Arnold Kling

Evaluating Health Care Systems

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How can you tell whether one country's health care system works better than another? In this essay (read the whole thing), I talk about how not to make the comparison.


Overall, I think that it is a mistake to define the health care problem as the need to reduce the ratio of expenditures to life-expectancy gains. I think that the policy implications of such a definition are mostly unacceptable.

UPDATE: Patri Friedman writes,


(note: for this analysis I am assuming the viewpoint of an economist designing a nationwide health care system and ignoring the problems with public, centralized solutions.)

...The money we spend on a hopeless cancer patient is money we don’t spend on people with full lives ahead of them. Improving our spending to health ratio is improving the efficiency with which we produce health care - how can that be a bad goal?


I think that Patri is attacking a straw man here (something which my original piece also might be charged with). I did not argue against trying to minimize the cost of achieving a given degree of longevity. I simply meant that we should not look at longevity and total spending side-by-side as indicators of efficiency. Implicitly, that approach treats all health care spending that is not longevity-related as waste, and that is wrong. Sorry if that was not clear.


For Discussion. Is there a straightforward way to compare the efficiency of different countries' health care systems?


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TRACKBACKS (3 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/114
The author at Catallarchy in a related article titled Economics doesn’t apply to health care writes:
    Over at EconLog, Arnold Kling cites his recent TCS essay where it looks like he’s arguing that economic efficiency should not apply to the health care industry. He notices that other OECD countries spend less and achieve the same or better life expecta... [Tracked on August 31, 2004 5:22 PM]
COMMENTS (10 to date)
nathan b writes:

If other countries dropped drug price controls, drug companies could recoup costs from a wider base, and per capita costs would start to equalize. The lost innovation and human costs of waiting for rationed care found in other countries should also be accounted for.

Walker writes:

No, there isn't. There is no ultimate authority. It will be interesting to see what Arnold comes up with in the subsequent essay.

Life expectancy is only an indicator of the overall level of health in a society. Like other indicators it's limitations should be kept in mind. Of course, a similar essay could have been written about GDP/capita, inflation, or just about any other social/economic indicator.

Not only that but life expectancy, etc. are only indicators of societal health, of which the quality of the health care system is one factor among many.

Nonetheless, the U.S. spends twice as much on health care as Japan, while Japanese citizens live 4-5 years longer (most other indicators reveal similarly stark differences). However imperfect life expectancy is as an indicator, I would like to see someone explain away a difference that large.

It seems a reasonable to conclude that the Japanese are healthier than Americans, whether this is due to their respective health care systems or other factors is something to consider.

Scott McGerik writes:

Can the discrepancy in life expectancy versus health care expenditure be explained by examining health care expenditure and life expectancy in the USA with regards to economic class and ethnicity? Is life expectancy the same for all economic classes and ethnic group in this country? What about health care expenditures?

Scott McGerik writes:

And do Americans exercise as much or eat as well as the Japanese? Could our behaviors be wiping out any gains in life expectancy acquired through high health care expenditures?

Patri Friedman writes:

What's the trackback link? I don't see it on the page. Anyway, I responded with a blog entry:

http://catallarchy.net/blog/archives/2004/08/31/economics-doesnt-apply-to-health-care/

Brad Hutchings writes:

If you hadn't so thoroughly dismantled all the happiness research, you could conduct a survey on whether people are happy with their healthcare.

Lawrance George Lux writes:

The straight-forward way to compare health care systems is compare the number of Sick days taken by Worker and Student. It is not very efficient given cultural preference to skip Work and School.

A second method is to compare the number of follow-up visits past the initial request for medical service. Efficiency can be determined by this factor of speed of cure, which can also be computed in Money saved.

Medical throughness can also be determined by the number of diagnostic procedures undertaken per visit--American medical practice does three times that necessary.

The amount of Drugs proscribed can also be used to test the health of both Patients and medical practice--Americans are probably over-drugged by at least two-thirds. American medical practice used vast over-kill at huge expense. Most Chemotheropy could use half the dosage, over half the Period, if foreign rates are to be believed.
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We cannot do anything about the ballooning health care bill, until We think to limit the Payscale of health care Providers. Doctors need to be told they are Federal Employees, after they have received a quarter million per year of Federal funds. Same for Hospitals and Clinics--though set at $5 million. Drug companies need be told their royalties have a set financial limit when the Patent is issued. This is the only manner to control this Cost, consider me the ruthless, non-compassionate non-conservative on this Issue. I really worry that I am getting Draconian in my old age! lgl

Walker writes:

And do Americans exercise as much or eat as well as the Japanese? Could our behaviors be wiping out any gains in life expectancy acquired through high health care expenditures?

Though I believe the Japanese tend to smoke more, I would have no disagreement with the idea that the Japanese lifestyle is healthier than the American lifestyle, and that this goes a long way to explain the numbers. It is an open (and perhaps unresolvable) question to what extent superior Japanese health stats are due to more effective health care services or due to lifestyle choices.

On the other hand, taking a broader view of health care, it is also arguable that Americans face a less healthy set of lifestyle choices than those in Europe or Japan. For example, opportunities for exercise in daily life are fewer in the U.S. where transport by automobile is usually the only feasible option.

Patri Friedman writes:

Arnold - thanks for the clarification. I certainly agree with you that lifespan is an overly simplistic metric (as exemplified by the example of your father). I think it was the 5-year cancer survivor example that led me astray. It sounded like you were rejecting the idea that we should be more willing to spend money on those who have longer to live.

In addition, your discussion of medical uncertainty sounded like you were saying that we should not use doctor's estimates of outcomes for policy, just because they are uncertain. Your rhetorical question "Would you want to deny care to someone..." seemed to imply that "yes" was a bad answer. I think its crucial to remember that choosing not to deny care to someone w/ a 49% of survival is choosing to deny care to someone else.

I'll be interested to read your future thoughts.

mrkmyr writes:

In order to compare health care systems, you would first have to have a philosophical agreement on the role of society allocating health care to its citizens. It also requires a system to value things like life experience, life expectancy, pain, loss of economic production, and life itself.

There will always be rationing of health care. If nothing else, on ability to pay in dollars.

Rational public health care discussions are difficult, because no one wants to admit that we put a price on people's lives. It is something society does constantly, but it comes into sharp focus when you have the opportunity to save a known individual's life and choose not to. Usually we choose to harm unknown individuals, such as with air pollution. Who knows which kid's lung disease comes from living near the freeway? hard to say.

This willingness to harm undefined individuals allows people to guiltlessly let the current system keep running- and causing harm and death to some without the ability to pay, who otherwise would be cured in a universal health care system.

I agree with Walker. You do attack a straw man. Krugman and others use life expectancy and infant mortality rates, not because they are the only important numbers, or they are the only goal of a good health care system, but because they generally reflect the quality of health care system, and they are easily measured across nations.

Its hard to argue under any measure that the US health system is superior to the state run systems of other nations, unless, of course, you value the lives of wealthy more than the poor.

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