Everyday Economics — Sunday Chart of the Week

Chart of the Week: The Rare Disease Spending Dilemma

by Elaine Schwartz    •    Jul 20, 2014    •    430 Views    •    TIME TO READ: 1 minute

Our Sunday Chart of the Week

Since our chart looks at Medicaid spending on rare diseases, we better start with Medicaid.

It is complicated. Yes, Medicaid targets the poor and has federal and state funding. However, varying from state to state, it has 50 versions because individual states implement their own eligibility criteria.

All states, though, face disproportionately high spending for a small number or illnesses:

Opportunity Cost of Medicaid Spending on Rare Diseases

High spending takes us straight to opportunity cost. Spend more state Medicaid money on one item and the opportunity cost is less for something else.

For example, with the elderly population growing, long-term care will need more Medicaid money.

Opportunity cost and long-term care Medicaid spending

From: JAMA /Kaiser Family Foundation

And therein lies our dilemma and our bottom line: With scarcity an unavoidable economic principle, we not only need to decide how best to allocate our dollars within Medicaid but also between Medicaid and other state spending obligations. One Princeton economist suggests using the QALY.

Sources and more...Well worth 2 hours, these Econtalk podcasts from Austin Frakt and Jim Manzi clearly conveyed how tough it is to evaluate Medicaid. The source of my long-term care infographic, the JAMA /Kaiser Family Foundation series "Visualizing Health Care Policy" is a handy way to access heath care facts. In addition, this WSJ article had a good rare disease discussion.

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