A tale of two covariates: Why OWID and company are wrong about US healthcare
randomcriticalanalysis.com
randomcriticalanalysis.com
While driving at large is safe, there are a few high risk subsets of driving: speeding, drunk driving, and inclimate weather.
1) Healthcare spending has rapidly diminishing returns, not only comparing the US to Europe, but comparing countries within Europe (such as the Netherlands versus Spain).
2) The lower life expectancy in the US can be explained mostly by higher obesity. US states with similar obesity to European countries have similar life expectancy.
Every time I read about weight the dangers of an extra 10 lbs. seem to be pretty ambiguous. Though I'm totally going to drop that 10 lbs. I only had 2 donuts today.
From wikipedia: >The National Center for Health Statistics at the CDC showed that 39.6% of US adults age 20 and older were obese as of 2015-2016 (37.9% for men and 41.1% for women).[1] Obesity in an adult is defined as a BMI of 30 and above.
The Average american male is 5'10. A "normal healthy" BMI of 22 is 153 lbs. A BMI of 30 is 209 lbs. [2]
[1] https://en.wikipedia.org/wiki/Obesity_in_the_United_States [2] https://www.nhlbi.nih.gov/health/educational/lose_wt/BMI/bmi...
Suicides and obesity can also be caused by low income and drug abuse, so it sounds like the author may be seeing causation where correlation is more accurate.
This is an important distinction.
While obesity likely does reduce income somewhat (due to stereotypes), income can be considered an independent variable here.
Relatedly, we know that obesity is very hard to treat, while poverty is incredibly easy to treat on an individual level. The only reason we don't is because people see treatment of poverty as unfair, while treatment of obesity is not seen that way.
Obesity is prevalent in both the middle class and poor, with the middle class slightly leading the poor[1]
>39% of people ≤130% of the federal poverty line (FPL) are obese.
>40.8% of people 130 to 350% of the FPL are obese.
While individuals should be brought out of poverty for other reasons, it is not a cure-all for obesity. If anything can be implied by the correlation, it will make the problem worse, and the healthcare system should prepare for this.
Almost all of these things aren't really "Healthcare". I don't need to go to a Dr. to know I should lose 10 lbs. Maybe - maybe, maybe - a Dr. can help me quit heroin (frankly I doubt it) and certainly a Dr. can give me a flu shot.
Most of "healthcare" money has nothing to do with longevity. If my buddy had a heart attach you can spend $500,000 on treatment. Heck, you can give him a new heart. It's all great. Who would say no? Not me. (He's my buddy after all).
At population scale though that does nothing for longevity. At population scale you'd be better off setting the speed limit to 40mph. Taxing alcohol to high heaven. Playing tons of old Erol Flynn movies (To encourage people to get into sword fights instead of gun fights.)
None of that stuff is sexy though. Even the non-crazy version of that list is un-sexy. It probably doesn't cost a lot of money but it royally pisses off people. People also vote. They don't like it if you try to run their lives for them - even if you would technically do a better job then those idiots do. Except for me. And I'm going to lose that 10 lbs. really soon.
Socialized medicine and other forms of "planned state healthcare" seem to do a better job promoting lifestyle changes and preventative medicine, which reduces the costs of these externalities.
And many more similar questions.
Was that really controversial?
Maybe try actually reading it though?
The question that arises for me from the article is: what should society shift spending towards/away from healthcare to receive the most life expectancy gains? Fight obesity, transport safety, drugs? Is any areas of those amicable to be solved by spending?
Donu you also suggest that high levels of health care spending are more effective than we might expect since the wealth that allows more spending also come with higher obesity and larger overdose risks?
Is there one of your charts that indicates which countries have seen the best returns from higher levels of health care spending?
Your first sentence is "In the popular telling, there is a strong and reasonably constant relationship between health spending and life expectancy.". My comment was that I am not aware of this being the popular telling. But instead from what I can tell most people agree that the US doesn't deliver better results despite much higher spending.
Otherwise I think you have dug up a good and useful amount of data although I think some of your conclusions are debatable. This is probably to be expected if you analyze such a complex system.
That is to say, a socialized healthcare system with the same spending is unlikely to provide any improvements in life expectancy.
That's probably not true, because as the author pointed out, Obesity is considered an "external factor" but many countries with socialized medicine have programs to tackle these issues. Americans lack "preventive maintenance" programs that are a given in Europe. I think we all agree throwing money at the problem will not lead to enhanced outcomes, but to extrapolate that to mean that socialized medicine won't lead to a different outcome is not correct.
A classic example is physical rehab. In the US, getting insurers to pay for physical therapy is difficult and often capped. This in turn reduces long term mobility and leads to issues down the road. In Europe, it's far easier to get physical therapy leading to better long term quality of life.
https://i1.wp.com/randomcriticalanalysis.com/wp-content/uplo...
These programs are often implemented by insurers with already healthy populations, such as large corporations. Hardly the populations that medicare supports. It's not surprising that Microsoft has good support for smoking cessation (and spends lots of $$$), but a mother of two working multiple jobs has no such access or funding.
> Further, actual medical evidence suggests medicine doesn't have good treatments for obesity
Depends on how you define "medicine". Are societal programs like healthy school lunches and subsidized healthy meals part of public health plans? Europe would agree, the US would disagree. Part of the issue is the US scope of interest isn't holistic.
The high average caloric consumption in the US is likely substantially explained by our income levels. Humans are not genetically adapted to living in an age of cheap, plentiful, readily available, and highly palatable food. Above and beyond high average income levels and particularly affordable food prices, countries also differ in a number of other dimensions. For example, it's quite clear the US escaped the malthusian trap long before most of Europe because of the ample amount of fertile land settlers had at their disposal. Americans were taller and fatter than Europeans in Europe long before the development of the welfare state. This is also verifiable. It's quite possible such differences lingering effects on dietary preferences, serving sizes, and other variables that impact food consumption.
Further, there are clearly large spatial differences in the United States and they're unlikely to be well explained by the sorts of policy you mentioned. Parts of the US settled by people that migrated from periphery of the UK (Scotland, N. Ireland, Wales, and Northern England) suffer from these issues much more than most Americans and more than can be explained by observables like income, education, and the like. This residual also seems to play out in the UK today
https://www.bmj.com/content/342/bmj.d508.full.pdf+html
I've done my own analysis and found this maps well to genetic population structure (not yet published), but whether this is genetic or some sort of subtle cultural phenomenon is a different question.
While I'm quite skeptical that existing non-medical programs of that sort have significant effects (evidence?) or even vary nearly as much as you seem to believe (US affluence has implications for purchasing power of all households, even allowing for somewhat higher inqequality, and size of welfare state often underestimated), I think you need to explain how it is that these higher income, higher spending countries with larger welfare states achieve results no better (probably somewhat worse) than much poorer countries.
https://i1.wp.com/randomcriticalanalysis.com/wp-content/uplo...
Also, you should probably also be able to explain why it is that socioeconomic gaps in life expectancy and other health outcomes are probably at least as large in Finland, Norway, and the like.
If those other factors were corrected, the comparison could be made fairly. Maybe it would turn out to be good enough, and maybe it would not.
> That is to say, a socialized healthcare system with the same spending is unlikely to provide any improvements in life expectancy.
Few countries actually have a wholly socialized healthcare _system._ The UK and Canada do, but it's a completely different stories in other developed countries. In France the health insurance system is mostly socialized, while delivery (doctors, pharmacies, hospitals ...) is mostly though not entirely private. In Switzerland and Germany, if I remember correctly, insurers are private but operating similarly to utilities in the US, i.e. within strict government guidelines.
https://randomcriticalanalysis.com/2018/11/19/why-everything...
https://randomcriticalanalysis.com/2019/12/03/no-means-no-th...
Also while I agree that 100% of a GDP is a reasonable approximation of an upper limit in practice, that's not necessarily strictly true either. GDP measures domestic production, not the income available to residents. The income available to residents can certainly be much less than GDP (e.g., Ireland, Luxembourg, etc), so the reverse can be true in principle too.
It isn't just that we spend more... if that was the only issue, then everything would be fine because we would be obtaining what we paid for.
But since it's not an efficient free market... the fact that we spend more only increases the urgency that we reform the system... since those inefficiencies become so huge in a system that accounts for such a big portion of GDP.
So while RCA's analysis might be perfectly correct... unless he also proves that the healthcare market is at least as efficient as a free market system... then we still need to reform it.
https://www.ama-assn.org/press-center/press-releases/ama-fun...
Most patients are able to shop on price. The majority of insurers now provide web sites where their members can obtain estimates of out-of-pocket expenses for common treatments at network providers. There are still some gaps and room for improvement but most people are able to do price comparisons for non-emergency care if they want to.
https://randomcriticalanalysis.com/2018/11/19/why-everything...
He argues very convincingly that high income leads to high health care spending very directly. Not only is the US not an outlier in terms of inefficiency, but he can't find any compelling examples of countries significantly improving on health care spending predicted by actual household income. (Other countries have better health outcomes, but not significantly less spending relative to income.) So while common sense indicates that there's lots of room to reform the system, analysis of data from around the world indicates that no one's been able to do much to avoid spending roughly a fixed percent of actual income on health care.
> The most successful cost containment regime in the OECD was probably the UK (NHS), which was perhaps an accident of history. They rationed particularly aggressively and managed to hold costs substantially below what we would expect for a country of its wealth for a few more years than usual.
> However, people (voters) ultimately wouldn’t stand for it, so this rationing effort was radically reduced (budgets expanded). Today they are much closer to expected spending levels.
a) many (perhaps the majority, don't have time to source now) of the bankruptcies in the US are due to medical issues and spending, and at least 75% IIRC of those going bankrupt from medical spending HAD insurance. This is practically unheard of outside the US.
b) The rate of growth of US spending on healthcare, especially government spending on healthcare, far outstrips the rate of growth of money / wages / any other measure of something that can pay for it.
c) The same medicines by the same manufacturers and often the same production lines (not just equivalents or generics, which are much cheaper still!) often cost 10-100 times more in the US than they do in other places. The DaraPrim and QuestCor cases are famous for being outliers, but they are only outliers in the speed of price increase, not in the fact that prices in the US (but not outside the US) keep going up irrespective of costs.
It was not until I lived in new york that I heard gainfully employed people say things like "I have to stitch my cuts my self because I cannot afford medical care"; neither could I understand George Carlin's "dirty doctor" joke.
So perhaps the overall spending/GDP analysis is not direct proof, but the US medical and healthcare system is very, very sick. Karl Deninger at the https://market-ticker.org has been documenting these atrocities very dilligently since 2007.
The vast majority of medical bankruptcies have nothing to do with the cost of medical care, but the disruption to career/income flow imposed by illness. This is clearly a problem in other countries as well.
https://www.nejm.org/doi/pdf/10.1056/NEJMp1716604
> The rate of growth of US spending on healthcare....far outstrips the rate of growth of money
This is true in other OECD countries too. Further, this doesn't mean what you think it does. As our productivity rises, the share spent on consumption categories with high productivity growth (increasingly low relative prices) can decline, which frees up spending to be spent on health and other areas subject to less productivity growth (the majority of the expenditure growth corresponds to rising real health consumption tho)
https://randomcriticalanalysis.com/2019/12/03/no-means-no-th...
> The same medicines by the same manufacturers and often the same production lines ... often cost 10-100 times more in the US than they do in other places
One might be able to find outliers of this sort, but that clearly doesn't reflect anything close to central tendencies (mean, median, mode, etc), especially when compared (accurately) to other high-income countries. Richer countries, like the US, generally pay relatively higher prices.
The US may pay a somewhat higher premium, but there are tradeoffs here vis-a-vis incentivizing innovation in the long run. It's also not widely appreciated that the US pays markedly less for generics....
They are making an empirical argument that pricing in the US is not actually out of line when compared to the correct base. This would imply that the US system is about as efficient as all others. And considering the differences between vastly different systems are almost negligible, it is also an argument that these systems are rather efficient. Because if there were easy wins with any specific measures, you would expect some systems to improve relative to others with skill or just luck.
https://i2.wp.com/randomcriticalanalysis.com/wp-content/uplo...
Drawing that curved line is crucial for making the US appear to be on-trend. If you simply use a linear correlation — which seems more reasonable from first principles — you reproduce the US as an outlier, albeit with a slightly smaller z-score. We do see a good fit on the log-log plot (but anything fits a log-log plot) but there remains at least the open question of why the proportion of healthcare expenditures should increase with absolute household disposable income. Even if this is a global trend, it is still clearly not a sustainable one.
2, there’s no necessary reason why increasing health share with rising real income is unsustainable. We can and have increased share spent on health while increasing real expenditures across the board.
3. I touch on some reasons why this may curve up and then eventually flatten out.
4. No, not everything fits on log-log slopes and us is very close to the trend.
https://randomcriticalanalysis.com/2019/12/03/no-means-no-th...
2. Asymptotic growth towards 100% certainly sounds unsustainable.
3. You mention Baumol’s cost disease and the proportion of income spent on services, which is not so bad.
4. Log-log overfitting is a well-known phenomenon and a low deviation (particularly at the edge of the graph) doesn’t make it go away.
5. This claim, tucked between historical spending and nurse salaries, underpins much of the thesis, but is curiously unsubstantiated:
>Nor do we tend to find results consistent with this in wages, profits, and other proxies for (or presumed causes of) such issues in these sectors. On the contrary, the reliable statistics for healthcare (at least) shows prices have fallen relative to average nominal income and that most of the increase is therefore explained by rising real consumption (quantities per capita).
Healthcare prices are kind of the whole point here. The lower third of this country can’t afford essential care. Not only that, but we’ve seen the prices, and they’re ridiculous.
So if you have data about healthcare prices not being out of order, that seems a lot more relevant— and less cherry-picked — than the history of household spending on food consumption.
https://i0.wp.com/randomcriticalanalysis.com/wp-content/uplo...
> 2. Asymptotic growth towards 100% certainly sounds unsustainable.
"Sounds" isn't an argument and I'm explicitly arguing the slope is likely to flatten, eventually. The point the income elasticity of health expenditure can be (is) well north of one and we can (and do) consume more of everything else at the same time.
https://randomcriticalanalysis.com/2019/12/03/no-means-no-th...
> Log-log overfitting
That isn't a thing. You can argue this specification minimizes the residuals at the high end if you want, but it's very likely to the correct modeling decision, it's bog standard in economics, and the US residual ~= 0 (certainly not notably high). It's also pretty obvious health expenditures are increasing in % terms and that failing to log-transform results in particularly poor model performance with constant slope out of sample.
https://i0.wp.com/randomcriticalanalysis.com/wp-content/uplo...
> So if you have data about healthcare prices not being out of order, that seems a lot more relevant
https://randomcriticalanalysis.com/2018/01/06/its-not-the-pr...
https://randomcriticalanalysis.com/2017/07/27/health-care-pr...
> The lower third of this country can’t afford essential care.
The lower third of the country consumes approximately the same amount of care as the rich, as in other high-income countries, and the socioeconomic gaps in other countries are likely comparable to even larger (depending on how measured).
https://randomcriticalanalysis.com/2017/04/15/some-useful-da...
https://twitter.com/RCAFDM/status/1203715358152167424
To the extent there are real and ultimately consequential issues with affordability for some small segment of our population, these aren't likely to be explained by aggregate costs or prices so much as by narrow details that we can tweak, i.e., without requiring massive change, should the political desire exist to do so.
> seems a lot more relevant— and less cherry-picked — than the history of household spending on food consumption.
Pardon me, but I was engaging with someone that was arguing this expenditure growth implied starvation and you're making very similar (wrong) arguments. Whether you appreciate it or not, the role of general increases in productivity, the source of real income growth in the long run, and differences in the rate of productivity growth in different sectors, which we are clearly reflected in prices, is very much on point. Food production is simply a way to make this concrete for people that struggle with abstractions like price indexes and relative prices.
No, but yes.
>> So if you have data about healthcare prices not being out of order, that seems a lot more relevant
> https://randomcriticalanalysis.com/2018/01/06/its-not-the-pr....
> It is the consensus view amongst researchers that have published long-run analyses:
>https://www.cms.gov/research-statistics-data-and-systems/sta...
So I think it's interesting here that you make no mention of the explanation for HCE increases provided in the "consensus view" link.
>In health care research, the impact of medical technology on health care cost increases has always been a great unknown. Yet 81 percent of the leading health economists agreed with the statement, “The primary reason for the increase in the health sector’s share of GDP over the past 30 years is technological change in medicine”.1Growing attention to the role of technological change in driving growth in health spending, and to the costs and benefits associated with new medical innovation reflects an acknowledgement of the long-term dilemma posed by historically unsustainable rates of growth in medical costs, combined with an increasing consensus that technological advance is a major factor in driving this growth. The current acceleration in health spending growth - following the quiescent period accompanying the spread of managed care - brings troubling implications for the long-term viability of our current system of financing and provision of health services. Understanding the magnitude of technology’s historical contribution to growth in costs is vital to the analysis of the future path of medical spending. Of course, in most areas of the economy a rapid pace of technological advance is regarded as a good thing. That this is not the case for medical care reflects a second point of consensus. Throughout much of history, imperfections in medical care markets have failed to provide incentives for the cost-effective provision of medical services, encouraging the development and diffusion of innovations beyond the point that would prevail under competitive market conditions. Low out-of-pocket costs for medical care due to insurance coverage, combined with patients’ lack of full information on the services they consume encourage the provision of medical care to a point where the marginal benefit of treatment to the patient is small relative to its marginal cost.
You can hand-wave this as "increased consumption", if you want, but it is:
- recognized as an anomaly
- considered a point of concern
- likely to lead to cost reductions if fixed
In other words, this is precisely the sort of phenomenon you are arguing does not exist in US healthcare!
I've highlighted the role of technological change on my blog before, but technological change is a major proximate cause. The root cause is income growth. Countries are chasing these technological advancements in direct proportion to their income and the degree to which they can afford them (as prices fall, countries with lower real incomes are more able to afford technologies the US and other rich countries had long before, but the frontier has long since moved on....). If you throw year fixed-effects or a time trend into analysis the coefficient on time (a proxy for tech chg) is very modest and the income effects are virtually identical.
Would someone care to explain how this works? What's the factor causing divergence between the two? Is it the proportion of GDP being returned to overseas investors? Or a mis-counting which includes GDP of US multinationals produced by workers overseas?
In short, yes, I believe globalization and, specifically, multinational corporations (affiliates of foreign owned corporations) are the primary cause. However, in regression terms, this has less to do with net income flows into the US than net income flows out of several small high GDP/person countries. The US is a very large, very rich country whereas many of these countries are much smaller so it doesn't take much to have outsize affects on them. Even if 100% of this ultimately accrues to the benefit of US households, (which I don't think is quite accurate) the effect in % terms is vastly different.
Although some of this can be directly observed as primary income flows in the current year national accounts (dividends, rent, etc), some of it shows up as gross savings or disposable income in the foreign affliates, i.e., it's equivalent to retained earnings. Over the past decade or two non-financial corporate savings have increased massively and these savings are largely uncorrelated with domestic (capital) investment, i.e., it's almost entirely financial and it's largely leaving these countries in the form of net lending. These things also influence the calculation of (GDP) PPPs and cause other headaches.
Of course, there are also other reasons why GDP misleads. For example, Luxembourg has a very large non-resident workforce. Something like 50% of their workers live in neighboring countries (varies year to year), meaning ~50% of aggregate employee compensation goes home (cross border) to Germany and the like. Then there are petro-states like Norway whose income flows are inherently temporary (finite amount of natural resources to extract) and highly volatile, meaning they can't consume out of their measured GDP like most other countries. They need to practice massive consumption smoothing if they don't want their standard of living to crash in the not too distant future.
Long story short, GDP was never intended to be an indicator of material wellbeing and the household perspective (consumption, disposable income) are better measured and more reliable. One might try to throw a bunch of variables in to counteract the many issues imposed by GDP as a proxy for the household perspective, but why bother?
~ RCA (sorry for typos, grammatical errors, etc... limited time to comment and would rather focus more effort on blog)
https://randomcriticalanalysis.com/2019/12/03/no-means-no-th...
Some people may prefer a regime that offers more insulation (socialization) from the true costs (generally overstated IMO), but that's something of a different problem with different potential solutions than the popular notion that US prices are inexplicably high or outcomes inexplicably bad where we're (presumably) likely to win-win-win if only we copy the regimes found elsewhere.
For example I'm sure there are people in the UK who have turned to the private sector for treatment and in doing so incurred debts which resulted in bankruptcy. But that's such an exceptional unusual concept I'd be surprised if it occurred more than a handful of times in any given year.
While I can believe there is somewhat higher variance in the US system in terms of bills/prices/etc, which sometimes affects people meaningfully, it's also worth pointing out that out of pocket costs aren't unusually high in the United States. I mean, we might have a slightly larger problem with these, but that's much more of an implementation detail in terms of who pays and how much than the sort of top-down policy proposals some people seem to believe are necessary (because they've badly misdiagnosed the situation or are ideologically blinkered)
No one particularly thinks that artificial knees are life extending.