Unhealthy healthcare: pay more, get less

Posted: 23 August 2016 in Uncategorized
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While I was finishing up the latest right-wing libertarian dystopian finance novel, I was also trying to figure out the dystopia that the U.S. healthcare system has become.

Clearly, for most Americans, the combination of private healthcare and private health insurance (and, now with Obamacare, public subsidies) is a nightmare. There is a glaring contradiction between healthy profits and the health of the U.S. population. Over the course of the next couple of weeks, I plan to explore various dimensions of that system.

To start with, consider how much of an outlier the United States is in terms of expenditures and outcomes compared to other countries. As Max Roser explains,

the US spends far more on health than any other country, yet the life expectancy of the American population is not longer but actually shorter than in other countries that spend far less.

If we look at the time trend for each country we first notice that all countries have followed an upward trajectory – the population lives increasingly longer as health expenditure increased. But again the US stands out as the the country is following a much flatter trajectory; gains in life expectancy from additional health spending in the U.S. were much smaller than in the other high-income countries, particularly since the mid-1980s.

This development led to a large inequality between the US and other rich countries: In the US health spending per capita is often more than three-times higher than in other rich countries, yet the populations of countries with much lower health spending than the US enjoy considerably longer lives. In the most extreme case we see that Americans spend 5-times more than Chileans, but the population of Chile actually lives longer than Americans.

Comments
  1. It would be interesting to chart where the overpricing occurs. I don’t have data, and work for a medical equipment company. The views expressed here are my own, not the company’s.

    I’ve a hunch that if you charted cost (inverse value for money) against the seriousness of the condition, the middle part of the curve where people get typical hospital treatments for well-understood dangerous conditions, that part of the curve would be moderately overpriced. It would be steeper than the UK or France, but wouldn’t account for the whole difference.

    Where US health spending seems to go off the rails is at either end of the severity scale: At the low end, paying for expensive and dubiously effective medication for people who are not ill. At the high end, sparing no expense of technology and skill to try and save the lives of the extremely unfortunate. So I expect the chart to show two peaks of expense at either end, low and high. As I say this is conjecture, I don’t have data.

    The first peak, overselling pharmaceuticals to people who are not ill, is little more than a market failure. The other peak, expensive high-end experimental procedures, is more ambivalent. It leads to an over-competitive “survival at all costs” mentality that favors private payment models and inequality, and makes insurers defensive. High-end medicine also provides the high-cost early-adopter market in which new procedures and equipment are developed that later become cost-effective and mainstream (and it pays the wages of people like me in the process, so I’m biased).

    So yes, I suspect there’s a lot to learn if one systematically compared not just the aggregate cost of healthcare but how it differs in segments: Over the counter drugs, routine hospital treatments, rare and new procedures. People around the Harvard Business School are already promoting the idea of focusing on the “routine” middle part and making it efficient separately from the others. I need to dig up references (sorry not my main job focus).

  2. […] past week, the U.S. healthcare system is a nightmare, at least for workers and their families. It costs more and provides less than in other countries. Employees are being forced to pay higher and higher fees (in the form of […]

  3. […] Unhealthy healthcare: pay more, get less by David F. Ruccio on occasional links and commentary. […]

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