High US health care spending explained by its high material standard of living
randomcriticalanalysis.wordpress.com
randomcriticalanalysis.wordpress.com
It also neglects that for its massively higher spend 10% of Americans aren't covered and therefore don't receive preventative care yielding massively higher final costs, and it doesn't take into account the WHO ranks the US system as 31st in the world dramatically under all the socialized players.
[Edit] as I suspected [1] indicates a full 20% of spend is wasted mostly on profits and administrative costs. That should be taken off the top.
IMO this is a case of "figures don't lie, liars figure" but without the malicious intent.
[1] https://www.cms.gov/CCIIO/Resources/Files/Downloads/mlr-repo...
The WHO ranks the US low because 62.5% of their score is a measure of inequality. Only 37.5% of their score is related to actual health care measures (health outcomes and patient satisfaction). The US scores #1 on patient satisfaction.
http://visual.ons.gov.uk/how-does-uk-healthcare-spending-com...
> While the USA outspent the UK on healthcare (£6,311 and £2,777 per person2 respectively) in 2014, average life expectancy at birth in the USA was 78.8, compared with 81.4 in the UK.
> Despite spending, by far, the largest amount on healthcare, the USA was among the 10 OECD countries with the lowest life expectancy.
The fact that health care and health outcomes are minimally correlated is well known; see RAND, Oregon, and lots of non-RCT studies that generally fail to find much correlation (e.g. this one, which made the rounds recently https://jamanetwork.com/journals/jama/article-abstract/25135... ). I'm not sure what the relevance of that is to this article, however.
Also don't forget about how the US's socialized system - Medicare makes the whole system really bizarre by setting defacto price controls and encouraging over capacity of hospital beds and under capacity of primary care.
Profits provides the impetus for many of the medical advances invented here in the US, and many of these advances find their way to other countries. Because of profits, the US is essentially the medical R&D powerhouse for the world and every human in the world benefits. We help make more care options available to more people are lower prices sooner.
In a way, the US is providing socialized medical care over time beyond its borders and for more people instead of having it just be socialized in the present.
Until I hear solutions that acknowledge this very important detail, I'm going to remain skeptical of all comparisons with countries with socialized medicine and attempts to take the US in that direction. I learned long ago to be skeptical of anyone criticizing any system where they can't point out the value of that system versus the others they prefer.
Making the US healthcare system function like the socialized medical systems seen in Europe risks destroying the profit motive and therefore jeopardizes improvements in medical care quality, speed, options, etc. for everyone everywhere.
I far prefer a system where some lose out in the present in favor of a system where far fewer people lose out in the future. This is essentially the trolley problem. We can provide care for X people in the US who don't have care in the present or we can provide care for several times X people in the US and elsewhere in the world in the future.
[1] https://www.forbes.com/sites/matthewherper/2011/03/23/the-mo...
(Presently) Consequent is not the same thing as nessisary.
The specialist I currently see is considered the best doctor in the world for my illness because he's the foremost researcher in the world studying it. He's French. He's in the US because the system here provides him with the resources to study it and come up with better treatments.
Think how you'd feel if you were underinsured or uninsured? There'd be no hope at all. In any socialized system I'd be surprised if you didn't have access to the best doctors in the system anyways, as would anyone else in the country regardless of their employment status or net worth.
For every one person like you who is able to take advantage and be covered, how many more are left hopeless and isolated because they are deemed unsuitable for coverage due to their net worth -- effectively the luck of the draw? What of them? I have no interest in taking away your access. I want to make sure everyone else can get it too without fear of financial ruin.
FWIW, at least in Canada, if the government is unable to get you taken care of at home they'll pay for your coverage abroad which I would can only hope would happen to you if somehow your doctor moved back to France if the system were socialized.
The point more broadly is that of Tommy Douglas [1] the guy who brought the Canadian system to being: "I felt that no boy should have to depend either for his leg or his life upon the ability of his parents to raise enough money to bring a first-class surgeon to his bedside."
Insofar as the best doctors are concerned, they are pretty much all here in the US. Everyone who matters specializing in my illness is in the US. When I lived abroad, I saw a doctor specializing in my illness and the level of knowledge they had relative to the specialists I've seen in the US was laughable. The only medical care I've had abroad (I've lived on three different continents in my life) that was comparable cost as much as healthcare in the US.
There may be a few countries that are exceptions in terms of the socialized medical care available, but I would be surprised if any were as genetically heterogenous as the US or had a population even 1/5 of the US.
One of the main problems in the US is that there isn't a clear way to compare health insurance policies. You can't exactly go out and say, I want health insurance that covers the 90% of the most likely issues I'd most likely be afflicted with for one price or choose one that covers 99.99% of the things for another price. That lack of comparability and enforcement of payout is what lacks. If these features existed in the market, it would be possible to find insurance at $50 a month all the way to $500 a month. Transparency and comparability would make the market function much better. Something that covers 90% of the things that could go wrong is already way way way better than whatever the richest could afford 50 years ago.
Your point about Canada is only worthwhile if another country exists where you want to be treated. If the US socialized medical care and ended up with a system comparable to Canada, all of a sudden that option wouldn't be all that useful because you've lost the best market in the world for providing care that Canada can't.
The US subsidizes everyone research on behalf of all people in other countries. Maybe the rest of the world can find it in their heart to help those in the US that lack healthcare instead of lecturing us on how our system is broken when it already does so much for medical progress for the entirety of humanity.
Something like 95% of all drugs developed are developed in the US. I went to a university where many of my colleagues went on to join companies that were creating the most advanced medical textiles available, such as artificial aortas and whatnot.
What if you had a disease that left you unable to do that? Physically, mentally? You can't work, you don't know people, now what? Why should society deem that life not worthy of saving because of an illness and a bank account balance? It's not civilized. Why should these people depend on the charity of a few individuals and not distribute that burden across society as a minimum guarantee?
>> One of the main problems in the US is that there isn't a clear way to compare health insurance policies.
IMO it doesn't make sense to. You can't know what kind of disease you'll get or when. How can you choose to exclude cover for a broken leg? Are you planning on walking extra carefully, or buying special boots? And why settle for a 90% plan to prop up the health insurance industry when you can give everyone the 100% deal?
>> Your point about Canada is only worthwhile if another country exists where you want to be treated.
The way I see it, it goes one of two ways. (1) everyone has socialized medicine, the doctors are equally distributed but you can still find them [no passionate doctor worth their salt will just pack their bags up rather than treat everyone] or (2) one or more countries exist where they congregate due to lack of socialized medicine, and you're free to travel there if you find the home country offerings unsuitable.
Also, many of the best hospitals anywhere in the world are in Germany, Hong Kong, Singapore, etc.
>> The US subsidizes everyone research on behalf of all people in other countries.
The US government subsidizes the research heavily (as do foreign countries) it's not re-invested proceeds. [1]
The cost of a gallbladder surgery does not go around and get funnelled back into research and innovation; it is padding the pockets of coders (an almost unheard of profession in much of the rest of the world), administrators and doctors who are busy paying off student debts the size of most doctors in the western world's mortgages.
Drug costs are completely out of control and the bankrupting effect this has on the most vulnerable members of a community is completely outrageous and out of touch with what a reasonable society should be expected to do. The high price of monoclonal antibodies and other treatments is no excuse for the blatant market failure that occurs here.
To further expand on this: Healthcare is a price inelastic good. The current situation in the US is one of abject market failure as what should be considered an essential service is made available to only those able to pay for it (or willing to bankrupt their families). The worst instances of this are in cases of cancer, where life-extending therapies (maybe only a few months, maybe many years, and a tiny pay-off of a long future) are only available for tens to hundreds of thousands of dollars. So vulnerable families pay it - middle class families that thought they were doing everything right, sell or re-mortgage the family house in the hope of keeping their loved one around forever. Then they die. Then the hardship begins. This is, in my considered opinion, criminal.
Bottom line: I firmly believe there is no excuse for the wastage and high costs that the American system provides. Healthcare should be about innovation; and yes we need to fund it. But in the US as in other countries, significant funding is provided by governments for basic research which goes on to be capitalised by private companies, when this information should be free. Bottom line- this article, and indeed your comment, is a post hoc rationalisation of high healthcare charges, with little recognition of the true drivers, and it does not need to be this way
These seem to be academic publications and according to this Quora post [1], it's primarily driven by American universities and research institutes. It is not entirely clear to me how profits within the US would be a major factor here: I would have thought that NIH spending is more important in this context. While it's sort of true that NIH spending is more relevant for the R in medical R&D and industry spending for the D in R&D, the Forbes article seems to be only about peer-reviewed published research.
[1] https://www.quora.com/What-countries-have-lead-the-world-in-...
In any event, if you want to make such a claim, it's up to you to support it. I was merely pointing out that your argument is fairly incomplete as it stands. It doesn't even address the question whether it may be due to economic clustering effects or a superior bioscience infrastructure in America; after all, if selling drugs in the US were so profitable and that was the cause of research, that would also spark research in other countries.
The D in R&D dwarfs the R.
Fire: it's to everyones' benefit if a persons' house catches fire to prevent burning down the neighborhood.
Education: all society benefits from more educated youth.
Prison: all society benefits from remediation of people with criminal tendencies (not punishment, btw, but preventing it from happening again)
Police: everyone benefits from lower crime rates.
Health: everyone benefits when people who are sick are treated to prevent infecting those around them, and people tend not to have a choice in whether they get sick, it's something that happens to them beyond their control.
It's strange to me that people tend to draw the line just before they get to health. They see the benefits to society of everything else on the list being socialized (most do, anyways) but they don't map it to health.
There's no risk of demolishing a profit motive. Canadian doctors get paid upwards of $300,000 per year. Nobody there is suffering. Patents ensure that even when realistically negotiated, drug companies can secure a healthy profit for novel drugs. Drug reasearch often funded by public money.
It's also strange to me that your argument for not covering many Americans is that doing so hurts people beyond the border. You should look out for the broader good but why not look out for yourself and your neighbors first? As much as I'm a globalist I don't think it's worth sacrificing American lives to the nebulous goal of trickle-down healthcare to people outside America. Can you cite some evidence of the effectiveness? I'm not an American, by the way, and I'm all in favor of exporting surplus healthcare, and I feel like you should make sure you've got your house in order first.
Canada doesn't have a big drug sector to the best of my knowledge though playing along, plenty of countries with socialized medicine do:
Denmark has Novo Nordisk.
Germany has Boeringer Ingelheim and Bayer.
Switzerland has Roche.
Astra/Zeneca is Swedish/British.
GlaxoSmithKlein is British.
Sanofi is French.
Novartis is Swiss.
Actually, of the top 10 by revenue, only two (Johnson and Johnson, and Pfizer, #1 and #3 respectively) are American. All the rest are European. Assuming based on the references that development has more to do with funding, I'm willing to bet the EU spends an awful lot.
https://www.theatlantic.com/magazine/archive/2009/09/how-ame...
Essentially, it's a mess of perverse incentives that are unintended side effects of heavy regulation.
I have no problem with the idea of healthcare expenditures increasing proportionally to GDP because it's a luxury good. This is logical. I'll pay more to protect my life than widgets.
But I don't see the connection between this and the thesis:
>Now, to be clear, my position is not that we ought to be spending as much as we spend. My position is that the issues we face are very similar to the issues faced in Europe and other prosperous countries (and are generally similar to patterns many decades earlier). They are largely differences in degree, not kind. Our large apparent cost differences mostly originate from our significantly higher material standard of living. The long term increases found in the United States and other developed countries are generally a product of ever increasing material living conditions and varying levels of productivity in different economic sectors (healthcare being labor intensive and relatively high skilled at that). Despite the fact that all developed countries allocate a large and increasing share of their consumption expenditures on health care these these richer countries, including the United States, still spend more on other forms of consumption.
That sounds to me like the cost of our healthcare is ultimately up to the market, but that's not a thesis to fight for, as it's always a fact.
By using end result economic data like GPD or AIC to compare healthcare costs the analysis ignores the changing cost of inputs. Those rising costs should be linked to changes in business conditions.
Healthcare costs have been rising faster than inflation. And they have been rising faster than the material standard of living in the US. There are structural problems.
That's not circular. It's merely pointing to an underlying cause that is probably not specific to the health care system.
The underlying cause being high material standard of living? Because that is why it's circular logic to me.
I still have a problem with using the end economic result data.
It _automatically_ assumes that price increases are called for based on the market.
If all firms in an industry can raise prices at the micro level, then no firm stands out at the macro level, which means macro analysis is kind of useless.
An analysis of healthcare companies COGS and profit margins would be more illuminating.
This empirical regularity can be explained by the fact that as countries get rich they attach increasing value to human life _and_ they experience diminishing marginal utility with most other consumption expenditures (an extra year of life, even discounted, can be worth a lot more than buying yet another bauble, a few more sqft in housing, etc)
"Profits" as such are unlikely to explain more than a tiny fraction of this as (1) for-profit sector isn't that large in the health care space (2) their cost profile is generally very similar to government and non-profit alternatives (3) the patterns generally have relatively little to do with true price increases/inflation. Further, even removing profit per se from the equation does not mean that problems of this sort necessarily disappear. Principal-agent problems abound, even a physician on state payroll doesn't necessarily have their incentives well aligned with the interests of their patients.
I've talked to a few U.S. citizens that worked abroad who said healthcare in European countries is universally available but the demand outstrips the supply causing longer wait times to get treated than in the U.S. and that they prefer the U.S. system. These are of course people who have good jobs in the U.S. with company provided coverage. Is that true?
Is there any system that can both cover everyone without making healthcare worse for people who already have good coverage?
1) Public Medicare, the publicly funded system available to everybody. 2) Private insurance, paid for by the individual and tailored to their needs.
To pay for the public system everybody pays a Medicare levy as part of their income tax. The levy is coarsely means tested. If you have private insurance then this levy is reduced somewhat.
The real critical differentiation between the public (Medicare) and private offerings are that any services deemed as elective in nature (ie, non life threatening conditions such as surgeries to treat injuries, etc) can be completed by the public system but there is a wait list which can often be quite long. If you have private insurance then you can get in very quickly with the surgeon you want.
Having private in no way restricts your usage of the public system so there is no downside to having private except that it costs more. There are also fee structures in place to encourage people to take up private when they're younger and the saving on the medicare levy.
As I said, it's far from perfect, but the 2 tiers offer a high level of customized cover for people willing and able to afford it while offering an acceptable level of cover for those who can't.
Here's the post: http://blogmaverick.com/2017/03/08/some-thoughts-on-fixing-o...
From anecdotal conversations I know there are many people who purchase a new pair of glasses every year just because the system is basically set up to encourage this which smells like very wasteful consumption to me. I don't need a pair of glasses every year. I have gone through 3 sets of glasses in 15 years.
If I wanted to I could opt to exclude optical from my cover and save some money every month but then I'd worry about what happens if I lose my glasses or sit on them and I'd end up out of pocket so I keep paying for optical cover I don't use and feel like a sucker every year for not taking advantage of subsidized glasses.
Same thing with trips to dentist I know people who insist on general dental (unnecessary cleaning etc) because they are subsidized so they "need to take advantage to get their money's worth".
My insurer has gone as far as cold calling me last year "I notice you haven't been claiming any of these benefits, would you like to review your policy."
For example, I know that if my wife becomes pregnant or if there are complications we won't be hit with thousands or tens of thousands in medical bills on leaving the hospital.
However on the flip side, it's very difficult to find a decent NHS dentist where we live, so we'll pay about £300-600 in dental checkups or dental work per annum.
Just by having the NHS provide dental or any medical care there is downward pricing pressure on private competitors so however flawed a system like the NHS is it certainly has a very important pricing function even if you choose to go completely private.
Everyone is covered by the national health insurance. No more worries about getting hit with a huge health care bill. Children have a lot of free stuff - most health care and dental (braces are an exception). I can change my doctor a couple times a year if I want. Some things just make sense: For example, the government sends me a letter to remind me to get cancer screenings every 3 years (I'm female) - and this stuff isn't as possible with the fragmented system in the states.
Now, the downsides are things like longer wait times. This does suck, for sure. Some of this is simply being cost-effective, I'm sure. But other cost effective things work out: For example, if you need a home nurse, you get one covered up to 6 times a day. Free, because it is cheaper than a nursing home. Dental can tend to be expensive and folks have some odd ways of going about this. For example, I've heard of a group of Norwegian dentists in... Poland?... that cater to Norwegians. The cost is often cheaper, even when factoring in the travel costs.
There is a private health care system. The government still pays their normal rate to the private provider and the patient pays the difference. Some folks use this to go around the waiting times and I'm guessing this option would seem more similar to the American system for folks with insurance - though I'm not sure it is ever like the nearly on-demand medical care one comes to expect in the states. The system is vastly better for those with poor coverage or those that have good coverage but can't afford to use it.
Hopefully, if the US does a single-payer system, they take a look at some of the downsides and try some things to lessen them.
Whether we want to ration care by ability to pay or by another means, such as severity of illness, care will have to be rationed -- and the degree to which it must be rationed is inversely related to what percentage of people are covered by it.
So of course well-off folks will perceive a system with a greater percentage of people covered and with care rationed in a way other than 'ability to pay' as being worse than a capitalist system -- they have to wait longer because they're standing in line alongside folks who, in the healthcare system they are used to, could not afford to be standing in line with them at all.
The question is whether that drawback is worth providing access to care to folks who otherwise would not be able to access it.
For example, here in Italy I can look for: public sector, private public-affiliated sector and full private sector.
When I needed a full low abdomen echography I first contacted the public sector, they told me they had a wait list of 2.5months for that common exam, but I could call a private public-affiliated clinic and do it there (they also gave me suggestions on which clinics were available). Cost ~23euros (not all the exams have this waiting time, when I needed just physiotherapy or to see a psychologist I had <7 days wait time)
Called three private public-affiliated clinics. These are clinics where all the staff is private and is managed like a normal company, but if they do an exam and you have the paper from your GP they can fill a form and get a part payed from the public sector (in a sort of exchange for helping reducing the wait time) In all of three they could visit me in 2-4 days, paying just ~30e.
Lastly there was the full private clinic, those are not subsidized in any way but they have a very short list and if you want you can make a private insurance that cover basically whatever exams you will ever need from them. They could visit me in the next 2 hours for just ~80e.
Note I was not in a emergency, if that was the case I could just run to the hospital and they would visit me instantly without making me pay anything (you can also run to the hospital without an ongoing emergency... they usually don't make you pay nothing anyway and do the exams but make you wait hours until they have no more urgent cases). Note also that if you have a serious condition (cancer like or anything with high risk of fatality) you will get ahead of any list and be visited asap, no money asked.
And Italy is considered one of those "long list countries" in EUW.
(Personally I feel "real" / objective health is more important than the subjective "customer satisfaction" aspect of health care, but yea, I guess that's politics.)
1. E.g. http://www.nationmaster.com/country-info/compare/Sweden/Unit...
This can be all over the place, depending on what you look at (GP appointments, specialist appointments, emergency and urgent care, elective surgeries, etc.) [1]. In general, the US outperforms some countries, but never all of them, and this is not taking into account that people without access to healthcare may suffer de facto infinite waiting times or that in many countries, people seek out their doctors far more frequently than in the US [2]. "Europe" is definitely not a homogeneous blob (just think of, say, France vs. Bulgaria) and there are great variations between even the affluent EU member states; it is pretty much impossible to generalize.
What we do know is that the US has a fairly low physician density for a developed country [3], though that's not the only factor that goes into waiting times.
[1] Google will show you a fairly large number of studies, but few that cover more than a handful or so of countries and/or more than a few metrics, so it's difficult to get a truly comprehensive overview.
[2] https://www.statista.com/statistics/236589/number-of-doctor-...
[3] http://gamapserver.who.int/gho/interactive_charts/health_wor...
The article doesn't disagree that you could get similar health outcomes for less money. The claim of the article is that as people become richer, they spend more money on marginally beneficial health care.
(Or sometimes just consumer goods masquerading as health care, e.g. Oxycontin and similar drugs, used by our leisure class use to mask their ennui. https://www.commentarymagazine.com/articles/our-miserable-21... )
Here's a link to the embedded image of text that explains this (which you can also find in the 3rd paragraph or so): https://randomcriticalanalysis.files.wordpress.com/2016/09/s...
The people who get shafted are the middle-class or working class people who are stuck with contracting gigs or shitty employers who face financial ruin if they get sick. Your average truck driver, for example, is far more likely to die from preventable heart ailments due to the nature of the job and the inability to access medical care, even with insurance. That's a big reason why CVS Doc in the Box and Urgent care is a thing.
(Unfortunately that's an embedded image of text, so I can't quote it. But here's a link: https://randomcriticalanalysis.files.wordpress.com/2016/09/s... )
https://randomcriticalanalysis.files.wordpress.com/2014/11/a...
2) It's not sensible to run regressions when observations consist of US and EU-(14|28) alone. Small n and these all of these common EU aggregations would be MUCH poorer than the US.
3) US states have a fiscal, political, legal, social, and other union much beyond that of EU member states in the EU. I would very much anticipate larger spillover effects between US states than between EU member states for this reason (as in, MS's standard of care will be much more like MA's than Slovakia will be like Norway), not to mention gains from greater economic union, transfers, and the like.
3) Perfectly comparable data do not exist to make direct comparisons across different levels of analysis feasible.
4) I actually did run some regressions on US states and found: (i) states vary quite substantially in their expenditure levels and (ii) consumption (PCE) to be an exceptionally stronger predictor than GDP, personal income, and some other economic indicators. DC spends more than twice as much as Utah (and if you don't like DC as an observations, similar results are found for MA)
https://randomcriticalanalysis.files.wordpress.com/2016/09/r...
Even so, even if I were to try to equate these measures, I would not except the slope within countries like this to match the cross country slope due to some of the aforementioned spillovers.
5) I actually did analyze outcomes between states and even counties.
https://randomcriticalanalysis.wordpress.com/2016/11/06/us-l...
6) Tho the US has greater geographic heterogeneity in outcomes than most of individual EU countries due to its size, greater historic diversity, and more, it's worth pointing out that health systems do not produce equal outcomes within countries. As I pointed out in the above link, the northern areas of England and southern parts of Scotland perform quite terribly.
https://randomcriticalanalysis.files.wordpress.com/2016/11/s...
These regions, btw, are where a large fraction of people in the US came from (especially those that settled in and around Appalachia). There is a whole literature indicating that "deep history" predicts economic and social outcomes many centuries later.....
This has nothing to do with US being expensive. It's a broken system.