The Incidental Economist has an interesting series of posts on health care spending in the U.S. (h/t Buzzcut). From country-to-country, pretty much without regard to the structure of the health care system, health expenditures rise consistently as a function of GDP. Except for the U.S. Even accounting for our greater GDP, we still spend substantially more on health care. (And our results aren’t notably better.) Apparently there is no single bad guy against whom we can deploy the torches and pitchforks.
Careful. I wouldn’t say “we don’t get better results for our money”. That is unclear.
What I find most interesting is that ethnicities in the US generally live longer in the US than their home countries. For example, women of Japanese descent live longer in the US than Japan. Did you see the recent news story about how Hispanics are living longer in the US than whites?
Anyway, I posted that article because I think it gets to the heart of the problem with US healthcare: third party payment. Most of our health care is pre-paid with pre-tax dollars. We have every incentive to go out and consume as much health care as we possibly can. And we don’t have the artificial limits to consumption that you would have with socialized medicine.
What was most interesting to me were the areas where we spent less than you would expect. For example, long term care, where people mostly pay out of pocket.
But there is substantial evidence that “more” health care does not mean “better” health care. In fact, it may in some cases be worse for the patient.
This article explains how doctors are incentivized toward more invasive and more expensive treatments:
http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande
I think we could do with some of those “artificial limits on consumption.”
I wouldn’t just blame it on doctors. I think patients are complicit as well.
Look, Americans want health insurance that totally insulates them from all cost, pays for anything and everything that they or their doctors want, and is as packed full of cutting edge technology as possible.
I’m as guilty as anyone. I’ve got a herniated disc in my back, and whenever it acts up I think about going to the doctor, getting an MRI, and maybe having surgery to “fix” it.
But the reality of back pain is that MRIs and surgery are not magic bullets, and surgery has as many risks as possible benefits.
After all, the third leading cost of death in the US is medical mistakes.
Doctors kill more people than booze does. Crazy, huh?
Anyway, that’s why HMOs worked so well at cost containment back in the 1990s. While it seemed to patients that HMOs were arbitrarily limiting care (and maybe they were), the care that they limited had higher costs than benefits. That’s why health care inflation stalled without any decrease in health care outcomes.
Buzzcut, how do you explain away that all the other industrialized nations have some sort of government-paid health care in order to come to the conclusion that the third-party system is the problem? You could also come to the conclusion that by spreading the costs among the whole population through taxes, it actually makes health care less expensive than the fragmented system we have in the United States.
I just heard the coats anti-ellsworth ad where in coats says that ellsworth voted to cut medicare by 500 billion or million or some odd number in support of forcing seniors into Obama’s government run health care program. I understood that by cutting some Medicare expenditures seniors would gain those services back through the health care program and would save more due to the savings resulting from the health care program. Anyway, the point is that coats claims that cutting medicare, a government run health care program (in the sense that the government decides what is covered, what is paid, who is eligible, but not in the sense that the government provides the care) will force the same seniors into the government run program passed by those evil Obamaites bent on socializing America. Does coats not see the fault of his argument? Or does he assume Hoosier elderly and their spawn are too stupid to understand both are government financed/regulated programs that reimburse providers a specified agreed to fee while allowing seniors the choice of doctor. Do these politicians really have no actual substance or real issues to talk about?
exhoosier, I think that if we had socialized medicine, there would have to be serious cost containment through rationing.
There would be the same pressure to spend that any third party payment system has.
I think that Americans expectations of their health care system are so high that if you had rationed care, there would be a second Revolution, one that would make the tea parties look like… real tea parties.
Seriously, those other developed nations that you cite have a lot more social cohesion than we do, being that they’re nation states and we’re not.
So really, I’m not necessarily disagreeing with you, but I think that you are being too simplistic. And you are not taking into account the views and expectations of your fellow Americans, who have come to expect to get as much medical care as they could possibly want without paying for any of it directly. That’s a bad combination, and not something that you transform easily.
With that said, I could totally see a state like Oregon, Minnesota, or Vermont implementing a socialized medicine system and having it work pretty well. States that are homogenous could probably pull it off, and it would be constitutional at the federal level.
BTW, there are few economies of scale in the provision of health care, so your assertion that pooling everyone would lower costs is not based in reality.
Buzzcut said,
BTW, there are few economies of scale in the provision of health care, so your assertion that pooling everyone would lower costs is not based in reality.
There are always economies of scales that can lower the cost of delivery of services. But most importantly, the larger the pool of insureds, the lower the percentages of administrative costs. That is based upon textbook insurance principles and demonstrated by the experiences of Medicare and large payor organizations.
Further, by giving the government monopsony purchasing power, healthcare providers would be faced with something they rarely forced to do. Lower costs.
Todd,
You are mistaken, but your mistake is a pretty common misperception.
We can see the fallacy if you take the ratio of health care spending per person under 65 and divide it by the health care spending per person over 65. People under 65 are largely covered by private, employer provided health insurance, and over 65 largely by Medicare, at least in the US.
Then take the same ratio for other countries, where there is socialized medicine for all.
You’ll find that, by that measure, the US is not an outlier. There are some countries with a lower ratio (UK) and some with a higher ratio (Japan).
So, despite your vaunted “lower administrative costs” for Medicare, and socialized medicine, and despite having that national base that you think provides economy of scale, Medicare overspends in other areas to more than make up for the administrative costs and economies of scale.
In fact, even in the US, Medicare spending varies by region. The spending variation in the US is often more than the spending variation between the US and other countries.
Finally, when it comes to economies of scale, you’re going to have to explain how there can be such in healthcare. I can see it with General Motors (machine tools are expensive, and the more cars you can make with a set of capital equipment, the cheaper the unit cost of the capital spread over the production run). I can’t with doctors, hospitals, etc. etc. etc.
Buzzcut,
I am not mistaken about anything. Your first point is undocumented and not relevant to the lower cost of administrating Medicare. I did not and do not address Medicare relative to its payment methodology and rated, all though in nearly all categories it pays less than private carriers. There are areas that Medicare overpays. But you will often find that these above-market rates are the result of political pressure from DME providers.
Costs for services, pharma, DME, hospital, post acute can be addressed by negotiation. They are irrelevant to adminisrative costs.
And of course Medicare differs by region. We have regional fiscal intermediaries and carriers that operate semi-autonomusly.
The argument that Medicare operates with dramatically lower administratve costs is ineluctable. No one, not even conservatives think tanks, have been able to demonstrate that Medicare is more efficient in administrating health benefits than private carriers.
With regard to your statement that economics of scale cannot be leveraged with larger organizations, you argument defies logic. You claim that manufacturers can spread the burden of capital costs over a greater stream of revenue but providers cannot is unsupportable. And the PHO clients and healthcare networks clients that I represented were deluded in their financial analysis.
Todd, you are missing the point. Even if Medicare pays less per procedure, even if its administrative costs are lower, why is spending different in different regions?
Because their are different cultures in different regions. Some regions have more specialists. Some have more medical facilities. Some have populations that want and demand more services.
It is Medicare recipients that drive Medicare costs. They demand a certain number of procdures, and THAT is what drives the cost, much more than what is actually paid to providers.