Arnold Kling  

Data Request: Health Care Spending

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Overspending and Obesity... Evaluating Health Care Systems...


Gerard F. Anderson, Uwe E. Reinhardt, Peter S. Hussey, and Varduhi Petrosyan write
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the United States spends more on health care than any of the other OECD countries spend, without providing more services than the other countries do. This suggests that the difference in spending is mostly attributable to higher prices of goods and services.

They use a variety of data sources to make their case. However, one seemingly-obvious source is overlooked: real vs. nominal spending in the national income accounts. If they're right that we get no more health care services, then in real terms, the ratio of health care spending in the U.S. ought to be the same as that in other OECD countries.

The data I have seen is on nominal shares of health care in GDP. Their paper quotes data, and I found updated information here. If I had the data on real shares, then it would be relatively easy to say how much of the difference in nominal shares is due to prices and how much is due to real quantities--at least as measured in the national income accounts. My guess is that this estimate would only reinforce the conclusions in the paper, but it would be a useful data point.

For Discussion. Can anyone point me to or send me a copy of similar data on real spending shares?


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COMMENTS (5 to date)
ed day writes:

Seems to me that it makes little difference if both numerator and denominator are in nominal terms, then shares wouldn't change using real numbers for both. It might make a difference if the price of health care were rising here more rapidly than abroad and more rapidly than the general price level in the U.S.

However, lets say that prices for health care are rising faster than the general price level in the US and abroad and the shares in GDP are the same, as seems to be the case. Then we might observe health care rationing in lower demand for health care in the US and greater queing for health care abroad. This seems to be the case.

A factor not included in these sorts of studies is that a healthier life-style may be evident abroad that would show up, say, in lower population weight that would lead to fewer pathologies in the population. It is clear that fewer teenagers have access to a car, must walk more, and perhaps smoke less.

Just my 2 cents.

Mike Moran writes:

Calculation of real shares should not be done with NIPA statistics. The chain-weighted statistics now used to represent real GDP were not designed for such calculations. This relatively new technique to calculate real GDP provides for accurate growth rates, but the accuracy comes at a cost -- the inability to calculate shares of the various components. A number of papers published by economists at Commerce have cautioned against the use of ratio analysis with chain-weighted statistics.

Tom writes:

I can't answer your question, but I have a suggestion. I think the right way to look at the problem is captured in a post by Tyler Cown at Marginal Revolution:
http://www.marginalrevolution.com/marginalrevolution/2004/04/where_is_health.html
Citing and quoting from William Lewis's The Power of Productivity, he summarizes:

In other words, Americans pay more but get better health care in return. We die sooner because we eat too much and exercise too little, among other facts.

Lawrance George Lux writes:

Arnold,
A sneaky, round-the-back approach would be to find out who are the major Economists on Stats for the FDA. They would not release to ordinary citizens, but would to an ex-Fannie Mie Economist doing a relationship study.

The United States probably falls below most of the major nations in Real spending, due to the lack of Preventive Care, pre-Emergency Room care, and low-end medical treatments. lgl

dsquared writes:

More or less completely impossible. The bundle of services bought in the various countries is different, therefore the PPP calculation is indeterminate. This is a general problem with PPP figures, but in the case of something as specific as healthcare, it's not even nearly right.

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