Thursday, August 27, 2009

Socialized Medicine: decisions on cost effective procedures

In the on going debate over Health-Care Reform aka Health Insurance Reform you have undoubtedly heard the reference to Death Panels. Further you have heard that a board of faceless bureaucrats would make decisions if a procedure was cost effective for patients and in particular elderly patients.

The argument is based on other Socialized Medicine plans that function in other countries. That indeed decisions are made regarding the cost/benefit of procedures and procedures are denied in the course of every day events in Socialized Medicine.

What does not get any attention is: what is the cost/benefit analysis? In other words, how do they determine if a procedure is cost effective and what is the benefit? What cost/benefit determines denial of a procedure?

You might want to look to Dr. Solomon S. Huebner's and his development of The Human Life Value Concept.

The Human Life Value Concept was an attempt to measure the income/economic loss sustained by a household due to premature death of a wage earner. The value was used to determine Life Insurance needs.

However, The Human Life Value Concept was adopted by Trial Attorneys in wrongful death cases among other legal cases. The Human Life Value Concept has found its way into many of the Social Sciences.

In a nutshell The Human Life Value Concept works as follows: if John Q. Public is 30 years old, he has 35 more working years (65 normal retirement age). He makes $50,000 per year. The income is projected over the next 35 years with an inflation factor for pay raises. Then the resulting value is reduced to the current value of the future benefit.

Hence John/Jane Q. Public is reduced to a dollar and cents value. Remember, this dollar and cents value was for calculating Life Insurance needs. However, the Human Life Value Concept has found its way into other Social Sciences and is used in many other ways than the original needs for Life Insurance that Huebner discussed.

One can quickly see that The Human Life Value Concept, with income equal, is going to yield a higher value for the younger worker than the older worker. Then comes the retired worker. Of course there is the 70 year old retiree and the 87 year old retiree. What arbitrary calculation of Human Life Value do you assign to the retired worker? Is the 70 year old some how more valuable than the 87 year old?

The Human Life Value works well in Life Insurance for calculating the need for Life Insurance. When you take the concept and move it out of the realm of Insurance/Economics and into other Social Sciences its is no longer an Economic number, it becomes a Political-Economy number.

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