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December 29, 2005

Health Spending In Different Countries

A lot of libertarian economists (Arnold Kling and the like) tend to argue that the high costs of care in America are a simple result of how much we pay for services. They, predictably, ascribe the sums to the awesome technologies and phenomenal operations we deploy. But it's more structural than that. In their (damn good) paper on the variance between US health spending and costs in other countries, Uwe Reinhardt, Peter Hussey, and Gerard Anderson explain:

Distribution of market power and prices. In a previous paper we argued that Americans pay much higher prices for the same health services than citizens in other countries pay. There are a number of reasons why this might be so.

First, the distribution of compensation in the United States is wider than in most of the other industrialized countries. The highly trained and highly talented health professionals employed in health care must be recruited from the same talent pool used by other industries offering high compensation, such as law and finance. Because health care is a labor-intensive industry, labor is one factor driving up the cost of producing health care in the United States.

Second, the highly fragmented organization of the financing of health care in the United States serves to allocate relatively greater market power to the supply side of the health system than to the demand side. As we have argued in previous papers, multiple purchasers of care allow U.S. prices to rise above the level attained in other industrialized countries that either endow the demand side of their health systems with strong, monopsonistic (single-buyer) market power (such as the Canadian provincial health plans) or allow multipayer systems to bargain collectively with the providers of health care, sometimes within government-set overall health care budgets (as, for example, in Germany).

None of that proves we don't use more services and better technologies. For that, you turn to "It's The Prices, Stupid," written by the same team:

A study by the McKinsey Global Institute followed that more in-depth approach. The research team, which was advised by a number of prominent health economists, based its analysis on four tracer diseases: diabetes, cholelithiasis (gall stones), breast cancer, and lung cancer.31 Using PPP-adjusted U.S. dollars as the common yardstick, the McKinsey researchers found that in the study year of 1990 Americans spent about $1,000 (66 percent) more per capita on health care than Germans did. The researchers estimated that Americans paid 40 percent more per capita than Germans did but received 15 percent fewer real health care resources. A similar comparison revealed that the U.S. system used about 30 percent more inputs per capita than was used in the British system and spent about 75 percent more per capita on higher prices.32

So, when tracking the utilization of resources for a variety of treatment-intensive diseases, we pay more and receive less than residents of other countries. The fiction that we pay more but receive proportionately greater amounts of care is just that: a fiction.

December 29, 2005 | Permalink


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Where are the trolls to repeat the supremacy of the American system in the face of all available evidence? This post has been up for whole minutes already.

Posted by: Allen K. | Dec 29, 2005 4:12:15 PM

If I used your reasoning, then we would have a federal government schools system. It would be cheaper, more fair, and easier to implement new material. Hint: there are non-monetary reasons why that doesn't happen and there are some non-monetary objections to a single-payer, government run healthcare system that you and yours fail to address. Until you do, you will have difficulty in convincing the voters.

Posted by: Fred Jones | Dec 29, 2005 4:29:24 PM

Um, Fred? I've already convinced the voters. We just have a governmental structure massively resistant to fundamental change. Also, your invocation of the education system makes no sense, and you posit arguments against single payer without mentioning a single one of them. So whip 'em out -- let's see your reasoned, emprical attack on single- and multi-payer systems.

I'm waiting...

Posted by: Ezra | Dec 29, 2005 4:35:21 PM

So, is this one of the polls that counts?

Ah yes, don't listen to the people, when given a clear question they don't know what the hell they think, even if they say they do.
Posted by: Ezra | Sep 29, 2005 6:20:15 PM

Posted by: Fred Jones | Dec 29, 2005 4:48:15 PM

Ezra, the invocation of the schools was an analogy. I thought you would get the picture. Well, let's do it manually:

The economic pros of a federal school system are efficiency, efficacy and expediency. However, they were designed (as was the entire federal government) to be decentralized because of the danger of government indoctrination and utilization for purposes other than the three R's. Instead, a system of independent school districts, foregoing efficiency and economy for individual control.

Why would anyone be surprised that some people have concerns about a large government bureaucracy running the healthcare industry?

Posted by: Fred Jones | Dec 29, 2005 4:59:19 PM

Man, Fred -- what a dishonest little cuss you are. That comment, like this one, was aimed at a conservative who was denying the results of this very same poll. Here's the whole comment, which you decided to decontextualize for the occasion:

First rule of opinion polls: don't expect them to represent anything remotely resembling physical reality.

This is true for any poll, on any subject.

Futures markets tend to do a much better job (something to do with putting your money where your mouth is), but even they fail every so often.

Posted by: Mastiff | Sep 29, 2005 6:11:11 PM

Ah yes, don't listen to the people, when given a clear question they don't know what the hell they think, even if they say they do.

Folks -- that's not an ambiguous poll. People think Canadians get better care than they do. They may be wrong, it may not translate into policy support, but you can't really argue with the belief.

Posted by: Ezra | Sep 29, 2005 6:20:15 PM

Man, usually you're just annoying, but when you're this dishonest, you're an embarassment.

Why don't you just leave this site already? Go bother someone else? If you're not going to contribute anything of intellectual substance or honesty, it's time for you to go elsewhere.

Posted by: Ezra | Dec 29, 2005 5:00:43 PM

I thought the same thing about you.

Your post was comparing healthcare systems of different countries, many of whom use single payer systems. Yet the polling report you cited to me as evidence that voters were ready for a single payer system mentioned nothing about that to the respondents. Earlier today you even complained about Rassmussen for their lack of polling skills yet you ignored this poll's shortcomings.

My intention is not to rag on you, but when you must drag out the whole post to show the nuance of your clear statements to prove that you really didn't say what you really said, it just seems "Kerry-ish".

Please accept my apologies.

Posted by: Fred Jones | Dec 29, 2005 5:17:51 PM

Bullshit. Read the polls on the page, that's why I linked you to it:

"Canada has a universal health care system run by the government that covers all people. Compared to Canada, do you think the overall health care system in the United States is better, worse or about the same?"

Better Worse Same Unsure
% % % %
10/03 29 37 23 11

Nothing ambiguous there. It even says government-run. And none of my points were ambiguous either. You lied about a comment I made and apparently can't scroll through web sites -- that's the whole of it.

As for "kerry-ish", you pulled a sarcastic statement (i.e, one that says the opposite of what it means) and are complaining that it requires context? You're the one who dug it up -- not me. And you didn't link to it, either, apparently hoping nobody would follow the time stamp. Reading it in context allows for no possible misinterpretation -- and you didn't misinterpret. You misdirected.

You were dishonest from start to finish, and you're continuing with the same misdirection and fatuous excuses now. I'm not going to ban you, as I don't like banning folks, but you are welcome to simply leave. After this performance, I've no respect for your intellectual honesty nor ability to make a worthwhile contribution to this site.

Posted by: Ezra | Dec 29, 2005 5:30:12 PM

Dear Ezra,

By your own post, you have shown that in this particular poll that 52% (29% better and 23% same) Americans believe that the Ameican system is at least the same or better than the Canadian system.

How is this any "proof" that the voters are clamoring for a single-payer healthcare system?

Posted by: Fred Jones | Dec 29, 2005 5:49:13 PM

Hey, and thanks for not banning me.

I will try not to disagree with you next time.

Posted by: Fred Jones | Dec 29, 2005 5:52:45 PM

'Use of services' seems a difficult thing to evaluate.

What we are hoping to by from health care, is of course health not stays in a hospital bed or visits to a doctor.

If, for example, I could recieve two treatments for my condition, one of which would magically cure me in seconds and cost $100,000 and another which could cure me after several weeks in a hospital and multiple visits to doctors and cost $50,000, the above metrics would imply that not only does the first scenario cost more, but also I am getting 'less' from it. I would argue that I was getting dramatically more from the first scenario.

Is this example at all relevant to real life? I don't know. The 'It's the Prices Stupid' contains a chart that shows the U.S. has dramatically more angioplasties than per 100,000 than the other nations listed. Angioplasties are generally much quicker to recover from than other forms of heart surgery.

I expect though that the U.S. pays more per capita than these other nations for just about every 'service' industry. The U.S. is richer than these nations, the fact that we spend more is not unlikely.

Posted by: Dave Justus | Dec 29, 2005 6:12:08 PM

I will try not to disagree with you next time.

Oh, cock right off, you sarcastic munt.

The U.S. is richer than these nations, the fact that we spend more is not unlikely.

Um, the phrase 'PPP-adjusted' is there for a reason.

Posted by: ahem | Dec 29, 2005 6:51:46 PM

Or, put a more honest way, that 60 percent think it better or equivalent. Of course, the highest number in the poll are those who think Canada better. In any case, I don't care if you disagree with me -- I care if you lie about my statements or dishonestly rip my words out of context, omit a link, and misrepresent my thoughts. Don't do it ever again.

Posted by: Ezra | Dec 29, 2005 6:52:24 PM

Dave: angioplasties are actually a rather poor treatment -- same with bypass surgeries. What you're talking about now are health outcomes, as we've already evaluated utilization of services. There's no argument that we overuse certain intense procedures (angio's being a great example), but that has a lot to do with the way we structure our medicinal payouts, not their utility. Our outcomes are generally worse than the rest of the world's, though it's tough to tell what's medical and what's lifestyle.

In any case, on angioplasties, read this Biz Week piece. David Cutler does a very good job explaining why we have intensity (rather than value) based medicine in his book, which i reviewed for the last issue of The Prospect. If you can find it (it's got Bolton on the cover), I go through some of that ground.

Posted by: Ezra | Dec 29, 2005 7:01:50 PM

I don't know that an article that states an admittedly extreme and minority opinion is good evidence that angioplasties are poor treatment.

I have a friend who had an angioplasty last summer. She was out of the hospital the next day and has been way way better ever since. Before she was basically unable to function and since she has been healthy and much happier.

Hardly a representative sample obviously, but i am pretty sure it wasn't a placebo effect.

I am sure that we practice unnecessary medicine. I have my doubts about chemo in many situations but I doubt you will sell a universal health care plan on the concept that you will stop giving people treatments deemed 'unnecessary' whether you have data to support such a decision or not.

If I was in bad shape, I would certainly be tempted by 100-1 odds.

Posted by: Dave Justus | Dec 29, 2005 9:01:26 PM

What Dave said. Besides, it's just human nature to want to do something active in an attempt to fix a problem. How many ads for cold medicine have you seen on TV lately? That cold is going to get better anyway.

I'm not sure that I agree that angioplasty is not a good procedure. Any time you look at a study you have to think about the end-point of the study. If you are looking at additional months of life as your end-point, angioplasty may not that well, but if you are looking at pain free months, angioplasty may do quite well. Honestly, I'm too lazy to go look it up, but you might want to read the following:

Also, well, you're young and healthy. Surprisingly even us old wrinkled up people like being alive. You would be surprised how much even the very sick and the very elderly prize even a few more weeks of pretty limited existence. It's hard to tell someone that it isn't cost effective to give them some form of treatment.

Posted by: J Bean | Dec 29, 2005 10:08:29 PM

Here's another in defense of angioplasty:

Posted by: J Bean | Dec 29, 2005 10:12:49 PM

Or, put a more honest way, that 60 percent think it better or equivalent.

A good point. However, what I was attempting to show is that your assetion that this poll was somehow this big mandate by the clamoring voters screaming for a big government single-payer system was simply wishful thinking on your part. It just isn't so.

Posted by: Fred Jones | Dec 29, 2005 10:20:18 PM

Obviously this is not a medical blog but what is known about angioplasties is the following:

In an acute infarct ( heart attack) they are the preferred therapy, often life saving.

In certain anatomical patterns of symptomatic coronary artery disease they are a less invasive, less painful and less costly form of treatment than is surgery or medication.

In asymptomatic coronary artery disease, they are of little value, are often overused and prone to all the malincentives discussed here and elsewhere.

Posted by: quietstorm | Dec 29, 2005 10:32:59 PM

The point, though, isn't that there are no constructive contexts for angioplasties, but simply that they're overprescribed -- something I don't think is in doubt. So we can argue about what's the right balance, but when evaluating the stats, it's not necessarily true that more of X procedure leads to better outcomes or is even a logical treatment structure.

Posted by: Ezra | Dec 29, 2005 10:56:10 PM

I completely agree and I think that is what you meant all along but the thread kind of veered toward a yay or nay evaluation of the procedure itself.

Posted by: quietstorm | Dec 29, 2005 11:33:27 PM

I have been very ill for the past 2 months and my parents had to take me to the neurologist. The Dr. gave me a prescription for 7 months one pill is 2.67 each here in the U.S.A but fortunatly my mommy family is from El Salvador and her aunt is a vet (did I mention I am a dog?) and got us the SAME pills in the SAME package for 62 cent a pill.

Posted by: Cairo | Dec 30, 2005 2:05:44 AM

Fred Jones, Let me guess, you have health insurance? I am one of the millions of Americans who doesn't. I am also one of the self employed/underemployed Americans who cannot possibley get a job that offers health care. I am a handy man who chrges $35 an hour. My overhead is about $10 an hour and my taxes are about $10 an hour - I have a hard time getting work sometimes (not often because I'm damn good at what I do) because I have competition that only charges $15 or less an hour because they choose not to pay taxes. There are no jobs in my field right now that offer benies like health insurance. When I'm sick I just get through it usually at work because if I don't work I don't eat and I get behind, with no hope of catching up in anything less than 3-4 months. And now thanks to the morons in office my almost four year old kid may well get cut off health care because I make to much fucking money. I would have a fucking job that I could live on if we had single pay health in thisd fucking country. Go screw....

Posted by: DuWayne | Dec 30, 2005 3:08:35 AM

I would have a fucking job that I could live on if we had single pay health in thisd fucking country.

*OR* if you had any other expense drop off the map such as free shelter you would do better. *OR* if you got into a field that pays better you would be in better shape. *OR* if you got more education.....etc. Any of these things would help your situation.

So, why aren't you upset at the doctors and medical field? Why should you need insurance to see a doctor for a cold? Why is a simple office visit $100+ ? Why does setting a broken arm cost $12,000? Why should you need insurance for non-life threatening issues?

Your anger should be directed at the greedy medical community. Instead, you are angry at those who don't want to pay these outrageous bills for you.

Posted by: Fred Jones | Dec 30, 2005 2:16:36 PM

Fred, you're such a troll, I shall this once break my never-respond-to-trolls rule just for you. Congratulations.

In words of one syllable: you do not get it.

In a free, capitalist society, the handyman and the doctor both should try to get what the market will bear. Would the handyman's customers be better off if he accepted $10 an hour? Sure. Is he under any obligation to do so, legal, ethical, or I'm-a-supergenius-troll-on-a-comments-board-al? Hell, no. However, in a working, regulated market (where everyone pays taxes instead of screwing the honest by cheating the government), $35 (actually, since we wiped out the $15-per incompetent cheaters, probably more like $50) is the market-clearing price for the handyman's services.

The problem is that the market for ob-gyn's is not a working market. It is broken, for any number of reasons, to some of which commenters here have alluded and about which good books are being written. As a result, an ob-gyn does not get a fair market-clearing price (my guess, there, might be $75) but instead something much closer to $300. There is no ethical or moral obligation for her not to take advantage of the broken market.

No, the ethical and moral onus is on those we employ to repair broken markets and solve collective-action problems: our government.

A single-payer Canadian-style system would solve many of its problems, as would a German-style collective-bargaining one. The handyman would find affordable healthcare, the ob-gyn would get her fair, market-clearing wage and even dogs would get fairly priced pills.

You, however, do not now and I fear will never understand this.

This failure is more than an annoyance to other commenters on this thread. In a world of 401ks, it probably will cost you a good retirement (unless you're the product of inherited wealth; it would explain a lot of your congenital blind spots). If you run your own money, let me guesstimate, off the top of my head: your real portfolio return over the last five years was 0 or worse. Yes?

Thought so.


Posted by: wcw | Dec 30, 2005 2:38:53 PM

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