundamental problem with it. With socialized medicine, a bureaucrat, or the law, decides.
Even though the system in the U.S. is not socialized in the manner of U.K. and Canada, the government has a huge influence in these types of decisions. The government has created a system that has moved individual decision-making away from the consumer – not as much as in a socialized system, but enough for it to matter. From my own experience, I find that the system in the U.S. still works extremely well to solve diseases; however, it does not do too well in the area of preventive tests and procedures.
The example of the test I gave above is just one example; there are many other tests that insurances do not cover, based on their own estimate of seriousness and cost. When someone has a disease, they seek treatment and options. However, when it comes to tests and prevention, people are often unaware of risk factors they face and possible tests. In the context of U.S. health-care, it is particularly important to quiz your doctor. It is possible that he does not mention some test because it’s expensive and insurance won’t cover it. As a consumer, it’s important to quiz him a bit to figure out if there is something he is hesitating to tell you. More long-term, it is also important to look for doctors who are less inhibited by insurance rules, and are willing to tell you what your options are, regardless of coverage.
People often condemn businessmen for trying to sell one unnecessary things. Doctors aren’t an exception. So, the other side of the insurance-pays system, is that some doctors will prescribe tests that one does not really need, but which insurance will pay for. First, there are always bad-apples in any profession. Secondly, the unfairness of the insurance system actually encourages such behavior (… but this post is long enough already).