Arnold Kling  

Where is My Free Lunch?

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Mark Thoma writes,


It seems to me that there is far too much discussion of cutting services, and not enough about how to control costs without affecting services (e.g., using the government's purchasing power to reduce the amount the government pays for drugs, reducing the cost of insurance companies fighting over who pays bills, etc.). Costs that can be cut without reducing services need to come first, then, when those efforts are exhausted, we can think about the services themselves. But that doesn't seem to be how we are proceeding.

In other words, let's find the free lunch first, before we have to pay for lunch. Here are my remarks:

1. Note the distinction between cost reduction and cost shifting. For example, if government pays less for drugs, that shifts the costs of the drugs to someone else. It does not make drug development or drug delivery more efficient. I am not saying that it would be a bad idea to shift costs, but it is not really a free lunch.

2. On the issue of fighting over insurance bills, be careful what you wish for. If you want health care spending to go down, then you probably want the insurance companies to be tough, not soft.

3. Remember that every consumer's cost is some health provider's income. This will make the politics of beating down costs rather difficult. It may be worth trying, but public choice theory predicts that the doctors will generally win these battles.

4. For public choice and other reasons, when you want institutions to be efficient, market discipline generally works better than government regulation. How many examples can you cite of inefficient firms or markets that were whipped into shape by government intervention?

5. Any idea for holding down costs should be subject to rigorous testing. I worry that wonks will promote an idea as cost-reducing without ever having to prove their thesis. Romneycare was supposed to hold down costs by reducing emergency-room visits. However, emergency-room visits did not decline and Massachusetts health care spending has risen by more than the national average. Should this not be counted as a failure, at least on the cost front?

6. Remember that the Rand experiment found that patient cost sharing helped to reduce spending. That was a rigorous test.

7. When all is said and done, and as many inefficiencies have been wrung out of the system as possible, the main issue will remain that there are many procedures with high costs and low benefits. The process for deciding when to undertake such procedures is the crux of the heatlh care issue.


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COMMENTS (44 to date)
Doug writes:

I can tell you that the immediate push-back you're going to get on this front is the European counter-example. This is why so many leftists believe socialized healthcare is a magic bullet: Europe spends less per capita and has higher life expectancies.

If socialized healthcare fails to produce these expected results in America it will always be the fault of the healthcare system not being socialist enough, not it being too socialist.

Of course European healthcare really is far worse than American healthcare. The fallacy is assuming that the only input to life expectancy is healthcare quality. In reality the elephant in the room is that for many reasons, a combination of genetic and behavioral, minorities have far lower life expectancies regardless of healthcare level. Comparing like to like (Swedish-American life expectancy to Swedish life expectancy) America comes out ahead.

Even mentioning this fact in "polite company" will immediately lead to you being ostracized and labeled a racist.

Foobarista writes:

These "we could do better with process magic" arguments always boil down to "if only we get the right mix of process and bureaucracy, everything will be great".

But at the end of the day, the only processes that focuses attention on and reduce costs in the longer term are those where those directly involved have personal incentives in reducing costs, either by minimizing out-of-pocket expenditures or by wanting to capture market share with lower prices. In other words, a market.

You can come up with procedures that mimic some elements of a market (ie, commission/incentive structures, etc), but government is particularly ill-suited for this sort of thing.

Dave writes:

You could use the government's purchasing power to justify centralization in any industry. Why don't we just centralize the production of laptops? Certainly the US government has more purchasing power than Dell, HP, etc. If we centralized raising chickens, think of how much the government could drive down the cost of feed. If the centralization of production is always justified by "purchasing power" you'll always come to the conclusion that everything should be centralized, and you'll always miss the innovation and cost cutting pressures that arise from market competition.

quadrupole writes:

Why not?

Most private companies produce the same or more with reduced resources every quarter?

David N. Welton writes:

"3. Remember that every consumer's cost is some health provider's income."

I'm not sure that's quite accurate. Perhaps "every consumer's cost is income for someone in the health industry", which includes the insurance companies, not just doctors and nurses and actual providers of health care.

@Doug: I live in "socialist" Europe. Italy to be precise, which isn't known for being run in the most efficient way, and, you know what? The health care system has its defects, but it works pretty well. And I experience a *great deal* less bureaucracy that in dealing with health care in the US. That's right, less bureaucracy in Italy than in the United States. And less headaches and worry as well. Doctors' offices don't have nice furniture here, and things tend to be a bit more spartan, that's for sure - it's no "magic bullet". But if you do have the money, you can certainly buy cushier private care here.

There are a lot of things where I'm not very happy about the state's intrusion into affairs I don't believe are its concern here in Italy, certainly, but health care here is way less stressful than in the US. Here, since I pay for it out of my taxes (it's not "free"), I am free to work independently rather than being forced to work for a corporation as I would in the states, and to me that personal freedom is much more valuable than some sort of weird "freedom" to go without health care.

Chris Koresko writes:

Mark Thoma: "using the government's purchasing power to reduce the amount the government pays for drugs..."

Arnold Kling: "...if government pays less for drugs, that shifts the costs of the drugs to someone else."

I find it startling to see a real economist miss this critical point. In fact, it seems to me that it's worse than Arnold says: the U.S. pays for roughly half of all global drug development, if memory serves. If the U.S. follows the European example of using political leverage to reduce its spending, that will likely have a fairly severe impact on the rate of drug development. Since drugs are among the most cost-effective means of treating disease, the result would likely be greater overall medical cost worldwide. This is not a good idea.

Doug: Europe spends less per capita and has higher life expectancies.

Both of these statements are fact, but it's probably fallacious to conclude from them that European medicine is more efficient than U.S. medicine, and not only because the U.S. effectively subsidizes it. Measures of life expectancy are not always directly comparable between countries (e.g., the U.S. and France count live births differently if I understand correctly). And life expectancy is a function of many other factors than the quality or availability of medicine. It would make more sense to compare the treatment outcomes of severe injury and disease, rather than life expectancy. On that metric, U.S. medicine looks superior to its European counterpart.

Lord writes:

1. If the government pays less than someone else has to pay more? Really? You have made far, far too many assumptions that are likely false.

2. If you want healthcare spending to fall, you most likely don't want insurance to exist at all.

3. So why has public choice theory failed in other countries? Better institutions?

4. Natural monopolies and utilities. Due to all the regulation, healthcare is already largely a monopoly.

5. Not a success on the cost front anyway, though perhaps on satisfaction. One should probably assume costs would have risen faster due to its large urban population being a service industry. It would be interesting to look at cost increases vs procedure increases.

6. We already do more cost sharing than most other countries so that doesn't seem particularly effective.

7. Yes. We really need to price procedures by benefit, not cost, or only accept new procedures that are more cost effective than existing treatments.

Philo writes:

An excellent post. The primary concern about "health care costs" should be about *social* cost, not just about cost *to government*. The government's shifting some costs to the private sector will do no good overall.

The best bet for really reducing health care costs is to reduce government regulation (especially licensure). But that's not likely, for political reasons.

MikeP writes:

Romneycare was supposed to hold down costs by reducing emergency-room visits. However, emergency-room visits did not decline and Massachusetts health care spending has risen by more than the national average.

There are two blindingly obvious points that prove as idiots the people who promote this idea.

First, subsidizing more people to get insurance increases demand for existing health provider supply and drives up costs for everyone. Duh.

Second, what the hospital bill says notwithstanding, the emergency room is pretty much the cheapest place to provide care. The providers are already there. If it isn't an emergency, you might find yourself waiting a long time. But otherwise you will use underutilized resources. If non-emergency ER care truly is expensive for the hospital, the hospital is free to open an urgent care center next door. The fact that most hospitals don't do so tells the story: that they get to charge exorbitant ER prices far above actual marginal costs to more people in the hopes that some will pay.

Indeed, the failure of Romneycare to lower costs is completely predictable. It should be counted as a failure.

Milton Recht writes:

Cutting costs is a good idea if one remembers that all government services and programs have intended economic and social benefits and that there is usually a more direct and lower cost way to achieve the same end goal.

Milton Friedman set out one way. He was in favor of a negative income tax that would give the "needy" money to spend. It is a low cost way to distribute funds to those who cannot afford food, healthcare, shelter, daycare, or who are unemployed, disabled, retired, etc.

The cost of using a negative income tax versus a government benefit program should be the basis and gold standard for determining the cost effectiveness of a specific program.

Since the IRS is already collecting taxes, the incremental cost to the government to administer a negative income tax is very low.

A negative income tax could replace many social and subsidy government programs at a lower cost with more funds reaching the intended beneficiaries.

Even if some of the beneficiaries spend wastefully, the final costs to the government would most likely be less than the cost to run the government benefits programs.

The government has too many programs with too many employees and bureaucracy spending too many dollars that do not achieve their intended social goals. A negative income tax is a more efficient, lower cost way to for the government to take care of those in need.

quadrupole writes:

@Milton: You are discounting the possibility that the intended social purpose of the program is to employ government employees...

Yancey Ward writes:

Doug identifies the immediate rejoinder, and I think Thoma would probably use that if pushed, but then that is, in itself, an argument for cutting services in health care.

jc writes:

Good point about life expectancies as the universal DV. I just read a couple studies, for example, that look at survival rates (and number of added years) for various kinds of cancer, and the U.S. had a sizable advantage.

Now, whether studies like this are enough to offset the findings of the many studies that do use life expectancy (and typically find no U.S. advantage), I don't know. Fwiw, I also don't know if studies that account for problems noted above (e.g., inconsistent operationalizations and/or data quality) still find a U.S. life expectancy gap.

And, of course, this is also not the same thing as saying we get good value for our money (these treatments are not typically inexpensive, after all).

Also a good point on innovation. A friend of mine is alive today because of a treatment that was developed fairly recently in the U.S. Whether he's right or not, he's convinced it would not have been developed w/o U.S. based profit motives.

I haven't seen studies (not that they don't exist; this is simply not my area), but is it indeed the case that we subsidize healthcare innovation for the rest of the world in a manner similar to the way we subsidize the rest of the world's military spending (i.e., they don't have to spend as much in either area because they know we will)?

jc writes:

Oh, fwiw, here's a graph of OECD data illustrating how much countries spend - public and private - on healthcare. (Only two countries' govts. - Norway and Luxembourg - spend more than ours does.)

And here's some data regarding average general physician pay in various countries, according to WorldSalaries.org (anyone know if these guys have good data?).

According to them, U.S. physicians make more than double the physicians in 11 out of the 13 other countries they had data for in nominal terms (U.K. and Japan are the lucky 2 of 13) and nearly 10 of 13 when adjusting for PPP (add Taiwan).

I wonder what these figures would look like if we looked at revenue, rather than income, e.g., the figure *before* malpractice insurance, rent, office expenses, etc. were deducted.

This was just general physicians, of course. I also wonder if healthcare providers across the board - pharmaceutical companies, medical equipment manufacturers, surgeons, etc. - make more in the U.S.

Libfree writes:

Doctors make more in the US but have to pay for their own education. Europe pays education expenses and so reduces medical costs but at the expense of educational costs. It's hard to compare the US to Europe

Andy writes:

Arnold,

How about a follow-up post of your short summary of the lessons of nationalized health care around the world, since that is a common argument.

quadrupole writes:

Libfree,

We also train our doctors enormously more than most other countries.

DaveThomas writes:

Actually Europe doesn't have higher life expectancies when you look at similar causes of death. When you remove gun deaths and auto fatalities the United States has higher life expectancies than Europe. Touting Europe's socialized medicine is a false choice using an inaccurate comparison of life expectancy.

Jean Lemaire of Penn's Wharton School wrote an article "The Impact of Firearm Deaths on Life Expectancies in the United States" that dealt directly with this discrepancy.

If you want to talk health care then talk health care and don't fudge the numbers.

Extinct Species writes:

Consider Mr Thoma's suggestion to be restated as a call for a real effort to eliminate the capture of economic rents in the healthcare industry before cutting services.

Even you libertarian ideologues agree that such rent capture is inefficient, don't you?

The "free" system in the US seems severely ineffective at minimizing such rents especially when compared to the evil "socialized" systems. Allowing medical device manufacturers to bribe (through consulting fees) doctors to use their products may be free, but it drives up costs (2010 US average price for primary artificial hip device $7200, Germany $1600 http://www.bloomberg.com/news/2010-06-11/new-hips-gone-awry-expose-u-s-kickbacks-in-doctors-conflicts-of-interest.html ).

Doug - There was a time that I believed like you but in the last few years I have read extensive amounts of literature on the topic and the overwhelming weight of the evidence seems to be that US healthcare clearly isn't the best and we pay a lot more for it. And I've seen studies that adjust for income, ethnicity... Can you give some sources.

Cancer survival is an area where the US does quite well and seems to be the most often trotted out by the we're #1 crowd, but it is only one area and the US is seriously deficient in many others. (There are reasons to question the validity of survival rates for comparison purposes http://theincidentaleconomist.com/wordpress/survival-rates-are-not-the-same-as-mortality-rates/ ) If our system is so much better and given that we spend so much more money per person, why aren't we better in just about every category?

Here's a decent overview comparing major nation healthcare systems. http://theincidentaleconomist.com/wordpress/how-do-we-rate-the-quality-of-the-us-health-care-system-introduction/

Doc Merlin writes:

Its because most macroeconomists don't seem to understand the difference between costs and money price. :-(

Greg writes:

Regarding #3

You are definitely "getting it" here!

Now take the next step and realize how this applies economy wide. Decreasing spending in response to this recession, in an effort to "fix" the deficit or the debt/GDP will only make it worse because decreasing spending decreases incomes, decreases GDP making the ratio worse and deficit higher.

Bruce S writes:

Interesting that Kling talks about a "free lunch." The philosophy of "tax cuts uber alles regardless of their impact on deficits," that has been the central tenet of "fiscal conservatism" (aka profligacy in the normal mind that isn't obsessively anti-government nor promoting a back-door strategy to create fiscal crisis that can then be used politically as a club to kill programs like Social Security and Medicare, which is the "Ryan denouement" we're seeing, although it's in a state of collapse) has created the so-called "free lunch" by defunding "lunch" with no political will to take lunch away from people. If I'm correct, Kling himself has admitted, years after the fact and the deficits were in place, that he was wrong. I'll take that as proof that paying much attention to Arnold Kling on broad strategy is a fool's errand.

This fundamental dishonesty of "fiscal conservatism" - glib nostrums as polichy - was practiced by the Right for over 30 years amd has created most of the debt mess we're in. Of course, difficult issues of how to pay for extreme health care inflation over the long-term and health care costs that as baseline are nearly double those of countries that have taken an essentially social-democratic or mixed-public-private regulated universal insurance approach will be with us, no matter who is footing the bill.

IMHO the Ryan notion that individuals negotiating with health insurers - including those over 65 - is pure fantasy, as is most of the economic kool-aid that has come from a rightward direction since the canonization of Reagan as fiscal conservative, despite his moving deficits in a direction that was unprecedented since WWII. Some "conservative."

The only models for containing extreme health care inflation that exist in the real world tell me that, once more, "fiscal conservatives" are engaged in an ideological hustle that satisfies what must be a certain confidence in their own ideals, but - ironically - merely follows the word "Change!" with an appeal to "Hope!" for a non-ideological person who actually cares about achieving a balanced sustainable health care system and relies on a certain empiricism as key to rational choices.

EMichael writes:

"4. For public choice and other reasons, when you want institutions to be efficient, market discipline generally works better than government regulation. How many examples can you cite of inefficient firms or markets that were whipped into shape by government intervention?"

If private health insurance had matched Medicare's cost control performance the last three decades, it would cost 1/3 less than it does now.

Anti-twitter writes:

Lots of theology here, starting with Mr. Kling. There is a big difference between US & European medicine. Maybe most commenters have been lucky enough to escape having a medical emergency in Europe or here when away from their home state. I had such a problem (detached retina) and got quick wonderful treatment in France. Nobody asked about insurance or payment. A cousin had this happen in Nevada and was turned away from two hospitals because she had no insurance. Yes, we lead the developed world in greed and firearms deaths.

However, unlike the claim above, no respectable person claims that elimination of all US firearm deaths would make our life expectancy similar to that in Europe or Japan. Lemaire's 2004 article estimated that 12.2% of the US life expectancy lag could be explained by firearms deaths. Check it out – the article is readily available. Life expectancy doesn't do justice to the Dickensian features of American healthcare - knee replacements for demented 85 year olds with insurance while insurance companies reject a few sessions of physical therapy for 40 year olds after vehicular injuries- 70% of all US psychiatric hospitalizations magically end after 30 days, the maximum time that insurance will cover- funny how few people need 25 or 35 days.

Not consistent with my values or those of the Sermon on the Mount


Russell writes:

Professor Kling,

This was a very interesting post. Many of the comments are thoughtful as well.

Certain foreign hospitals like Bumrungrad in Bangkok offer major medical procedures for as little as one-tenth the price they command in the USA. Don't you think that hospitals catering to medical tourists will eventually have the same impact on the price of medicine that Asian factories have had on the prices of many manufactured goods?

EMichael writes:

"4. For public choice and other reasons, when you want institutions to be efficient, market discipline generally works better than government regulation. How many examples can you cite of inefficient firms or markets that were whipped into shape by government intervention?"

Securities Exchange Act of 1934

jc writes:

@DaveThomas (or anyone else): Does anyone know of a cross-country meta-analysis (or even single study) of life expectancy that attempts to account for multiple possible confounds*? Or of survival rate studies metas listing multiple health conditions?

------------------

* Deaths due to guns or cars (I've heard it said that when we adjust for 'fatal injuries' the U.S. jumps almost to the top of life expectancy lists)

* Different infant mortality operationalizations (e.g., countries not counting deaths if babies are underweight, short, born early, die quickly, etc.)

* The health affects of subgroups less prevalent in some countries versus others (e.g., the grossly obese)

* Age of mothers giving birth

* Etc.

Jeff writes:

"In other words, let's find the free lunch first, before we have to pay for lunch."

Now I feel like a jerk. See, when I bought my car, I test drove many different sedans. Then, when I found the one I liked, I went to several different dealerships to find the best price. By doing so, I hurt the auto industry, society at large, and, ultimately, myself, because by trying to find the best car at the best price I was looking for a "free lunch." My comparison shopping and haggling merely meant that the dealer had to raise prices on all his other cars to make up for his lost profit - I had shifted the cost to someone else! Next time, I'll pay full sticker price for the first sedan I saw at the first dealership, just like a real capitalist would.

Bruce S writes:

"Of course European healthcare really is far worse than American healthcare."

Saying "Of course" makes it true?


I wish I wasn't a "leftist" because my orientation toward empirical facts hampers making one's arguments from faith and/or aggressive assertions unhinged from evidence.

Mark A. Sadowski writes:

Whenever the subject of European healthcare comes up I see these "oranges to apples" type comments. Only today did I start realizing there's a great many holes in these arguments.

1) There's a *gigantic* difference in healthcare expenditures between the US and Europe.

Corrected for cost of living (PPP) the US spent about $7300 on health care per capita in 2007. This compares to about $3,700, $3,600, $3,000, $2,700, and $2,700 in France, Germany, UK, Italy and Spain respectively. It would take a Grand Canyon's worth of fudge factors to honestly explain this difference.

2) Genetic differences do not account for the US' poor showing in life expectancy.

Yes, African-Americans (about 73 years) bring down the average US life expectancy. But Hispanics and Asians bring it up. Asian and Hispanic Americans live 86 and 82 years on average. The life expectancy of Non-Hispanic Whites is almost exactly the same as the general population (78.2 years vs 78.3 years).

Five national origins account for about 80% of Non-White American national origins: German, British (English, Scottish, Scots-Irish and Welsh), Irish, Italian and French. The life expectancy in these countries varies from 78.9 in Ireland to 80.7 in France, all greater than the average life expectancy of non-hispanic whites.

3) Behavioral causes do not account for the US' poor showing in life expectancy.

Approximately 1.1 million deaths in the US are attributable to behavioral causes annually. Firearms and motor vehicle related fatalities account for only 2% and 3% of that total respectively. Tobacco use, obesity and alcohol abuse account each for about 36%, 27% and 9% of those deaths.

Anyone who's been to Europe knows they generally drink and smoke us under the table (must be something to do with our Puritan forbears). Cigarette consumption per capita annually is about 3,000, 2,200, 1,800, 1,700, 1,600, 1,500 and 1,400 in Greece, Spain, Belgium, Austria, Italy, Ireland and Denmark compared to just 1,200 in the United States and yet all those countries have longer life expectancies than the US. Similarly total alcohol consumption in equivalent liters per capita annually is about 185, 145, 135, 125, 120, 120 and 115 in Ireland, Austria, Germany, the UK, Portugal, Denmark, and Spain compared with about 100 in the US and yet all of those countries have longer life expectancy than the US.

True, the US beats the world in the incidence of obesity. But what fans of the genetic hypothesis fail to note is that there are considerable differences in the incidence of obesity based on race in the United States. Blacks (36%) and hispanics (29%) are far more likely to be obese than non-hispanic whites (24%). In fact the incidence of obesity among non-hispanic whites is is barely more than it is among the British (23%). Similarly, blacks (21%) are more likely than non-hispanic whites (19%) to smoke.

It's also worth noting to fans of the motor vehicle and firearm fatality hypothesis, despite it's relative unimportance in overall behavioral causes of deaths, that the death rate form firearms is over twice as great among blacks (about 20 per 100,000) as it is among non-hispanic whites (about 9). (The motor vehicle death rate is about the same.) So, much of the negative contribution of behavior is already removed when one factors in race/ethnicity.

4) Quality based measures of US healthcare outcomes have to be taken with a grain of salt.

The most popular study among opponents of healthcare reform is the Lancet Oncology study of cancer survival rates. What proponents of the study fail to note is that Cuba outperforms the US by most of these measures. If a Communist country outperforms the US by the most cited study by opponents of health care reform what does that tell you?

And in the final analysis, what does it matter what the quality of the treatment is if you have no access to it?

Mark A. Sadowski writes:

A good friend of mine has alerted me to the fact that the stuff about the US lead in drug innovation is complete nonsense:

"August 25, 2009

Global Drug Discovery: Europe Is Ahead
By Donald W. Light

Abstract

It is widely believed that the United States has eclipsed Europe in pharmaceutical research productivity. Some leading analysts claim that although fewer drugs have been discovered worldwide over the past decade, most are therapeutically important. Yet a comprehensive data set of all new chemical entities approved between 1982 and 2003 shows that the United States never overtook Europe in research productivity, and that Europe in fact is pulling ahead of U.S. productivity. Other large studies show that most new drugs add few if any clinical benefits over previously discovered drugs. I discuss ways in which Congress, employers, and insurers can increase the value of drugs and revitalize the U.S. pharmaceutical industry.

A reanalysis of data from 1982-2003 contradicts the claim that U.S. drug firms overtook European firms in pharmaceutical innovation.

For more than a decade, industry and official reports have concluded that the United States has overtaken Europe in the discovery of new drugs, commonly defined as new chemical entities. "Europe risks to be relegated into the fringe of the industry," concluded a seminal report that has shaped European policy. "The United States has become the dominant player," the European trade association reported in 2008, as U.S. research investments grew 5.2 times from 1990 to 2007 compared to 3.3 times in Europe. Reinforcing this view, Henry Grabowski and Richard Wang examined all new chemical entities discovered between 1982-1992 and 1993-2003 and concluded that U.S. firms had overtaken their European counterparts. They also concluded that although the number of new chemical entities declined, their quality is high and has increased. In other words, most new drugs that are discovered are better than existing drugs, and most come from the United States.

This paper offers a new perspective based on a reanalysis of Grabowski and Wang's key findings and large studies of clinical quality over many years. It thus poses important challenges to widely held American beliefs about U.S. dominance in pharmaceutical research productivity and about the superior quality of those new drugs. The findings suggest that Congress and large purchasers are motivating companies to develop and market drugs that add little value, instead of rewarding true added value. This is not good for the long-term vitality of the industry or for those paying too much for too little...."

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.5.w969v1

And so another myth bites the dust.

Yancey Ward writes:

Mark,

Of course, the fact of Hispanics in the US totally undercuts the claim that access to health insurance is necessary at all, doesn't it? Perhaps the Europeans are living longer because they don't get as much medical intervention. In other words, maybe the Europeans are vastly overspending, too.

On firearms and other accidental deaths in the US: while a small part of early mortality, they are both heavily skewed towards younger victims (under 30 years of age). This has a disproportionate effect life expectancy, and as you yourself note, Mark, the ethnicities in Europe don't actually have much longer lifespans to begin with- the difference is usually less than 1 year. Also, I note that while you list the % of early mortality related to obesity, smoking, and drinking in the US, you did not do the same for European countries. It takes more than just listing how much one drinks and smokes.

Look, I actually believe we spend far too much on health care because I think much of it is totally useless, and even counterproductive in that having it makes one complacent, but you really could have done a better job of marshaling your data. In other words, I don't think you really made your case at all that differences in culture outside of medical care aren't the entire explanation for Americans having slightly lower life expectancies.

Mark A. Sadowski writes:

Yancey,

1) Hispanic superiority in life expectancy.

Actually the most widely accepted explanation of why American hispanics exceed most other Americans in life expectancy is "selectivity bias". In other words, hispanics that already have overcome major health obstacles come to the US. This bias would obviously mainly apply to hispanics and not other major racial groups. And since the US tends to have a higher percentage of immigrants than most European countries this bias tends to skew US life expectancy statistics upward in general.

2) Behavioral mortality rates

I did not list European behavioral mortality statistics because they are not much different. Are you seriously implying that Europeans who emigrated suffer higher mortality rates from behavior than their European brethren?

In short, I wasn't trying to make the case that all that differences in culture outside of medical care were the entire explanation for Americans having slightly lower life expectancies. I was raising the question of why, correcting for behaviorial and genetic differences, Americans still have lower life expectancies, despite spending twice or more the amount that Europeans do on healthcare per capita.

This suggests that the US healthcare system is profoundly inefficient. Thus there *is* a free lunch here somewhere.

Babinich writes:

Mark Thoma opines:
Costs that can be cut without reducing services need to come first, then, when those efforts are exhausted, we can think about the services themselves. But that doesn't seem to be how we are proceeding.

Cutting costs? Government?

Hey Mark, did you ever think that the act of curbing spending was anathema to a government bureaucrat?

Mark Sadowski writes:

Babinich,
Don't be insipid. Of course spending less on something means being able to spending more on something else. How assinine.

Peter writes:

I find these arguments about who has the best health care system tiring, because they all miss the point. Costs in all of these countries have been rising faster than the rate of economic growth, thus they are all unsustainable over the long term. In order to have a sustainable system over the long run, some totally new way of providing health care has to develop, and what is the more likely source of such progress? Is it through centralized experimentation of the sort that the progressives seem to favor, or decentralized experimentation? Where is the more plentiful source of ideas? What environment allows successful ideas to propagate and change the way health care is provided? That is what we must discuss and much of the rest of the arguments are a waste of time.

Yancey Ward writes:
I was raising the question of why, correcting for behaviorial and genetic differences, Americans still have lower life expectancies, despite spending twice or more the amount that Europeans do on healthcare per capital.

However, this is exactly what you didn't prove with your first post. You didn't control for it, you simply claimed you did. I will give you a couple of examples from your very first post. You mentioned drinking related early mortality, and noted that Europeans drink more, however, there is actual medical data that moderate alcohol consumption has some beneficial effects on longevity. Do Europeans drink more often, but to less excess than Americans? I don't know, and seemingly, neither do you. Also, you mentioned obesity. I will note, however, that obesity is too broad a category toss off-hand the way you do. If you wanted to make your point better, you might have compared obesity in European populations with rates of diabetes and cardiovascular disease prevalence in the US vs Europe, or, in other words, the correlation of obesity with any of these diseases isn't 1. It may well be possible that two populations have equal rates of obesity, but one has lower rates of heart disease and diabetes because the diets are different, too.

All in all, I found your argument to do exactly what you claimed the counterargument to do- be too superficial. I am willing to be convinced, but your data doesn't even come close to passing muster.

Yancey Ward writes:

Or, let me ask you this hypothetical:

What would be your response if someone could show that if the US spent the same per capita amount on medical care as, let's say France, and this caused longevity in the US to fall by one year? Would you then consider the excess spending of the US to be worth that extra year, or not?

And this isn't a trick question- I am trying to find how much you value lifespan vs cost.

Don Levit writes:

Yancey:
Good question.
In my case, what I envision doing is saying to the health insurer/Medicare "We both know these are covered benefits.
However, I will voluntarily forgo the treatment, if you pay my beneficiaries one-half the cost in death benefits."
I wonder how many people/families would jump all over this?
Don Levit

Jeff writes:

Yancy:

What about this:

What would be your response if someone could show that if the US spent the same per capita amount on medical care as, let's say France, and this caused longevity in the US to remain the same overall, but not among classes. Longevity among the poor would rise, but longevity among the wealthy would fall.

quadrupole writes:

Jeff,

How exactly do you intend to cut the US per capita health care spending? The only part of it that can, to my understanding, be cut by fiat is the public spending, meaning medicaid and medicare. The people impacted by such cuts would be the poor and middle class, the rich can, as always, afford to buy better care. Unless you forbid the rich to buy health care, they'll still get theirs.

Babinich writes:

Sad, it's you that is being ignorant.

Costs will not be cut, spending will increase and we'll inherit less collectively.

There's the cost.

Jeff writes:

quadrupole:

I was posing a hypothetical after reading a hypothetical posed by Yancey. I do not have a secret plan to solve health care problems in America. Sorry.

Jeff

Shangwen writes:

I'm posting late on this, but here goes:

#3 (Health care provider income)...sadly, that may be the ultimate determinant of how spending and policy get determined.

#4 (efficiency of govt vs market)...I was speaking yesterday to some engineers consulting to surgery who had replicated the findings of other studies in public hospitals, showing that making the system more operationally efficient (less unnecessary bed time, fewer cancellations) actually drove costs up, because patient turnover costs go up dramatically with throughput efficiency. So cost-effectiveness suffers a net decline.

#5 (empirical validation of cost-savings schemes) strongly support this one. Any program proposal that says "doing program Y will result in decreased utilization/more efficiency/reduced wait times in program X" is telling a fairy tale. Urgent care clinics did not reduce emerg backlogs. Surgical prehab does not reduce recovery times or post-surg rehab costs. Psychological prophylaxis in the military and police does not reduce rates of PTSD diagnosis. Yes, there are some successes, but they are rare, and mostly depend on low-cost lifestyle interventions that do not profit special interest groups; these are things like nutritional counseling and smoking cessation. Not exactly big money makers, unless Barry O will pay Jeff Immelt to build a Live Wisely Machine.

I am less sold on information asymmetry, and more on a Hansonian/Veblenian explanation of irrational addiction to health care consumption. The only way I see costs (i.e., utilization and provision of ineffective care) coming under control is through some combination of top-down rationing and higher consumer payment burden. Very popular ideas of course.

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