Tuesday, June 28, 2011

Why Medical Costs Keep Rising

Recently, some new drugs have been developed that have shown the ability to extend the life of men with prostrate cancer by up to two years (see NY Times story). Good news, right? Treatment with these drugs can cost $90,000. Is it worth $90,000 to extend your life by a year or two? Maybe. Or maybe you'd rather die a little earlier and put that in your grandchildren's college fund. But what if that treatment were only a few hundred dollars? Makes the decision a lot easier doesn't it.

The way we structure medical plans right now, that treatment will only cost you a few hundred dollars because Medicare (most prostate cancer patients are over 65) will pay for it (which really means your children and grandchildren are forced to pay for it with payroll taxes). So rational decision making by the affected parties (the patient and his family) is effectively truncated in favor of government policy that diverts more and more resources to medical treatment.

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