U.S. Health Care Costs


In today’s WSJ, Justin Lahart observes that the United States spends a much larger portion of its GDP on health care than other countries, yet seems to get little for its extra spending. I wonder whether this is true, which is not to say that I disagree with his larger point: that we are spending too much on health care for what we get.

But here are some thoughts:


1. Lanhart points out that both infant mortality and life expectancy are higher in Japan and France, which spend (on average) approximately 55% of what the United States spends on health care. But critics of our system have noted that a large part of what we spend money on is spent on expensive care for people during the very last part of their lives. So a relevant question might be: do people who reach, say, age 60 in the United States live longer and/or more comfortably than members of their comparable cohort in Japan and France. And we can refine that question bit more by limiting the comparison to people in the United States who have access to good health care.

Is there a free-rider problem here? Some have argued that drug costs are high in this country to pay for research, which produces important advances in medical science. Do Americans thus fund new medications (and other medical technologies) whose value other nations can import without paying their share of developing these technologies?

What is the infant mortality rate and the life expectancy rate for people in this country who have access to good health care, and how does that compare to the infant mortality and life expectancy rates to people in Japan and France? Do we know if our insured, or at least those of our insured who have good coverage, fare as well or better than the Japanese or French participant in the national health care systems in those countries?

There are certainly other questions we can ask along these lines and the answers might show that we are getting something for the extra resources we expend. It might not be purchasing what we should be purchasing, and our choices might be critiqued on moral grounds (as the folk song goes, if religion were something that money could buy, the rich would live and the poor would die), but I would be hesitant to conclude that we don’t get much for our extra spending.

And of course, there is the extraordinarily important point Frank Cummings makes on his recent post, that the employer system has faults of its own, apart from aggregate costs and quality of medical delivery. Making some employers bear the costs of our imperfect system is itself a serious imperfection in our system.

I intended to end the post two paragraphs up, but let me make two additional points related to the employer system. Two related arguments for the system are: 1) the employer is an efficient purchasing agent for its employees; and 2) the employer pools risk (which is part of the reason it might be an efficient purchasing agent for its employees). But national health care pools risk far more effectively than individual employers and can anybody seriously argue today that the employer has been a good purchasing agent except for its ability, though risk pooling, to create access to the health care market for its higher risk employees? Well I suppose you can say that the employer forcing employees to take part of their compensation in health care coverage is good, but national health care also takes care of this problem