• We’re not good at cost-control

    David Brooks claimed earlier this week, with respect to cost controls in health care, that:

    The fact is, there is no dispositive empirical proof about which method is best — the centralized technocratic one or the decentralized market-based one. Politicians wave studies, but they’re really just reflecting their overall worldviews.

    Many, including, Ezra KleinJonathan Cohn, and Jon Chait disagree. So do I.

    It’s worth remembering this chart at times like this:

    That’s health care spending as a percent of GDP. Let’s own that for pretty much every one of the OECD countries, the slope is positive. But it’s not hard to pick out the US. We are, by far, the worst at controlling costs.

    I don’t think these data are just “reflecting my worldview”. I think one of these countries really just doesn’t look like the others.

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    • Does anyone know of any research that looks at how much of the difference in health costs between the U.S. and other countries could be attributed to higher rates of violence and/or substance abuse or diet?

    • You can’t seriously be considering the current US health care system as “market based.”

      The US health care system is market based for Lasik eye surgery and most plastic surgery. And those things have gotten cheaper.

      • That is because they are completely elective. Think of them as the equivalent of tattoos. Both parties can walk away if they are not happy with the price. Most other medical care does not meet this standard. A patient usually has a symptom for which they are seeking treatment, or a diagnosis (think diabetes or hypertension) that has few symptoms but negative consequences if not treated.

        Steve

        • The care of hypertension is a great example of something that is mostly elective. Except in the rare case of malignant hypertension, hypertension is treated because it will cause problems at a much later date. The patient could easily forego treatment to shop around for a better deal if the price was outlandishly high. But, many patients do pay several dollars per day to treat hypertension when it can easily be treated for pennies per day. Why? Because the cost is majority covered by third party payment which removes the desire of the consumer to make the most economically effective choice.

          If insurance covered Lasik, you can be assured it would not be getting less expensive. The difference is not elective vs not elective. Most medical care is elective or semi-elective. The difference is payment mechanism.

    • In partial answer to George’s question:

      It’s The Prices, Stupid: Why The United States Is So Different From Other Countries
      Gerard F. Anderson, Uwe E. Reinhardt, Peter S. Hussey and Varduhi Petrosyan
      Health Affairs, 22, no. 3 (2003): 89-105
      The data show that the United States spends more on health care than any other country. However, on most measures of health services use, the United States is below the OECD median. These facts suggest that the difference in spending is caused mostly by higher prices for health care goods and services in the United States.

      • Of course it’s the prices. But that merely begs the question. The main purported benefit of a market-based system is that competition and choice result in lower prices. One can argue that the US system is not REALLY a market-based system, but there is no denying that there is far more competition and choice than one finds elsewhere in the OECD. So why are prices (or price growth) higher in the US?

    • Charts like these obscure complicated and nuanced realities. (1) America is a very wealthy country with high-tech healthcare, so you could argue that it makes sense that we would spend more money as a percentage of GDP on healthcare than other countries. You could probably produce charts showing that we spend more as a percentage of GDP on computers than any other country, or video games, or shoes, or whatever. (It all depends on which industry the left is trying to annex this week.) (2) If healthcare represents this much of US GDP, it would be absolutely absurd to try to cut it down. You’re talking about lopping off a huge chunk of the economy. Only out-of-touch and economically illiterate politicians would look at the size of an industry and demand that we somehow shrink it. You’re talking about millions of people losing their jobs. (3) America spends more on R&D than any other country. Some of our major research hospitals (such as MD Anderson, the Mayo Clinic, St. Jude’s, etc.) spend more money on cancer research each year than the entire country of Canada. American pharmacuetical companies invent most of world’s new drugs. American healthcare device companies design and manufacture most of the world’s new healthcare devices – such as proscetic limbs, pacemakers, artifical organs, etc. These other countries essentially free-load on our R&D, i.e., their healthcare spending is lower BECAUSE we spend so much. (4) Healthcare is much more broadly defined here than in other countries because we are so much wealthier. Psychological care, cognitive therapy, psych meds, physical therapy, sports medicine, dental care, cosmetic surgery, addiction treatment, fertility treatment, hair transplants, cosmetic dental care (e.g. braces) are considered part of healthcare spending in the USA. Much of this is non-existent in other countries though. In Britain they barely have dental care – not to mention things like therapy or addiction treatment. Some services, such as fertility treatment, are available privately in Britain, but because they are outside the NHS that usually are not included in the official statistics. So this chart is a big fat lie in many ways. It completely ignores that fact that Americans have a much broader definition of healthcare. Anyone who peddles this stuff without mentioning that Americans spend a great deal of money on quasi-medical services that are practically non-existent in other industrialized countries is engaging in propaganda.

      • You are arguing the causes of the symptom. The symptom is the chart we are looking at. The point to note is that for various reasons we really don’t want to see this symptom. That fraction of GDP allocated to healthcare is not producing any real measurable difference in the health outputs of the US vs. other OECD countries and it is contributing to at least one major problem, namely debt.

    • The American line would be even higher if it didn’t ration health services based on cost. As far as I understand it, the other countries on the chart cover nearly 100% of their residents while the number of U.S. uninsured are something in excess of 45 million (about 15% of population) with untold millions who cannot afford the co-pays and other limitations of their medical insurance.

    • The most interesting thing about this chart is that health care spending in the U. S. appears to have started wildly diverging from other countries at exactly the time Ronald Reagan took office. It leveled off for the entirety of the Clinton years, and then shot up again just as George W. Bush was taking over. I don’t know if that is a coincidence, or not, but it certainly seems like it would be worth asking why.

      • It leveled off because the Republican congress tried to cut Medicare. Congress also implemented SGR, new payment models, etc to try to cut the cost of care.

    • Comments above point to possible flaws in the data. Could the author please provide the source? (Or would it be a vain hope that the source might be illuminating on limitations?)