Healthcare isn't health

Right now, the U.S. spends about 18% of its GDP on healthcare (both private and public). It's by far the highest rate in the world, and on top of that, it keeps growing faster than inflation. Why is it so expensive? Well, standard stories are moral hazard and adverse selection; but there's another possible reason: we're buying the wrong thing. We're paying for healthcare as opposed to health, meaning that the "healthcare system" has an incentive to advise its customers to buy more and more health services, and not to evaluate which of those services provide the most bang for the buck in terms of health outcomes.

This article makes the point very thoroughly. And if indeed paying for the wrong thing is the biggest problem, then GMU economist Robin Hanson has a solution. Since currently neither the insurance providers nor doctors have an incentive to sell services that maximize health, and since it's impossible for individuals to find out on their own which services are best for health, health insurance should be sold in one package with life insurance, and from the same insurer. Then the insurer will have an incentive to try and find out which health services are best in terms of maximizing life expectancy; after all, they'll want you around as long as possible so they can keep collecting your premiums.

The devil's in the details, of course, and Hanson works these out too. They're just as interesting as the general idea.