A Fundamental Problem with Socialized Medicine – One Lesson Alfie Teaches Us

~750 words, ~4 min read time

I’m a bit of a weirdo when it comes to medicine. I will happily agree with basically anyone who says that the American medical system is messed up. The system is designed so that no one ends up actually comparing costs and benefits. Patients and doctors generally are trying to maximize benefits while insurance companies are trying to minimize costs, with no one really comparing the two against each other. The result is a system that gives mediocre performance on the whole, and does so very expensively.

I’m even willing to acknowledge that a reasonably designed socialized system might even perform better. Along that measure, the UK’s NHS is quite good. They evaluate cost per quality-adjusted life year (QALY). So, expensive routines that aren’t likely to extend or improve life aren’t likely to be approved. On the face of it, this seems like a reasonable system. Compare the cost of a treatment to the benefit. Obviously a good idea.

But, there’s a reason that I don’t advocate for socialized medicine. Preferences are subjective. How much is another year of life worth to you? I suspect everyone who reads that question will give a different answer. And there’s nothing special about years in your life. We each have different values we attach to everything. Some people believe that black licorice is very valuable. So valuable they’d even be willing to pay for the ability to eat it. Then there’s me. The subjectivity and diversity of preference is part of fundamental economic reality. What the market system allows us to do, rather brilliantly, is convert a vast array of subjective preferences into an objective number – price – that reflects the value of increasing the production of a good by an additional unit. This price can then be compared with the cost of increasing production by that unit, so that profit-seeking entrepreneurs produce just the right amount of the goods that are produced by the market.

Socialized systems cannot do this. They lack the necessary mechanism for reacting to individual preference. So, even if we assume perfect information about cost per QALY, the fact that we don’t have perfect information about each patient’s VALUE per QALY suggests that some patients will be over-served (if they place a low value on extending their life) and others will be under-served (if they place a high value on it).

To me, this is one of the lessons that Baby Alfie can teach us. The NHS simply could not account for the preferences of the people involved (the parents in this case). What they knew: treatment was expensive and unlikely to add QALY. So, it should stop.

I know it is uncomfortable – and to many feels borderline sociopathic – but when it comes to decisions about life and death, we have to consider both benefit and cost. For most of human history the reality was that death was not a financial choice. Staying alive was either cheap (buying basic food and shelter) or impossible (because we couldn’t effectively offset the effects of most diseases, old age, war, accidents, etc.). So, there was never really a point where a person would have to make a financial decision about life and death.

Today, though, things have changed. We have the technological ability to keep our bodies going for long periods of time. We can treat most diseases on some level. But, it’s often expensive. And worse, it’s expensive in monetary terms. So, someone has to decide: is it worth $3,000 per day to keep someone alive on life support?

It’s a difficult decision, no doubt. But, it must be made. The question is by whom? On the one hand, doctors are in a good position to estimate the odds of recovery. Naturally, if keeping someone on life support for a week is likely to lead to a full recovery so that the person will go on to live for another 30 years the calculation is a bit different than if the odds of ever recovering is basically zero.

However, doctors are not in a position to place a value on the person’s life – where the person’s family is in a much better position both to represent the person’s own decision, if they were in a position to make it themselves, and also to account for the impact of the person’s life on those around them. Easy? No. Heart-wrenching? Absolutely. But, is it better to ignore the subjectivity involved and impose a one-size-fits-all policy instead? I suspect not.

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