Why do Americans spend so much on health care?

by on July 21, 2017 at 8:19 am in Data Source, Economics, Medicine | Permalink

That is the topic of my latest Bloomberg column, here is one excerpt:

As outlined by the blog Random Critical Analysis, U.S. health-care expenditures go well beyond what the U.S.’s relatively high per capita GDP might lead us to expect. But viewed through the lens of consumption behavior, American health-care spending is typical of this nation’s habits and mores. Relative to GDP, Americans consume a lot more than Europeans, and our health-care spending is another example of that tendency.

And to channel Megan McArdle:

Furthermore, we shouldn’t take the lower health-care spending in many European nations as a sign of better health-care policy. It’s a reflection of a broader cultural difference. If the U.S. someday did move to a single payer system for health care, it probably would be a relatively expensive version of that idea. The U.S., of course, does have a partial single payer system through Medicare, and it is still more expensive per beneficiary than its European equivalents.

Keep in mind that high consumption expenditures also help explain various “anecdotes of outrage,” such as billings for $400 band-aids and the like.  To some extent such charges are fraud, and to some extent they are simply an unusual allocation of fixed costs.  Both practices are more likely in a non-Spartan society keen on spending a lot of money on health care and the very latest.

1 mavery July 21, 2017 at 8:23 am

Surely its foolish to compare the per-beneficiary rates of Medicare and Euro equivalents. Their enrollees come from completely different pools.


2 Charles July 21, 2017 at 9:09 am

I came here to make this point, so good on you. And not only is it “completely different pools,” the Medicare pool is (I’d assume) the most expensive to insure.

Has anyone compared the efficiency of US 65+ healthcare spending vs OECD or W. Europe?


3 mulp July 21, 2017 at 12:32 pm

Medicare isn’t single payer.

Medicaid IS government single payer.

Medicaid has a better cross section with the Obamacare expansion added to Clinton’s expansion.

Roughly 20 million workers, 20 million children, 35 million elderly, disabled, and carers.

$6400 per covered person for all categories across the US. $17,500 for the elderly, $19,000 for the disabled, $4000 for adults, $2600 for children

Doubling the number on Medicaid to 150 million would cost less than $4000 per person, pulling the Medicaid average down to $5200.


4 Moo cow July 21, 2017 at 4:17 pm

I always thought you could use Medicaid as the default, then layer private insurance on top of it.


5 mm July 21, 2017 at 6:38 pm

except every hospital & provider in the country would go broke in days…I am constantly amazed by people with no knowledge of healthcare (such as Bernie) advocating medicare or medicaid for all. The flaws in medicare & medicaid are, in medical lingo, TNTC (too numerous to count). The distortion of the market due to the feds is ENORMOUS. We need a catastrophic care mandate & add private insurance to it for those under 65-but Obama wanted to promise all the Julias of the world free birth control.

6 Random Critical Analysis July 21, 2017 at 9:55 am

Sure Medicare is overwhelmingly 65+, but both medicaid and medicare spend much more per beneficiary than private plans in the US. There is not a great deal of appetite in either public plan to ration care and the money saved through lower reimbursement, efficiency, etc are modest and quite debatable (accounting for fraud, cost shifting, etc these “savings” aren’t necessarily all they’re cracked up to be).


7 LinearLog July 21, 2017 at 9:59 am

Well, multiple heart valve replacement operations for habitual intravenous drug users can add up (re: per capita medicaid). Otoh, most such users don’t make it to medicare age.


8 spencer July 21, 2017 at 11:54 am

But comparing private plans to either medicare or medicaid is comparing a relatively healthy pool to a unhealthy pool.

The medicaid pool is 100% unhealthy people, as they do not enter the pool until they need care.


9 Random Critical Analysis July 21, 2017 at 12:09 pm

That’s not quite true though. They’re *mostly* selected by income/SES and the poor/low SES have notably worse health throughout the OECD. Overall the data do not suggest either Medicaid or Medicare are all that much cheaper controlling for need.


10 Sure July 21, 2017 at 1:20 pm

But this is the same problem with comparing the American health care pool to those of other OECD countries. We have vastly higher rates of homicide, motor vehicle accidents, obesity, and other health determinants which drive up spending.

Americans are the relatively unhealthy pool of the world.


11 GoneWithTheWind July 21, 2017 at 3:22 pm

“Americans are the relatively unhealthy pool of the world.”

When accidental and homicide death are removed from the stats Americans live longer than any other population including the much touted Japanese. So what is “healthy”? Certainly longevity is a legitimate and perhaps the only meaningful measure. But perhaps that doesn’t fit your narrative…

12 Sure July 21, 2017 at 4:45 pm

Normally we use something like DALY to measure health status. People report that would rather sacrifice some life expectancy than to not have to deal with breathing difficulties (like COPD) or poor wound healing (e.g. diabetes). Americans have terrible health inputs; the fact that Americans basically pull even on deaths from heart failure, cancer, pneumonia, etc. is a testament to the ability of the American healthcare system to offset terrible health determinants among the population.

13 GoneWithTheWind July 21, 2017 at 9:18 pm

I just can’t agree with your underlying premise. The only countries on earth that do not have these diseases of old age are those countries where people die young from diseases that we can cure or vaccinate against. If you live into your 80’s you will probably die from a heart attack, cancer or a stroke. This is essentially what old people die from.

14 Sure July 21, 2017 at 10:15 pm

Most of the countries where you see diseases of youth killing large numbers of people are ones where the problems tend to lie in the political sector, not the healthcare sector. Places like Yemen would have extremely good healthcare inputs (lots of young healthy people without metabolic syndrome) … if only they could avoid civil war, famine, and breakdown of basic sanitation.

After all, sewage workers have saved more lives in human history than all the doctors of the world combined. Diminished public health in the world typically does not result from health or healthcare, but from habits and institutions.

By far the best healthcare improvements in the world have been economic and governmental, not actually access to medicine. Healthcare cannot overcome poor agriculture policy in parts of Africa, it cannot overcome poor cultural practices in parts of America. Life expectancy is downstream of health status which itself is downstream of environment.

15 GoneWithTheWind July 22, 2017 at 10:35 am

The underlying theme in what you are saying is confusing. For example “Places like Yemen would have extremely good healthcare inputs (lots of young healthy people without metabolic syndrome)” What exactly do you mean? First of all you have no clue of the health of these young people or their potential metabolic syndrome. Secondly you seem to be implying that you are embracing the entire metabolic syndrome being associated with Western states/culture.
Here is a quote from Web MD “The syndrome runs in families and is more common among African-Americans, Hispanics, Asians, and Native Americans. The risks of developing metabolic syndrome increases as you age.”
In other words it is genetic and not the result of (choose one) not eating vegan, not eating organic, eating meat, to much sugar, Western diet, etc. This is all part of the anti-western diet/culture thinking that is prevalent today.

Another example from your comment “sewage workers have saved more lives in human history than all the doctors of the world combined. “ While I don’t want to understate the value of good sanitation I think you missed the discovery of antibiotics and vaccines each of which saved perhaps a couple trillion lives in the last 80 years or so.

Then there was this comment “it cannot overcome poor cultural practices in parts of America”. What poor cultural practices??? Drinking? Drugs? Smoking? I’m not sure any of that is “cultural”. It appears to me you have an anti-American or anti-Western bias and simply cannot help yourself from espousing it without proof or fact to back it up. You seem to actually resent and dislike the fact that America has the best health care system in the world AND we live the longest. This seems to grate you and deny you pleasure. I don’t understand where that comes from.

16 Sure July 23, 2017 at 12:53 am

First off, I have practice medicine on patients in both Sana’a and in Ibb, so no I do have direct personal experience with the health of both populations.

Second, health status refers to how many health problems you have. In Yemen you are healthy or you are dead. They are extremely few people in Yemen who live with chronic diseases that directly impact health. This means that when a patient comes to see me in Yemen they have one problem (e.g. malnutrition, Dengue); if I fix that problem they are basically healthy again. My American patients typically have multiple chronic diseases. If I see them for acute blood loss, fixing that with a transfusion tends not to make them fully healthy again – they still have poor wound healing from diabetes or they still have COPD making them short of breath.

This is a good thing. We are keeping people *alive* who would simply *die* in Yemen. This does, however lower the health status of the living American population. Good healthcare systems should have more unhealthy people because that means they are not letting unhealthy people die.

Think about it this way: say you have 100 people. In America 30 of them would have chronic health issues. 10 would have acute health issues. 60 would be healthy. In Yemen, there would be 5 people with chronic health issues, 2 with acute issues, and 50 would be healthy, the other 43 people would be *dead*. As health status measures only the living, this means that Yemen would have a healthier population.

Or more formally, the prevalence of disease in the US is higher because the mortality rate for disease processes is lower.

As far as poor cultural practices pick any of the following:
1. Binge drinking
2. Lack of exercise (in work or recreation)
3. A combination of promiscuity and less safe sexual practice
4. Cigarettes that are affordable for the poor
5. A de facto national cuisine that is fruit and vegetable poor
6. A breakdown of familial and religious support systems without implementing other support systems.
7. Drug use

If Yemen, magically, had a functional state with the rule of law, a vibrant market economy, and well defined & widely respected personal freedoms, they would immediately have much closer to American health outcomes for healthy Americans. Over time, more sick Yemenis would survive and their disease burden would approach ours.

This is the magic of survivorship bias. The population of the US is less healthy than dysfunctional states precisely because the sick “linger” and do not die quickly.

As far as vaccines and antibiotics, they are not even close to sewage. First off let us consider the numbers in play here. World birth rates are at an all time high around 350K per day. That gives us around 11 Billion alive in the last 80 years. Smallpox, the single most deadly pathogen in human history killed only around 500 Million people last century (before eradication). Without sanitation half of the world’s population would simply not be here. Something as simple as giving 2 Billion people outhouses would save 2-4 million lives per annum. Basic sanitation means that we are saving something like 60 million lives per year just from limiting fecal contamination. That easily swamps smallpox. Adding in the value of clean drinking water and it destroys vaccinations and antibiotics.

So in short, nope we can utterly ignore diet and still have lots of unhealthy Americans. This shows that American health works because these people are not dead. The reason so many unhealthy Americans are alive is that we can afford to keep them that way.

17 GoneWithTheWind July 23, 2017 at 10:34 am

I’ll give you this point; at least your last post made more sense.

Regarding smallpox; it is NOT Caused by inadequate sewage and cannot be prevented by better sanitation. Ditto for every illness prevented by vaccinations. Before the 20th century half of all children born would die before their 18th birthday, most before their 5th birthday, from illnesses we now prevent with vaccines. Simple as that!!! Not sewage/sanitation. Again I will say that sanitation is important but not as important as vaccines and antibiotics have been. I would place sanitation as 3rd after antibiotics.

“The reason so many unhealthy Americans are alive is that we can afford to keep them that way.”
You touched on a problem but kind of slipped by the point. In Africa (for example) their high birth rate and massive effort by the West has created a large and growing pool of healthy/survivors. BUT still millions and millions of children die every year from illnesses that are easy to prevent or cure. What you are looking at in Africa is the survivors and are interpreting this as the norm. Imagine you have a extended family of 30 or so people, i.e. parents, grandparents, children, grandchildren. Most are healthy but likely the older members are showing health problems. Still your extended family is 30 people. Now imagine in a 3rd world country where the number might have been 60 people thanks to higher birth rates but the actual number is about 10-12 people thanks to disease. BUT, and here is the point, if an outside looked at this without the knowledge that 80% of the family passed away too young, they would see 12 family members who were relatively healthy and think that was good. THAT is what you are representing and what most people and most studies see.

As for our “poor cultural practices” I don’t disagree. Most are problems of relative wealth. If you eliminated all welfare (ALL government payouts based on “need) tomorrow our drug problem would evaporate. Drugs, alcohol and cigarettes are subsidized by welfare and the lack or productive activity that welfare promotes also promotes exactly these kind of bad habits. As for the “less safe sexual practice” It again is Africa where literally millions and millions of men and women have died from STD’s and it is African culture that encourages blatant promiscuity. My point here is that it is counter productive to point at America’s “poor cultural practices” simply because we do a better job of tracking and publicizing them and ignore the rest of the world simply because they do such an ineffective job of tracking it. What you are talking about is human nature not America’s “poor cultural practices”. A certain percentage of humans will have a susceptibility to alcoholism and many/most of thee people are also susceptible to drug addictions. It isn’t because they are “Americans” it is because they are human and have genes that make them susceptible to addictive substances.

18 Jermy July 21, 2017 at 3:57 pm

That’s not true. Medicaid is basically health insurance for the poor. All poor people who want it have it, heathy or not.


19 mm July 21, 2017 at 6:40 pm

not true-the healthy poor often don’t sign up. People get enrolled after they present for medical problems

20 mulp July 21, 2017 at 12:38 pm


Employer cost per worker health plan $6,435 per Kaiser.
Medicaid cost per adult covered $4000 per Kaiser.




21 mavery July 21, 2017 at 2:10 pm

This is equally naive. Medicare, Medicaid, and private plans in the US serve three different pools of individuals. You’re comparing apples and orangutans.


22 Daniel Weber July 21, 2017 at 10:12 am

I have to run so I can’t supply the exact numbers, but

(Medicaid and Medicare budgets) / US population

gives a bigger number than most other countries spend per capita covering everyone.


23 A Definite Beta Guy July 21, 2017 at 10:29 am

Medicare: 590 billion
Medicaid: 574 billion
US population: 323 million
Per person coverage: $3600 (appx)
Canada spends like $5200 per person.
Medicaid covers 20% of the population, Medicare covers like 14% of the population. So Medicaid is still spending like $8800/person, which is still higher than everyone else. Also a huge fraction of people on Medicaid (40%+) are children, who are LESS expensive than other people, IIRC.


24 Daniel Weber July 21, 2017 at 10:57 am

Thanks. The first graph on this article is the one I had in my head: http://www.pbs.org/newshour/rundown/health-costs-how-the-us-compares-with-other-countries/

It certainly looks like the US government ought to be able to cover everyone when you look at the dark blue bar.


25 Random Critical Analysis July 23, 2017 at 7:40 am

CMS provides official estimates of expenditures per beneficiary for Medicaid, Medicare, and Private insurers. I plotted this here.


26 Fazal Majid July 21, 2017 at 10:49 am

The US population is younger than most European countries, if anything our costs should be lower.
Any discussion of health-care that fails to mention the AMA’s rent-seeking, or Big Pharma’s, the inefficiency of hospitals and bloated administrative costs is not worth the paper it is printed on.


27 Art Deco July 21, 2017 at 11:21 am

“health-care that fails to mention the AMA’s rent-seeking”

Medical salaries account for a small fraction of medical costs. I find those who complain about the salaries of health care professional to be those who are merely bitter that they were unable to become physicians themselves.


28 Art Deco July 21, 2017 at 2:25 pm

Tyler’s interns are now cataloguing my past remarks in order to produce synthetic remarks.


29 JWatts July 21, 2017 at 2:49 pm

“Medical salaries account for a small fraction of medical costs.”

That’s not correct.
Physicians = 20% of health care spending


“According to Fitch Ratings, personnel costs represented 54.2 percent of hospital operating revenue in fiscal year 2012, one of the highest figures of the past several years.”



30 Art Deco July 21, 2017 at 3:08 pm

Only in your addled brain do doctor’s salaries amount to 20% of healthcare spending

31 JWatts July 21, 2017 at 3:28 pm

My brains not addled and your response isn’t substantial. Generally speaking Doctor’s costs include a lot of extraneous expenses, and their take home pay is roughly 10% of total costs.

“Of this total, close to half is absorbed by the physicians’ practice expenses, including malpractice premiums”

Feel free to provide a substantive response, or if you feel like you can’t make a good case, you can resort to name calling.

32 Art Deco July 21, 2017 at 3:53 pm

My brains not addled and your response isn’t substantial. Generally speaking Doctor’s costs include a lot of extraneous expenses, and their take home pay is roughly 10% of total costs.

I think that’s about right.

(The remark to which you’re replying is another one of msgkings’ appropriations of my handle).

33 JWatts July 21, 2017 at 4:50 pm

“…s another one of msgkings’ appropriations of my handle …”

It would be relatively trivial and a nice addition if this blog would require logins with passwords.

34 Tyler Cowen July 21, 2017 at 5:38 pm

The sockpuppets have a Straussian interpretation that you cucks can’t understand.

35 msgkings July 21, 2017 at 6:25 pm

Art, I’m flattered that I’m so in your head that you think I’m the one sock-puppeting you. I’m not. You look stupid constantly mistaking me for that person.

I get sock puppeted too. Just ignore it, it’s obvious when someone is pretending to be someone else.

36 Random Critical Analysis July 22, 2017 at 2:54 pm

> That’s not correct. Physicians = 20% of health care spending

These are estimates of the share of expenditures paid to different types of organizations. It’s not a great reflection of actual physician take home pay because this only includes stand-alone physicians (not working directly for hospitals, in the main) and, more importantly, it must necessarily include supplies and overhead associated with physicians offices (e.g., rent, utilities, malpractice insurance, clerical workers, physician assistants, etc). Better estimates of actual physician income ranges about 5-10% of current health expenditures (the link you cited actually includes one such estimate… if you read it closely)

37 Random Critical Analysis July 22, 2017 at 3:06 pm

From: https://economix.blogs.nytimes.com/2008/11/14/do-doctors-salaries-drive-up-health-care-costs/

“This makes the physicians’ collective take-home pay only about 10 percent of total national health spending. If we somehow managed to cut that take-home pay by, say, 20 percent, we would reduce total national health spending by only 2 percent, in return for a wholly demoralized medical profession to which we so often look to save our lives. It strikes me as a poor strategy.”

Also http://www.jacksonhealthcare.com/media-room/news/md-salaries-as-percent-of-costs/

Anyways- both are in the ballpark of estimates i’ve come up with myself…. perhaps a topic for another day.

38 mavery July 21, 2017 at 12:30 pm

Medicare doesn’t insure “the US population”. It covers old people. Tyler compared this to European single-payers systems that cover the the populations of entire countries. It’s an absurd comparison.


39 Sure July 21, 2017 at 1:50 pm

Don’t be silly. Out population is more obese, more violent, and drives more. Those will easily drive far more healthcare costs than a few years of average age differences. Particularly as a lot of our lower average age is in children and women of reproductive age who diminish the savings from youth.

Enslaving the physicians would save us about three years of medical cost inflation. If numbers have not changed too much, physicians are paid less after inflation adjustment today than in 1995. Comments about physicians driving up medical costs are demonstrably false.

Big Pharma is similarly nonsensical. The pharmaceutical sector gained around 50% in value in the last decade, but the S&P 500 gained around 70%. Similarly worldwide pharma revenue is only around $1 Trillion and in the US they make up 10% of healthcare spending; of that somewhere around 20% might be profit (particularly if you are restrictive on how you expense long timer period investments). Pharma profits are about 2% health care costs and full nationalization and pricing at cost would give you, at most, one year of reprieve from medical cost inflation.

By far and away the biggest driver of healthcare expenditure growth is administration and compliance. Of course, this is exactly what every single congressional reform has fed relentlessly. I am literally banned from getting fellow physicians together and starting a hospital focused on reducing the overhead costs of care, even though physicians have historically been the ones best able to reduce administrative costs.

And less we forget, the UK has seen much greater medical cost inflation than the US.


40 mm July 21, 2017 at 6:50 pm

the growth in medical expenditures in the US doesn’t correlate with the growth of MDs- it more closely tracts the growth in the number of administrators


41 Rafael Pereira July 21, 2017 at 8:35 am

I think you miss the point by only looking at health-care expenditure. It’s not about the money spent per se. It is about the health outcomes a country gets *given* the amount of money that goes in health consumption. When one looks from the perspective, it’s fair to say that the US does “spend too much on health care” for the outcomes it gets.


42 Tyler Cowen July 21, 2017 at 8:40 am

Adjust for demographics, guns, and cars, and the U.S. arguably gets better outcomes across many variables, admittedly not natal.


43 prior_test3 July 21, 2017 at 8:59 am

Just change variables until the numbers fit your narrative is a concise way to put it.


44 Floccina July 21, 2017 at 9:20 am

So if someone dies at 16 by a gun shot to the head or in a terrible car accident knocking 62 year off life expectancy, that is due to inadequate healthcare?


45 The Other Jim July 21, 2017 at 10:15 am

Dems say yes.

46 prior_test3 July 21, 2017 at 10:28 am

Well, this is where the entire aspect of public health comes into play. In several English speaking countries (the UK and Australia), after horrific mass murders involving large numbers of vicitims, both countries aggressively limited access to guns.

Not exactly unsurprisingly, suicide rates involving guns also declined. ‘Some argue that Australia’s homicide rate was already declining before the NFA was implemented in 1996. But in 2012 a study by Australian National University’s Andrew Leigh and Wilfrid Laurier University’s Christine Neill concluded that in the decade after the law was introduced, the firearm homicide rate dropped by 59 percent and the firearm suicide rate fell by 65, with no corresponding increase in homicides and suicides committed without guns.’ http://nymag.com/daily/intelligencer/2015/10/how-australia-and-britain-tackled-gun-violence.html

Basically, America not only consumes expensive health care, it consumes a lot because it also tolerates a number of things that are considered unacceptable in other countries. (You can see this with AIDS too – lots of things contribute to why the U.S. is simply so much worse than comparable countries in containing the death toll and costs of that disease – https://newrepublic.com/article/117691/aids-hit-united-states-harder-other-developed-countries-why )

47 Floccina July 21, 2017 at 11:49 am

@prior_test3, that is fine and laws that ban guns might help especially with suicide and safer roads might be doable but most people separate public health measures like that and healthcare.

48 FYI July 21, 2017 at 12:15 pm

@prior_test3 This kind of fallacy (linking costs of unrelated political issues) is one of the reasons why some political change is so difficult here in the US. For instance, linking suicide to gun violence is ludicrous. The suicide rate in the US is lower than it is in countries with very few guns (Japan, Nordic, Eastern Europe). There is no way of knowing that a suicidal person would not find another way to commit suicide had guns not be available. Same thing with linking health care costs with deaths that cannot be avoided by *any* type of treatment.

You think you are helping but you are really not.

49 prior_test3 July 21, 2017 at 12:58 pm

‘but most people separate public health measures like that and healthcare’

Most Americans, that is. In other countries, when a public health problem is identified (see that AIDS link), it is in everyone’s interest to deal with the problem before it balloons out of control. One area to watch for the next generation is diabetes, to compare how different countries attempt to handle what is to a significant degree a preventable problem. Those countries that are able to effectively prevent a significant percentage of diabetes cases from developing will also have significantly lower health care costs.

50 prior_test3 July 21, 2017 at 1:00 pm

‘You think you are helping but you are really not.’

Maybe instead of responding to the specific example, and citing Australia, it would have been better to just note that AIDS link? There are any number of problems concerning why American health care is so expensive, and one part is that simply more is used, when that use could be reduced significantly.

51 Floccina July 21, 2017 at 3:43 pm

“when a public health problem is identified (see that AIDS link), it is in everyone’s interest to deal with the problem before it balloons out of control.”

So in your opinion are the Italians that much better at dealing with such problems before they balloon out of control and the Danish are?

52 prior_test3 July 21, 2017 at 3:57 pm

‘So in your opinion are the Italians that much better at dealing with such problems before they balloon out of control and the Danish are?’

An interesting question, but then, let us stick to comparing the U.S. to Denmark – ‘The opposite trend appears for ischemic heart disease, where the U.S. had among the highest mortality rates in 2013—128 per 100,000 population compared with 95 in the median OECD country. Since 1995, mortality rates have fallen significantly in all countries as a result of improved treatment and changes in risk factors.18 However, this decline was less pronounced in the U.S., where rates declined from 225 to 128 deaths per 100,000 population—considerably less than countries like Denmark, where rates declined from 242 to 71 deaths per 100,000 population.’ http://www.commonwealthfund.org/publications/fund-reports/2017/jul/mirror-mirror-international-comparisons-2017

But yes, I do actually think that Italy is quite good at a number of things, contrary to American stereotypes. I would also note that the problems of excessive drinking are likely considerably less in Italy than in Denmark, though to argue that the Scandic nations are unaware of that problem would be incorrect, of course. It is simply that for whatever reason, the Italians seem to have that southern European advantage when it comes to alcoholic excess, compared to nations such as the UK or Poland.

53 anon July 21, 2017 at 4:05 pm

“You think you are helping but you are really not.”

Speculating from ignorance (“no way of knowing”) that is contrary to established research is not helping. Access to firearms increases the risk of suicide… it’s a simple fact.

54 Mike W July 22, 2017 at 12:21 pm

If a 16 year old gets shot in the head or in a terrible auto accident and survives it is probably because of available, exceptional and expensive trauma care.

55 GoneWithTheWind July 23, 2017 at 4:57 pm

“One area to watch for the next generation is diabetes, to compare how different countries attempt to handle what is to a significant degree a preventable problem.”

Not true! Diabetes is genetic. The myth eagerly propagated by many special interests is that diabetes is caused by our Western diet. It is not. The diabetes rate for Americans of Northern European descent is still the same as it was 100 years ago and as it is for Northern Europeans. The diabetes rate for American Indians is 4 times that rate and it was 4 times that rate 100 years ago and will be 4 times that rate in another hundred years. The diabetes rate for Mexicans and others of South and Central descent is 2-4 times the rate of diabetes of Americans of Northern European descent. It was 2-4 times higher 100 years ago and will be 2-4 times higher in 100 years. It is genetic!! You get it from your parents/grandparents not your food/diet.

56 Sure July 21, 2017 at 2:07 pm

Oh please. Would you prefer we adjusted for obesity which appears to track far more with culture and class than medical care? That does away with a huge amount of the healthcare outcomes differences.

Heck even natal outcomes are massively biased by differences outside of healthcare delivery and policy. For a large percentage of Americans it is immoral to abort offspring even if they are likely to exhibit extreme congenital abnormalities; in other OECD countries in excess of 90% of these offspring are terminated based on genetic diagnosis. Many other things, like single parenthood (higher in the US when accounting for cohabitation), maternal age (way more teen pregnancies and corresponding preterm births), and the like (e.g. maternal drug use) vary wildly.

And that does not even open the can of worms on genetics (e.g. Danes in the US have longer life expectancy and lower infant mortality than Danes in Denmark).


57 carlospln July 21, 2017 at 9:18 am

“Adjust for demographics, guns, and cars, and the U.S. arguably gets better outcomes across many variables, admittedly not natal”


One more time:



58 Floccina July 21, 2017 at 9:35 am

Certainly the Australian healthcare system is very good and it might be a good model for the USA to emulate, but it does not push up high life expectancy for everyone because contrary to your comment, much early death is not about healthcare but other factors. See:

Aboriginal people can expect to die more than 10 years earlier than non-Aboriginal Australians. On average, Aboriginal males live 67.2 years, 11.5 years less than their non-Aboriginal peers, women live 72.9 years, 9.7 years less [13].

Aboriginal life expectancy is so low because Aboriginal health standards in Australia are now so bad that 45% of Aboriginal men and 34% of women die before the age of 45. 71% die before they reach the age of 65. [8]

When considering life expectancy remember that it differs regionally. While the median age at death is 57 years in New South Wales, the highest for any region in Australia, in Western Australia the median age is just below 50 years. [17] Hence, to properly consider Aboriginal life expectancy statistics, disaggregation is necessary.

According to the United Nations, the quality of life of Aboriginal people is the second worst of the planet—only China rates worse [10].

Source: https://www.creativespirits.info/aboriginalculture/health/aboriginal-life-expectancy#ixzz4nTN1Viae


59 Boonton July 21, 2017 at 9:51 am

Interesting person to read here is Gary Taubes, Good Calories Bad Calories. The “diseases of civilization” was the observation that Europeans and Americans started suffering from a host of conditions like heart attacks, diabetes, cancer, etc. that were almost totally invisible in native peoples. It would be common to have notes from colonies and missions where a doctor would see thousands of native patients and never encounter a cancer, obesity, or diabetes but see it all the time among colonists.

After a while of sustained contact, though, the amazing health of native people vanished and these ‘diseases of civilization’ appeared often with a vengeance hitting them harder than their ‘civilized’ peers. The culprit is probably refined sugars and carbs.

So it isn’t so much that the Australian health system isn’t doing well by Aboriginal people. It probably is doing quite well. If you took away the insulin, diabetes medication, BP medication provided their health would be even worse. It’s that Australian civilization hasn’t done well by Aboriginal people.

60 Jim Swindle July 21, 2017 at 10:19 am

Boonton makes the useful point that native peoples didn’t have much cancer or heart disease or diabetes. However, that doesn’t necessarily mean that the native people had amazing health. Is there evidence that native peoples (in Australia or elsewhere) had better over-all health or a longer life expectancy before their contact with western civilization?

61 Boonton July 21, 2017 at 11:12 am

Before the introduction of ‘civilizational diets’ yes. That might be why Native people’s get it worse. English colonists had already grew up under a diet with more refined carbs and sugars (as well as beer, wine and spirits in huge quantities). Those exceptionally sensitive to it would have already been ‘weeded out’ so to speak. As civilization advanced and grew carbs and sugars got cheaper and cheaper. While we’ve all gotten fatter and more prone to chronic diseases, native peoples were even more vulnerable.

62 Bob from Ohio July 21, 2017 at 12:19 pm

“host of conditions like heart attacks, diabetes, cancer, etc. that were almost totally invisible in native peoples”

I bet “cave men” didn’t have those conditions either.

These “natives” were living a prehistoric lifestyle so they had prehistoric health.

63 carlospln July 21, 2017 at 1:09 pm

Points taken [all of your’s] on the aboriginal population, but you are focusing on 2.8% of the total, & moreover, one that will become extinct within half a century, for reasons that drive the demographics you cite.

64 Art Deco July 21, 2017 at 4:11 pm

Boonton makes the useful point that native peoples didn’t have much cancer or heart disease or diabetes.

They die of infectious ailments before any of these kick in and when they are attacked by one of the foregoing, it is not diagnosed as such.

I had an aunt who insisted our family was oddly cancer prone. My mother pointed out to her that the median life span of the deceased among last several generations was been about 85 years. (“You gotta die of something”).

65 Boonton July 21, 2017 at 5:13 pm

No it’s not simply a matter of ‘infections’ killing native people early. Yes you have to ‘die of something’ but the metabolic diseases are clearly associated with the diets that civilization bring.

66 Viking July 21, 2017 at 6:31 pm

Floccina, you disappoint in your innumeracy, also the other posters:

For your second and third paragraph both being true, the 55% of aboriginal males that survive past 45 years must average 85 years at death.

67 GoneWithTheWind July 23, 2017 at 5:13 pm

Let me explain why “That might be why Native people’s get it worse” seems to make sense.

Diabetes is genetic, pure and simple. It is a disease that can be ameliorated by eating a low carb/low sugar diet that was high in protein and fiber. By chance a “native” diet for those who lived that lifestyle was low car/low sugar diet that was high in protein and fiber. Thus this genetic population lived long enough to pass on the fatal genes. Whereas a population that lived by farming and refining food ate a high carb/high sugar diet somewhat lower in protein and fiber. The result was some number of those in this population with the diabetes genes died young or were sick as young adults before they could pass on that fatal gene.

If you have diabetes following a diabetic diet can improve your health and extend your life. If you do NOT have diabetes eating carbs and sugar will not give it to you. Simple as that.

68 GoneWithTheWind July 23, 2017 at 5:04 pm
69 Bill July 21, 2017 at 9:50 am

OECD data are age adjusted, so the claim that demographics explains it is misleading. We do have cars, they do too, and, as for guns, I guess you’re saying that guns account for all the expenditures.

We do spend much more on pharmaceuticals, which was left out of the “guns and cars” claim.

Go to other OECD data for demographic comparisons.


70 Random Critical Analysis July 21, 2017 at 10:03 am

Some researchers associated with the CDC recently published a paper wherein they estimated the effect of these accidents on comparisons with other developed countries. Although these factors don’t, in and of themselves (there are other important differences), explain the entire gap with the modal EU country they put the US within spitting distance of a good number of them. Amongst the reasonably developed OECD countries there is ~0 correlation between NHE and life expectancy, likely due to combination of rapidly diminishing returns in NHE and some substantial confounds between countries, so imputing “quality” from life expectancy differences is likely a fools errand.


71 Ken Schulz July 21, 2017 at 11:36 am

Restriction of range is mainly what drives the correlation towards 0, that is, health care is of high quality in all “reasonably developed OECD countries”, and expenditures as a fraction of GDP also fall within a rather narrow range. Given how product-moment correlation works, correlation in such cases will always be low, and other factors, and randomness, will appear to dominate.

72 Bill July 21, 2017 at 2:34 pm

Random, You appear to be mixing apples and oranges. You are looking at data and are basing your claim on LIFE EXPECTANCY.
The discussion is about COSTS.

73 Bill July 21, 2017 at 3:33 pm


Here is the cost data comparing US with OECD from the source above:

“ Share of GDP: The share of GDP allocated to health spending (excluding capital expenditure) in the United States was 16.4% in 2013, compared with an OECD average of 8.9%. This has remained unchanged since 2009 as health spending growth matched economic growth.
 Per capita spending: United States spent the equivalent of USD 8713 per person on health in 2013, compared with an OECD average of
USD 3453. Public sources accounted for 48% of overall health spending, compared with an OECD average of 73%”

74 Boonton July 21, 2017 at 10:10 am

The argument is we play with cars and guns more than other nations do. If someone gets into a car accident or gets shot you can’t really say his physician didn’t do a good job with the guy’s yearly physical.

So back out all car and gun deaths in both nations and see what the ‘outcomes’ look like then.


75 Floccina July 21, 2017 at 10:30 am

Here is another interesting point, the Gap between Denmark and Italy in life expectancy is about as big as the gap between Denmark and the USA but few people contend that Italy has better healthcare than Denmark.


76 Random Critical Analysis July 21, 2017 at 10:38 am

Precisely many of these richer northern european countries spend much more than the poorer southern european counterparts (2x more in some cases) and see worse life expectancy (and certainly not appreciably better), yet it is almost never discussed as an indictment of their health systems and few seem to be curious about why this might be.

77 Colin July 21, 2017 at 3:49 pm

That’s a great point. Anecdotally my wife is Spanish and a physical therapist who works here in the US. She talks a lot about the training and overall state of the PT profession being much more advanced here than in Spain, where PTs are traditionally seen more as glorified massage therapists. Yet Spain has one of the highest life expectancies in the world. Now, who knows, maybe Spanish medicine and its overall health care system is superior in every other way besides physical therapy to that of the US, but I rather doubt it.

I’ll also note that my father is a former dentist in the US Army, and when I was in middle school we visited Aldershot, England and met a US military dentist who was based there as part of an exchange program with the British military (my father was considering applying for the program). The US dentist said the state of UK dentistry was a joke compared to that of the US. Now, this is just one small slice of health care, but it’s worth noting the UK has a life expectancy about two years greater than that of the US.

78 Random Critical Analysis July 21, 2017 at 4:18 pm

> You appear to be mixing apples and oranges. You are looking at data and are basing your claim on LIFE EXPECTANCY.

You were responding to Tyler who was talking about “outcomes”, i.e., life expectancy and related measures, and this is where guns and the like, which you alluded to, are particularly relevant (I don’t think the disease burden actually has much impact on NHE per capita)

> Here is the cost data comparing US with OECD from the source above:

Yes, I am aware of the NHE share of GDP. My blog post, which Tyler cited, discussed this issue at length. If you read the post you might have noticed that, according to OECD statistics, the variance is much better explained by differences in volume of care than price differences. Rich countries actually consume a lot more health care in real terms and the US is no exception.


79 RodneyBrown July 21, 2017 at 10:01 am

And fatness/fitness.

It’s fair to criticize the USA for these lifestyle choices (but be careful not to fat shame!) but they are lifestyle choices not healthcare system effects (maybe some small feedback as the costs aren’t born).

Free markets aren’t fat free.


80 Alan Goldhammer July 21, 2017 at 10:02 am

It’s not just the demographics but how one looks at the data. TR Reid did this just over a decade ago in a great book, “The Healing of America,” where he looked closely at several different countries health care systems (Canada, UK, Germany, France, Japan and even India) and how they delivered care that was in some cases better and some worse than the US. Japan was an interesting case in that citizens have more doctor visits per year than any other country looked at. Even so their costs per capita are 1/2 of the US. Reid was able to get great massage therapy for his ailing shoulder in India but it was preceded by a required horoscope reading! Maybe we should do more of the latter in the US.


81 Thor July 21, 2017 at 2:25 pm

I see a tall dark masseuse in your future!


82 yenwoda July 21, 2017 at 10:40 am

Guns and cars drive up expenses in the US to some extent – that seems fair. But we should be careful about cherry-picking out higher risk factors for Americans and leaving in higher risk factors for Europeans, like greater alcohol consumption.


83 Pshrnk July 21, 2017 at 10:53 am

American’s high consumption ethos and opioids do not mix well.


84 mulp July 21, 2017 at 1:19 pm

Only in the US would conservatives be big supporters of ads offering treatment for “oic” with a high profit patent protected drug.

Oic- opiate induced constipation.

High profits creates Wealth! If it creates wealth, it’s virtue.

85 Random Critical Analysis July 21, 2017 at 4:31 pm

The argument isn’t that guns etc drive up costs so much as they drive “outcomes” down (as in, life expectancy->down, mortality->UP, etc). Non-excessive alcohol use doesn’t seem to have a big impact on mortality either way (not as compared to obesity, smoking, etc) and, in fact, the simple correlations often run in the other direction in the US and, as I recall, in some international comparisons.


86 mulp July 21, 2017 at 1:08 pm

In other words, the US delivers great results for a nation that promotes the economic system of Africa and Asia along with the corporate treatment given workers in Africa and Asia and the rule of law of Africa and Asia.

Incomes leading to malnutrition of tens of millions.
Workers harmed in workplace, death and injury, and communities harmed by businesses, pollution mostly.
And then resolution of disputes with violence.

Plus denial of access to medical care based on not having money, just like Africa, except for dire emergencies.

Poor communities in the shadow of Houston refineries are like poor communities in Africa and Asia near refineries and chemical plants. Eg Bhopal stands out only due to the density around the plant increasing the number of victims, while in the US policies like zoning keeps the victim count down.

Public policy in the US allows corporations to place profits above safety unless specific laws force paying workers to provide safety. In the US, not paying workers is called job creating. Ie, it creates more jobs if mines are unsafe due to fewer workers paid and then blow up killing workers. It creates more jobs by not paying workers to maintain correct water chemistry thus causing lead poisoning from lead leaching from old piping that is not replaced because not paying workers to maintain century old infrastructure create jobs.


87 AO July 21, 2017 at 8:55 am

@rafael. Well the only articles I’ve seen use “life expectancy” as a broad measure of healthcare outcomes. So a common one liner is “the US spends more for a lower life expectancy.” But it’s not clear to me that this is a good measure because it ignores Quality of Life as just focuses on quantity. Many expensive, chronic diseased like multiple sclerosis are associated with about normal life expectancy, but potentially poor quality of life.

In general, it’s hard to make apples-to-apples comparisons of health outcomes across countries because two countries have very different baseline health characteristics to begin with and often even have different diagnostic and treatment criteria for the same disease.

This is complicated by the fact that outcomes are strictly related to costs. E.g. UK has lower healthcare spending on cancer treatments. However, 5-year survivals for many cancers in the U.K. are lower than the US. So the costs may be lower simply because U.K. Patients are accruing costs over a shorter period of time.


88 Colin July 21, 2017 at 10:22 am

it’s hard to make apples-to-apples comparisons of health outcomes across countries

Heck, it’s hard to make comparisons across states. The difference in life expectancy between Hawaii and Mississippi is 6 years:



89 Floccina July 21, 2017 at 10:33 am

That is some interesting data, thank you for linking that.


90 Random Critical Analysis July 21, 2017 at 10:34 am

Also the differences between states, countries, etc are (1) massive (2) very poorly explained by any observable characteristics relating to insurance status, health provision, etc (3) quite well explained by life style factors/indicators (e.g., obesity rates, smoking rates, etc). I touch on these more controversial topics at some length elsewhere in my blog if you’re interested….


91 FXKLM July 21, 2017 at 10:33 am

Sadly, quality and availability of healthcare has not a surprisingly small impact on measurable health outcomes. Poor U.S. health and life expectancy isn’t really an indication that our healthcare system is bad. It just means that healthcare doesn’t matter nearly as much as we would like to think (which is why I care more about reducing costs and less about improving access than most people).

There is a psychological need to overestimate the value of healthcare. Everyone wants to believe that healthcare matters because it gives them an illusion of control over their own life expectancy, which helps us cope with our fear of death.


92 mulp July 21, 2017 at 1:29 pm

The way to reduce costs is to reduce the drivers of cost outside the medical area.

For example, eliminate the various pollution sources, like the refusal to pay workers to fix water processing and distribution systems because paying workers kills jobs and destroys wealth.

Like the refusal to pay workers to build capital assets producing and delivering energy because that kills jobs so it’s better to burn capital and pollute, and to increase the pollution by cutting the workers paid burning capital in order to create jobs.


93 Axa July 21, 2017 at 8:39 am

Drug ads on TV, doctor ads on glossy magazines. Consumers should only care about this when they’re sick but there’s value in boasting about being treated by the “best” doctor. Why should doctors leave money on the table when consumers want health care AND feel special?


94 WC Varones July 21, 2017 at 8:39 am

This sidesteps the issue that low-cost options such as catastrophic insurance plus transparently-priced fee-for-service aren’t available due to bad policy.

Health care costs are a crisis, not a “meh,” for middle-class families who don’t have employment coverage.


95 carlospln July 24, 2017 at 7:01 pm

Government granted monopolies to Big Pharma and medical equipment manufacturers strangle affordable, competitive pricing.

Additionally, other pricing cartels (hospitals, pharmacy benefit managers, and insurance companies) squeeze US citizens for every dollar they can get through huge administrative fees, pricing opacity, the perversion of billing practices, and the market power that comes with unfettered consolidation.

The problem with Obamacare, healthcare before Obamacare, and the Trump plans is that they do not address the obscene cost of U.S. healthcare which results in worse outcomes than the rest of the developed world and at double the cost.

The U.S. healthcare market is bursting with pricing power distortions all arrayed against the consumer.

Cowen is either a) insane, or b) a whore for the healthcare industry.

Which is it TC?


96 Thiago Ribeiro July 21, 2017 at 8:46 am

Americans are particularly afraid of death because their lives are meaningless. It rises the prices for all healthcare and poor people can not,pay for it. It is the paradox that drives Americans on. If Americans’ lives were more meaningful, they would be able to see that to die can be an awfully big adventure.


97 Scott H. July 21, 2017 at 9:00 am

I like it. Instead of subsidizing health care, I propose we provide free “Death is just a big adventure” classes at the local community college. Problem solved.


98 Nick July 21, 2017 at 9:56 am

There has never been a society with more nihilism and more hatred of its own culture than modern europe


99 The Other Jim July 21, 2017 at 10:17 am

Give it one more generation – there won’t be any culture left to hate.


100 Lanigram July 22, 2017 at 12:27 am



101 FYI July 21, 2017 at 12:25 pm

There is no culture that fears death more strongly than latino culture. I speak from experience. Just go to a funeral in Brazil and one in the US to see the difference.


102 Thiago Ribeiro July 21, 2017 at 12:38 pm

What I see in Brazilian funerals is highly dignified mourning and longing after the deceased, it is not a coincidence we have the word “saudade”, we among all peoples in the world feel it the most. But is not the American fear of death or fear of acknowledging mortality. It is almost unheard in Brazil. There is a reason Brazilian soldiers used to fight if when badly outnumbered by mwrciless enemies.


103 FYI July 21, 2017 at 12:43 pm

You have to be joking. Latinos are obviously more emotional and love drama in all aspects of life. How that correlates to “fear of death” might be debatable, but to say that a funeral in Brazil is “dignified” is a joke. It is a soap opera.

And to say that Brazilian soldiers are braver than Americans is just ridiculous. There is not even a way to compare since Brazil has never fought a war in large scale (the “contribution in WW2 was very tiny, especially when compared to the country population).


104 Thiago Ribeiro July 21, 2017 at 1:06 pm

Maybe your family’s funerals are soap operas (which, if Brazilian soap operas are the standard and what I read about them is true, I suppose involves more sex and gossip than drama), not my family’s or my friends’ families’.
Even facing a soulless enemy who did not hesitate at sending its own children to death rather than stop trting conquer Brazil, Brazilian soldiers, even when outnumbered, behaved with unmatched gallantry. Rich, poor, free men and slaves, all alike fought with no respite. There was never something like fragging officers or refusing to be draft. Retreats were few and most of them were epic affairs like the Laguna Retreat, much more impressive than the Long March, surrendering was basically unheard of. When the Paraguayan enemy started its surprise invasion, Brazilian soldiers outnumbered by hundreds to one chose to cight to death instead of surrendering. “I know I die, but my blood and that of my fellows will be a solemn protest against the invasion of the soil of my Country”. As an old Brazilian poem says, “Fear not Death, Death will come anyway”. Aside Sparta, where to find such a people?

105 tonycohen July 21, 2017 at 11:38 pm

Am I really reading two people go back and forth arguing the relative dignity of a funeral between cultures because one person saw one, and the other’s personal family experience didn’t mesh with what the other saw…There are plenty of other blogs for this kind of exchange….

106 Thiago Ribeiro July 22, 2017 at 8:48 am

“There are plenty of other blogs for this kind of exchange…”
Which ones?
“Am I really reading two people go back and forth arguing…”
1:06 PM –>11:38 PM ”

107 Tom July 21, 2017 at 8:47 am

I wish more healthcare analysts would study other countries than just Canada and Western Europe. Bloomberg and Brookings come out with a healthcare rankings of nations and the single payer type countries the Krigmans’ of the world want to emulate get beat out by Taiwan and Singapore – even though people, men particularly – smoke like chimneys there. There healthcare systems are run much more live free market types advocate.


108 Todd July 21, 2017 at 9:38 am

Singapore? Free market health care?


109 mulp July 21, 2017 at 1:43 pm

Government run hospitals and forced payments for health care are clearly free market when ordered by authoritarians who are seen as corporate managers. After all, Singapore is a corporate charter created by the British Crown.


110 Ricardo July 21, 2017 at 1:42 pm

Taiwan has single-payer and Singapore recently changed its system so that government-provided health insurance is now mandatory for all citizens and deductibles are lower.


111 Thiago Ribeiro July 21, 2017 at 1:54 pm

Except for that.


112 WC Varones July 21, 2017 at 8:48 am

& I strongly support the high cost of small-company coverage is a major factor in the death of small-company entrepreneurship.


113 WC Varones July 21, 2017 at 8:49 am



114 mulp July 21, 2017 at 1:52 pm

Its never been easier to start a small business!

Acquire capital assets, sign up with Uber and you are a small business transport provider. Or sign up with Lyft.

Acquire assets, sign up with airbnb and now you are a hospitality business.

Acquire assets and sign up with Taskrabbit and you are now a handyman business mowing laws, dog walker, messenger business, manufacturing final assembler business, …

You are repeating the whining of those in business to do the legal work of filing dba’s, taxes, etc. with governments.


115 davis July 21, 2017 at 8:52 am

“To put it most simply, we Americans spend a lot on health care because we spend a lot period” TC

…the unanswered question –> is that spending economically efficient (output/input) under the circumstances ?

“If you think health care is expensive now — just wait ’til it’s free !” – P.J. O’Rourke


116 Brett Dunbar July 21, 2017 at 8:53 am

The US has a reputation for overspending on futile care. Spending excessively on very ill patients who are going to die very soon anyway or if they live will have negligible quality of life. Most other systems move to palliative care at a somewhat earlier stage. The US system provides the medical staff with a financial incentive to try any possible treatment even if it has no real prospect of benefiting the patient.


117 prior_test3 July 21, 2017 at 9:00 am



118 Adam July 21, 2017 at 9:09 am

Bingo. The entire healthcare system is motivated primarily by insurance companies (who add zero value) and hospitals desire for maximum profit. I believe most of the actual providers (doctors, nurses, etc) do actually care about their patients and aren’t trying to fleece them, but the incentive structure is all screwed up.


119 Daniel Weber July 21, 2017 at 10:09 am

If insurance companies really were trying for “maximum profit” they would be turning down those useless end-of-life procedures.

This is where Ezra Klein would rase his hand and say the problem is that insurance companies aren’t strong enough.


120 Hazel Meade July 21, 2017 at 10:14 am

Duh. And why is it the insurance companies can’t say no to anything, eh? I wonder if this has something to do with government regulation.

121 Adam July 21, 2017 at 11:13 am


The insurance companies might want to turn them down, but the hospital doesn’t. If they aren’t providing services, they aren’t billing insurance. The doctor may also think it’s a waste, but that goes back to Brett’s point that the doctor’s have no incentive NOT to provide the service.

122 Daniel Weber July 21, 2017 at 12:02 pm

Yes, that’s the primary objection to “fee-for-service.”

And even if there wasn’t a financial incentive, there’s a big culture of “do everything you can.” Doctors do everything they can to make sure they themselves are not subject to this, regardless of paying for it. https://www.thehappymd.com/blog/bid/295228/How-Doctors-Die

123 Jeff R July 21, 2017 at 10:22 am

“insurance companies (who add zero value) ”

Why do people keep buying health insurance, then?


124 charlie July 21, 2017 at 9:05 am


Rather like the crisis in the 1970s with patient falls and deaths.

You rack up 90% of medical costs in the last six months of life. Not to mention nursing homes.


125 Hazel Meade July 21, 2017 at 10:13 am

This is only part of the problem. The other part is that patients have no financial incentive NOT to try any possible treatment, because it’s all being covered by insurance, via either medicare, or an employer based plan, or (now) a community rated ACA plan. This is a problem that is if anything worsened by the ACA because it bans lifetime limits and annual maximums, mandates maximum out-of-pocket costs, and disconnects health insurance premiums from health care consumption. Because the patient is protected from the actual cost of their treatment, they might as well allow the doctors to try anything.
Absent this problem, the patient might have to consider things like whether they want to spend the kids inheritance, in end of life situations. Right now, someone else always pays for it, someone else with no name and no face.


126 Fazal Majid July 21, 2017 at 11:03 am

Those same incentives also apply to Western European countries, and yet they haven’t seen their costs explode like ours. It’s also a fairly recent phenomenon, the divergence started around 1980.



127 Hazel Meade July 21, 2017 at 2:06 pm

Do they? IIRC other countries ration care in various ways. There are ultimately limits to how much of other people’s money you can spend, because the government will eventually say no.

Our entire system is rigged to make sure that nobody paying for treatment is allowed to say no, ever.


128 Hazel Meade July 21, 2017 at 2:07 pm

I mean the people’s pocket the money ultimately comes out of cannot refuse to do so. I.e. young healthy people and the insurance mandate.

129 mulp July 21, 2017 at 2:07 pm

Don’t try to use facts to argue that since Reagan set off rising conservative Republican control of public policy, US health care economics have diverged from the norm in a bad way!!!

Reagan promised free lunch public policy that would shower Americans with so many free lunches, every American would soon be a millionaire.

And every lunch would be free except for TANSTAAFL liberals who won’t believe in free lunch medical cures. If no one is paid for treating cancer, there will be no cancer! If no one is paid to treat diabetes, there will be no diabetes. If no one is paid to treat black lung or lead poisoning, there will be no environmental hazard from rock dust, or lead in air and water.


130 Hazel Meade July 21, 2017 at 2:27 pm

If we let cancer patient die sooner, it will cost less. That should be pretty straightforward. You can make an argument that it’s immoral not to make heroic efforts to save the lives of every last cancer patient, up until the very last minute, but it’s pretty silly to argue that not paying for cancer treatments won’t save money.

I just wish people would stop pretending that screaming “health care is a right” isn’t effectively an argument that people have a moral right to spend infinite amounts of other people’s money. Otherwise, what is the right good for if some government advisory panel decides that your right is getting too expensive?

Do not that I’m not arguing AGAINST such a panel, I’m highlighting the contradiction between the concept of a right to health care, and the imposition of rationing of health care. In other countries, they seem to have resolved the problem in favor of rationing, but in the US , the advocates of universal health care consistently pretend that limits shouldn’t exist.

131 edgar July 21, 2017 at 10:55 am

It is a common misconception that the end of life care spending is higher in the US than elsewhere. Thoroughly debunked here: https://www.pennmedicine.org/news/news-releases/2016/january/cost-of-endoflife-care-in-


132 edgar July 21, 2017 at 10:57 am
133 Random Critical Analysis July 21, 2017 at 11:27 am

That may well be the US reputation, but the best available evidence tends to suggest skewness, share by age, income, etc are very similar to other developed countries.


134 Edward Burke July 21, 2017 at 9:02 am

Is it not also the case that the US health care system’s pharmaceutical industry absorbs (all? most?) R&D costs that get passed on to Americans (in both public and private sectors) but which (never? seldom?) get passed on to non-domestic health “markets”?

Doesn’t the US thereby subsidize pharmaceutics for the entire planet? (–or how does this measure against other countries’/blocs’ pharmaceutical R&D contributions?)


135 mulp July 21, 2017 at 2:59 pm

What R&D do drug companies pay for?

Is it really R&D when giving drugs to patients outside the US in controlled studies with data collected by approved methodologies by non-US workers often not paid by drug companies to provide data demonstrating the drugs do not kill patients?

Is it really R&D when employing past government methodology of scattershot random low cost tests to screen for possible drugs?

A lot of what is done is more like machine automation on a larger scale than what government funded MIT engineering students and professors developed. Most machine tools are controlled by g-codes developed originally at MIT to demonstrate computer controlled machine tools. The limits of both machine tool design and computer processors constrained the g-code language, but rather than industry doing R&D to find a better framework for communicating with machines, lots of bandaids have been applied, until additive machines gained enough capability to exceed the capabilities of g-code. But industry has not developed a new language for the new era, so it’s like going to a new nation and learning a new language to gain access to secret methods of their natives.

NIH and other government funding has invented and innovated new methods of drug discovery, with government promoting their use and application through to new drug classes. US drug companies have focused on creating monopolies to enable rent seeking because you can’t create wealth by paying workers to build capital and then paying workers to produce drugs that sell at prices just high enough to pay all those labor costs. That would be like paying an Uber transportation contractor just enough to pay him $8 an hour and to pay for buying the car and paying for gas and tires and cleaning. Just like farmers need government payments, Uber must pay it’s contractor capitalists to start a business, because Uber “drivers” can’t create wealth, but at best only pay all the labor costs of the auto workers to farm workers to keep the Uber car owner driving for no profit.

No economic profit means no wealth creation. No something for nothing.


136 mike July 21, 2017 at 9:04 am

I was hospitalized in Amsterdam a couple of months ago, emergency basis, hospital with outstanding reputation. Three nights in hospital, massive number of tests to determine source of fever, IV anti-biotics, 3 units of blood transfused, 2 units of platelets, 1 or more visits by doctors each day — bill was 2400 euros. No special deal, that was their charge. Because of my physical condition, i frequently have transfusions (2 units) in my local US hospital on an out-patient basis — charge each time is around $8,000 (fortunately covered by my insurance). Any thoughts on reason for dramatic difference in price?


137 prior_test3 July 21, 2017 at 9:08 am

American exceptionalism.


138 celestus July 21, 2017 at 9:27 am

Because you paid the 2400 euros but the $8k was covered by your insurance.


139 Slugger July 21, 2017 at 10:19 am

The organizations that get blood from volunteers, process it, and provide it to hospitals charge those hospitals a little more than $900 per unit. That is the actual cost to the hospital. In Germany this product costs $150, and in the UK it is $100. This is a lot like the prices for pharmaceuticals. Healthcare has almost no features of an open market with no transparency of prices, closed entry to competing vendors, and the buyer often not in a position to just walk away. In this closed monopolistic system the providers of a service you can not do without will maximize their income stream. This is just sensible business behavior on their part.


140 Alsin July 21, 2017 at 11:39 am

That is a great data point. Thanks.


141 mulp July 21, 2017 at 3:04 pm

So, you are arguing that in Europe the health care system is free market, but the US is government restricted?

Wouldn’t that mean adopting European health care laws would be liberty creating, freeing Americans from US government health care dictates?

Ie, in Europe, no mandates to buy private insurance, so Europe provides more liberty?


142 Jeff R July 21, 2017 at 9:04 am

To put it most simply, we Americans spend a lot on health care because we spend a lot period.

File under “speculative.” When buying cars and appliances, Americans are at least spending their own money. Healthcare is largely purchased with other people’s money.


143 Hazel Meade July 21, 2017 at 10:17 am

This is the correct answer.


144 prior_test3 July 21, 2017 at 10:32 am

How? Germans also spend OPM, so to speak, and are more than welcome to spend their own money too.


145 Hazel Meade July 21, 2017 at 10:51 am

Can Germans spend as much of other people’s money as they want, on anything their doctor thinks might help?


146 prior_test3 July 21, 2017 at 1:03 pm

Of course not – and neither can Americans. As a matter of fact, nobody in the world has that privilege.

147 prior_test3 July 21, 2017 at 1:08 pm

Sorry – the doctors may be in a slightly different position. However, in Germany, of course the doctors are not allowed to spend as much money as they wish – ‘the gods in white’ as they are referred to are not actually in charge of such monetary decisions.

148 Hazel Meade July 21, 2017 at 2:17 pm

Of course not – and neither can Americans. As a matter of fact, nobody in the world has that privilege.

Again, the ACA bans lifetime limits – so yes, Americans CAN spend infinite amounts of other people’s money. The restrictions on what treatments the insurance company can refuse to pay for are flimsy to non-existent. If it’s on the essential benefits list, and a doctor somewhere orders it, they pretty much have to cover it, with the exception of some treatment deemed “ineffective” by the IPAB . And the IPAB is politicized to all get out – they aren’t going to tell US voters they can’t have any treatment they want. US citizens outnumber health insurance companies by a wide margin.

So, not you are totally wrong about this – the whole point of the PPACA is to rig the system so that people CAN spend infinite amounts of other people’s money.

149 prior_test3 July 21, 2017 at 2:48 pm

‘Again, the ACA bans lifetime limits’

First, everyone dies – let us start with that extremely basic fact. Second, this just gets strange to discuss – an AIDS patient in Germany has access to all the medications necessary to reduce (if not effectively eliminate if viral load is considered as a measure) the further spread of that disease. This will be true until the end of their life (one assumes), regardless of how much those medications may cost. And the reason is to save money, not spend it. Saying that there is no limit for an organ donation procedure and following rejection reducing medication is simply not the same things as saying ‘infinite cost.’

Now, if you wish to argue that the U.S. is so screwed that American society is simply incapable of being able to handle health care the way it is in all other comparable societies (cheaper, and with effectively universal coverage), then I am on board.

‘so yes, Americans CAN spend infinite amounts of other people’s money’

Actually, no they cannot. Medicare does not hand you a blank check to spend – which makes me suspect you are not familiar with anyone older than 65 in the U.S. using Medicare.

‘they aren’t going to tell US voters they can’t have any treatment they want’

Again, this goes back to the point concerning American society.

‘the whole point of the PPACA is to rig the system so that people CAN spend infinite amounts of other people’s money’

See the point about Medicare – this is simply not true.

150 mulp July 21, 2017 at 3:38 pm

So, Obamacare banning lifetime limits caused employer health care costs to increase 100% while Bush was president, but by only 50% while Obama was President?

And does creating jobs that pay well in health care kill jobs? Do health care workers burn all the money they are paid ensuring auto workers to food workers become unemployed because people who become health care workers stop buying cars and food like the unemployed buy cars and food paying workers in those sectors?

US health care is a bigger share of gdp because doctors have not been forced onto food stamps and into subsidized housing like food workers have. If doctor wages were capped at $8 per hour at each part-time job prevising no benefits, US health care would cost a lot less just like food in the US costs a lot less than in other developed nations. Food in the US is about two-thirds the share of gdp and household income as in Europe and Japan. That great US cost cutting is accomplished by putting food workers on public assistance in large numbers.

151 Boonton July 22, 2017 at 8:12 pm

Again, the ACA bans lifetime limits – so yes, Americans CAN spend infinite amounts of other people’s money. The restrictions on what treatments the insurance company can refuse to pay for are flimsy to non-existent. If it’s on the essential benefits list, and a doctor somewhere orders it, they pretty much have to cover it,

This is a model myth. You cannot spend an ‘infinite amount’ of money on your healthcare. Steve Jobs died with plenty of wealth. He would have happily spent it several times over to gain even an additional year. Yet he died despite the fact that he had assets in the billions. How did this happen?

Because the number of medical treatments available are finite, their usefulness is limited and as you get close to the end of life some simply become unavailable because they will kill you before they fix your disease. There are people who have cancers killing them who cannot take the chemo that would help them because their bodies are so weak the chemo would kill them faster than the cancer would unchecked. Unlike other goodies no one really wants to spend an infinite amount on health care. They would rather spend less and not need medical intervention if possible.

It is true we spend a lot more in the last year of life on health than most of our other years. That’s the old 80-20 rule. Most of the time your medical interventions will be nothing or very limited….except when they aren’t. Most of the time you’ll pay for life insurance…but the one time you won’t is when the life insurance company is paying out big for you….but that’s only 1 out of many transactions between you and the life insurance company.

Anyway the ‘lifetime caps’ the ACA banned are important for some people but not critical to the overall cost of health care. If you have millions of expenses and you’re not dead or soon to be dead, odds are you will not be keeping your job much longer and will probably be on disability (which gets you into Medicare after two years).

152 Hazel Meade July 23, 2017 at 11:42 am

So here we have prior insisting that Medicare isn’t a blank check, and Boonton saying the reason you can’t spend infinite amount on health care is because there are physical limits to what is possible.

These two position are not entirely consistent. Medicare doesn’t cover 100%, but it does cover 80%. And 80% of infinity is still infinity.
Do note that I don’t literally mean inifinity, I mean, there is no numerical maximum, no point at which the government decides that enough is enough and the government won’t pay for treatment beyond that point. It will pay when is in the medicare price schedules and it will keep paying until you die.
As far as the ACA is concerned, for a person under 65, who has terminal cancer, same thing – you can keep getting treatment and have other people pay for that treatment, until you die. No insurance agency or government panel will step in and decide that treatment is not going to be covered – except for experimental or treatments deemed “ineffective”.
Americans have a problem with the idea that anyone anywhere will deny anyone treatment on the basis of cost – whether it’s because they can’t pay for it, or because other people can’t pay for it. Again this is why the ACA is written as it is – it pushes costs on third parties, who push it into other parties, who push it onto still other parties until it winds up coming out of the pockets of health insurance consumers who are legally mandated to pay for it, or onto taxpayers, who are legally mandated to pay for it. The system is designed so there are no limits and nobody can ever say no.

153 Floccina July 21, 2017 at 9:17 am

Canada 2014 per capita healthcare spending $6,045
per person in Utah 2014 per capita healthcare spending $5,982.

It looks to me like a state problem. And why not, since the federal gov pays for almost 50% of healthcare there is an incentive are for states to regulate for higher quality and higher costs. Politicians also the more health care paid for by the Fed Gov. the more incentive to regulate on a behalf of there instate providers than for consumers. So the more corrupt government states in the North East costs are much higher than in places like Utah which has arguably the least corrupt state government in the US.


154 Floccina July 21, 2017 at 9:39 am

BTW it might be worth trying having the feds give the money to the states based on population and age and say you must adequately cover the old and poor. Some states like Utah might be able to cover everyone and have money left over.


155 spencer July 21, 2017 at 12:21 pm

32% of Utah’s population is under 18 compared to 22% for the US.

I suspect this biases a lot comparisons for Utah. For example,Utah is in the bottom quintile of real per capita incomes in the US.


156 mulp July 21, 2017 at 4:00 pm

Government single payer for adults who work in the US is $4000, and less for children, $2600, nationwide. For Utah, adults cost $4200 and children $2500.


Utah family structure providing care for the elderly keeps their costs to under $12,000 vs $17,500 nationwide. For disabilities, Utah costs are on par with the US.

Employer single payer and other multi payer covered persons generally exclude the poor and frail elderly, and long term disabled. While many who are disabled by cancer are covered by employers, they are are not disabled for long in the non-government single payer sector. Either they recover from disability and return to work full time, or they are booted out out of that sector and onto government single payer, mostly losing jobs and going into poverty. The exception to going into poverty is where Obamacare provides low income workers, possibly unable to work due to illness, with government single payer without going into poverty. Ie, Medicaid expansion States.


157 ʕ•ᴥ•ʔ July 21, 2017 at 9:18 am

This is surely the most complacent view possible.


158 rayward July 21, 2017 at 9:19 am

The “broader cultural difference” is the tolerance of a higher level of inequality in America. Why are physicians so highly paid in America as compared to physicians in Europe? Why are pharmaceutical companies so highly paid in America for drugs that are available at much lower prices in Europe? Why are hospital companies in America so highly paid for in-patient and out-patient services as compared to hospitals in Europe? Of course, American health care has a payment system that rewards volume not outcomes. Is that due to a “broader cultural difference” or is it due to the influence of health care lobbyists over Congress? That Americans spend so much on health care because Americans spend so much on houses is unconvincing; fat people are fat because they eat too much may be true, but doesn’t actually answer the question of why they eat too much. Americans spend so much on health care because Americans tolerate a high level of inequality.


159 Rayward July 21, 2017 at 10:28 am

Hayward, SF, close to Newark, close to Castro Valley, a castrato, a eunuch, was the site of the 1868 earthquake, that one Zimmer Man studied. The 1868 Hayward earthquake occurred in the San Francisco Bay Area, California, United States on October 21. With an estimated moment magnitude of 6.3–6.7 and a maximum Mercalli intensity of IX (Violent) – close to Verona on the 68, and the it way it could have been, if it had happened in sunnyside. the violence of noveltie, the logs , the logs on the railroad sides are railroad ties.


160 Random Critical Analysis July 21, 2017 at 10:31 am

The best available evidence suggests US physician compensation is fairly similar to other developed countries relative to average wages and that it is on trend relative to US living conditions (most people, especially the reasonably skilled, enjoy substantially higher levels of real remuneration in the US than the typical OECD country). Actual physician compensation also accounts only a few percentage points of US NHE, the presumed residual even less, so this is unlikely to explain a whole lot.


161 asdf July 21, 2017 at 2:28 pm

GPs don’t make a lot in the US, so that wouldn’t surprise me. Its the specialists that clean up. That’s part of why the HMOs always wanted to make you go to a GP first.


162 Random Critical Analysis July 21, 2017 at 2:58 pm

No questions specialists make considerably more than GPs on average in the US, but the same holds in other countries and the patterns are fairly similar.


163 asdf July 21, 2017 at 3:44 pm

The report you link to literally has the same figures for Specialists, but it doesn’t show your point, so I guess just link to the GP one again.

In any event, this is a minor quibble compared to your entire basic premise. If healthcare isn’t producing any marginal benefit its wasteful for ever growing amounts of disposable income to be spent on it. Especially when we have some strong indications of what poor market incentives there are for nearly all participants. Changing the denominator of the waste from GDP to whatever disposable income metric you prefer doesn’t change this.

164 Random Critical Analysis July 21, 2017 at 6:25 pm


I linked to GPs on accident previously. Here are specialists if you’re interested.

I am inclined to agree in some respects. NHE is subject to rapidly diminishing returns vis-a-vis mortality and that we could probably cut spending in half without seeing a large drop in life expectancy in the short run (long run might be a different story), but whether this is “worth it” is somewhat squishy and subjective. Regardless of my own policy preferences, people don’t seem to be willing to actually make much different choices as a function of material living conditions under different health care regimes. Rationing care isn’t a popular policy position, in name or in deed, and our willingness to put up with it decreases as we get richer. I am not optimistic that will change, but if there is a solution it is apt to be found in convincing people more health aggregate health expenditures aren’t worth the cost…. until or unless this happens technocratic solutions to cost containment will only work for a short while.


165 mulp July 21, 2017 at 4:39 pm

“fat people are fat because they eat too much may be true, but doesn’t actually answer the question of why they eat too much”

Well, by slashing the pay of food workers to levels requiring public welfare assistance, the US creates more jobs by lower food prices and thus promoting consuming lots more food requiring lots more low income workers on public assistance. Higher wages for food prices would kill jobs because higher food prices would discourage overeating and getting fat, reducing food demand and killing jobs.

The question is “why don’t economist call for making food consumers pay out of pocket more of food costs instead of government distorting the market with so many subsidies like food stamps, housing vouchers, government single payer, and government paying 10-20% of wages of food workers in tax credits?”

Require business pay food workers in the fields to the processing plants to the food servers incomes high enough they can drive gdp based on only their income from working. Don’t subsidize food businesses with cheap labor that must get money from government to buy enough production to prevent gdp falling from lower worker incomes. Food will cost more, but worker private sector incomes will increase, unless the US economy overall needs massive government intervention to create jobs. But the FDR intervention of government paying workers to build long term capital assets that pay for themselves is better than subsidizing food production to get markers producing more food workers eat to get fat.

Hike taxes and fees on transportation to fund paying workers to build assets that pay for themselves in 50 to 100 years. Too much focus is placed on the billions paid to Wall Street to fund debts to build the Big Dig that will be still providing significant benefit long after the rent seekers have gotten the $5 billion in economic profits from shifting payments to workers to future generations of workers.

Wall Street had lots of cash to provide the debt for the Big Dig, but also to Greece, because so much revenue is not paid to workers by businesses who depend on government making sure their production is bought by subsidizing worker incomes so workers can pay the high economic profits.

Capital investment after hurricanes is not paid for with Wall Street debt to the same degree Wall Street rushed to fund Greece debt, Big Dig debt, Jefferson County sewer debt because no structure is immediately obvious to service such debt. Thus Wall Street forces Congress to borrow to fund paying workers to rebuild infrastructure.

Trump is trying to engineer a way for Wall Street to create a trillion dollars in debt with high rents that will extract money from taxpayers to the profit of Wall Street. He’s trying to relive his glory days as a builder when Wall Street rushed to give him money to build stuff he couldn’t pay for. He fooled them too many times for them to give him money anymore.

And when it came to Trump businesses needing to pay workers to deliver high priced food, Trump used his government authority to subsidize his labor costs, rather than paying higher wages to US workers? Why didn’t Mar a Lago buy American by offering workers $15 an hour instead of significantly less to non-US workers.


166 Taeyoung July 21, 2017 at 9:22 am

I don’t know if its still true, but about 10 years ago I looked at the total health expenditures per capita for Japan and the total per capita US government expenditure on Medicare + Medicaid (capita being the entire population of the US, not just beneficiaries), and found that on a per capita basis we spend about as much on Medicare and Medicaid beneficiaries as the Japanese do on all health care (noting, of course, that they have a more elderly population that all things being equal ought to be more expensive). We spend a lot on health care. If our costs were like Japan or France, the Democrats could have had single payer in 2009 without adding a dime in taxes.


167 celestus July 21, 2017 at 9:24 am

But regardless of all the US specific lifestyle and demographic issues, we’ve roughly doubled our per capita healthcare spending since 2000 and there have only been marginal changes in health. If you told me that we’d doubled our spending on food or cars or video games since 2000 I could point to increases in “outcomes” which merit that increased spending, but where is the benefit in regards to health care?


168 mulp July 21, 2017 at 4:52 pm

Most of those cost increases occurred before Obamacare had any impact by any rules required by the law taking effect. Which occurred after the majority of the contraction (2007-2011) drove out lots of costs and economic profits in most sectors, including health care.

Today, insurance premiums in a few regions and a few markets increasing 10% is considered so much worse than every insurance premium in every sector increasing 10% every year from 2000 to 2006, reduced by the contraction that followed. But that period of contraction did not reduce premiums, nor keep them flat, but only reduced the increases.


169 Jeremy July 21, 2017 at 9:50 am

This argument seems to deflect all the valid concerns and pretend like everything’s working and everyone is just imagining that it’s broken. It’s disingenuous, at best.

Healthcare is partly a huge rent-seeking scam.

You can’t blame it on consumerism if consumers aren’t actually agreeing to the price.

And you can’t blame it on “simply an unusual allocation of fixed costs”. We have “unusual allocation of fixed costs” in other industries that consumers willingly agree to pay.


170 Jeff R July 21, 2017 at 10:04 am

Maybe the argument is a clever Straussian attempt to get consumers to change their ways. “You don’t want to be one of those people, do you? The one’s who don’t save, buy ostentatious houses and cars, then overuse the healthcare system? You’re not one of those dirtbags, are you?”


171 Hazel Meade July 21, 2017 at 2:30 pm

You can’t blame it on consumerism if consumers aren’t actually agreeing to the price.

This is why the mandate to purchase health insurance exists. To force consumers to pay for things they don’t want to pay for – other people’s health care.


172 mulp July 21, 2017 at 4:57 pm

Yep, young people will never be required to pay for old people, because they will chose to remain forever young with a bullet to the head.

The alternative is the effectively mandated conservative public policy of 10% insurance premium increase every year. That’s roughly the increase required to increase premiums for the young for continuing to live to being old and paying five times the premium as punishment for being old.


173 Hazel Meade July 23, 2017 at 11:44 am

Young people can theoretically save money for when they are old.


174 DanC July 21, 2017 at 10:24 am

In the US we treat the “incurable”. We push the boundaries of what can be treated and sometimes cured. That is expensive with only incremental advances. On the margin such care is very expensive and not cost effective, in the short run. But we also have breakthroughs and discover new treatments and cures because we take that path. (Knowledge that is quickly and rather cheaply transferred to others). If we want to say that our knowledge has reached a peak and finding new cures and treatments are not cost effective we can quickly lower costs. No matter what we do we can not defeat death and disease. If we cure one form another will quickly emerge. Many of us are grateful that earlier generations fought to find cures for “incurable” diseases.


175 NF July 21, 2017 at 10:32 am

To me this argument is a little like saying “because we consume more, we pay higher prices on computers.”

I get the sector analysis but doesn’t it follow from that line of reasoning that if we pay a higher % of our consumption on electronics than say, the UK, that we should also have higher prices in computer gear?

How does consumption spending get counted when our consumption spending on health care is more private dollars and theirs is more government dollars? Does government spending get taken out of consumption as in the GDP equation?

I love reading Cowen but I believe he tends to have a “everything as is for a great reason” bias.


176 Random Critical Analysis July 21, 2017 at 11:06 am

See my reply below… somehow managed to reply to the post instead of to your comment.


177 mulp July 21, 2017 at 5:09 pm

In computers we pay less these days because many fewer workers are paid in the computer sector.

When the computer sector was greeting lots of jobs, spending on computers was increasing rapidly, and economies of scale were cutting the unit price enough to increase unit consumption faster than labor costs were reduced.

Free lunch economists try to apply that growth in spending on computers from 1940 to 2000 to food. But lower labor costs per unit of food in the price of food has increased food consumption to create lots of fat people, but not enough to increase food jobs or food revenue. Since 2000, computers have been more like food; reduced labor costs and marginally lower prices does not increase units enough to prevent job losses and revenue declines.


178 Random Critical Analysis July 21, 2017 at 10:53 am

Both Actual Individual Consumption and Adjusted Household Disposable Income very much include public expenditures on health, education, and the like. The only type of consumption they exclude is *collective* consumption, like military, courts, executive branch, etc, things which cannot be credibly attributed to individual households at a conceptual level (in other words, non-rival and non-exclusive public goods), an area where the US is not a real laggard overall either.

If you’re curious about these measures and the issues involved with using GDP as an indicator of the sort of *material* living conditions actually experienced by individuals in a country I highly recommend you read this long report by Joseph Stiglitz, Amartya Sen, and other noted conservative ideologues (sarcasm). Although I, for one, believe culture may play some modest role on the margins here, much of this also relates to fundamental differences in economic structure between countries. For instance, Norway is engaging in a great deal of consumption smoothing because much of their GDP is derived from finite oil and gas reserves whereas most countries aren’t quite in this same boat. AIC and the like allow us to remove these largely extraneous factors and better estimate how much NHE is attributable to actual differences between domestic health regimes (vs other economic differences, propensity to consume, etc)….


179 Random Critical Analysis July 21, 2017 at 11:17 am

I’d also like to point out that I ran principal components analysis on sector level expenditures. Across multiple dimensions, with different measures (PPP adjusted and actual volume estimates), and different methods (as in, share of consumption vs per capita expenditures, scaled vs unscaled dimensions, etc ) the primary component tends to correlate exceptionally well with AIC per capita and much worse with GDP (and AIC fully mediates GDP in OLS). Similar patterns are also found with the individual measures (as in, simple correlations and OLS on them individually). These patterns *not* just specific to health care and the data suggests the allocates of AIC in the US are highly consistent with what we’d expect to find in other OECD countries of similar means.


180 Random Critical Analysis July 21, 2017 at 11:18 am



181 Jack July 21, 2017 at 10:58 am

Very thought provoking article. Thank you.


182 edgar July 21, 2017 at 11:02 am

“we would be better off if we had a less consumerist, more philosophical, and indeed more spartan approach to our health and well-being.”

Translation: Hurry up and die already you tub of lard Walmart shoppers who don’t vote right.
Tyler has always had the eau de Bill Nye about him.


183 Dick the Butcher July 21, 2017 at 11:34 am

Three (among many) possible causes:

Personal irresponsibility/life-style choices.

Trial lawyers/excessive malpractice premiums.

The US doesn’t ration health care, yet.

Re: life-style choices. We were in a car wreck (19 year-old male ran red light) that “totaled” both vehicles. As a matter of caution, we all went to the ER. It was a rainy, early-Spring NY Tuesday afternoon. While we were waiting to be X-Rayed, etc, there were three individuals, apparently in respiratory distress, that weighed at least 400lbs each. It seemed as if they were “regulars.”


184 mulp July 21, 2017 at 5:22 pm

“Trial lawyers/excessive malpractice premiums.”

So, which Texas lawmakers are in the pockets of medical malpractice trial lawyers, and what provisions are in Texas tort reform law that reward trial lawyer rent seeking?

Why did the NH government created malpractice insurance company have such high profits without hiking rates for a decade that the legislature that created and capitalized it wanted to take the profits to pay for public health care, but the State courts ruled the doctors, nurses, and hospitals were entitled to retroactive insurance premium reductions because this government created insurer settled medical error disputes for lower and lower costs since 2000?

I get that as a conservative you continue to believe reality is unchanged even after you act to change reality. That’s conservative. Nothing can be changed. Ever. No matter how much you try. No matter what you do.


185 Massimo Heitor July 21, 2017 at 11:47 am

“$400 band-aids”

My six year old daughter hit her head on a sharp corner at school. I gave her basic over the counter treatment: a band-aid-like bandage and neosporin-like wound gel. So, I’m pretty sure that was all she needed, but this is my precious daughter, I want to make sure she doesn’t need any additional treatment. Maybe experts can do something to prevent minor scarring. I took her to a local urgent care clinic for an expert consultation. Fortunately, she was fine, and no extra treatment was needed. But I felt better for taking her in to make sure.

They don’t tell you pricing up front, you sign a service agreement, after service they talk to the insurance company, and weeks later, I get a letter in the mail indicating the pricing results. The bill came to $1000. My employer provided health care paid ~$850, I had to pay $150. So, the $150 that I paid is a little steep for a few minutes of consultation but it’s not a big deal. But $1000 seems rather crazy for a few minutes of a nurse’s time to look at a minor cut. Stories like this aren’t terrible, my daughter was fine, didn’t really need treatment, and $150 isn’t a big deal to me. But it still seems grossly inefficient for such a common routine scenario.

Also, there is added hassle of dealing with payment weeks after the incident, when my mind has moved on and is focused on other life events. Can you imagine if your bills for groceries or food were delivered to you weeks later, after you’ve mentally moved on?


186 Daniel Weber July 21, 2017 at 12:10 pm

For kids, “let’s check just to be sure” can be sensible from a QALY/$ question.

When you are over 70, “let’s check” can be actively harmful, whether or not what they’re checking for is there or not. Every time you walk down the hall to a new room to do a new test is a new chance to fall and break your hip.

Pricing is crazy. A requirement to publish pricing ahead of time, where possible, would improve things. It’s not possible everywhere, but surely we can know how much “an MRI” costs.


187 Massimo Heitor July 21, 2017 at 5:58 pm

Regular stores compete on clearly posted + advertised prices without laws forcing them to. What laws stop medical providers from doing what normal stores do? Better to fix that than add extra laws to force them to go back to normal.


188 Sure July 21, 2017 at 2:22 pm

We are required to do that. The moment you set your foot in the ER door and ask for treatment you likely generated a pro-rated bill for a portion of the ER overhead for the day – everything from the scheduler to the janitor goes into keeping the ER open. For some reason politicians get really upset if we bill sicker people more for overhead expenses (e.g. no billing a patient an extra $20 because they bled into the light fixtures that will take 15 minutes to clean and disinfect).

Likewise, we bill back our liabilities. So we expect a certain percentage of patients to sue and while we can very accurately identify which patients are likely to sue us, we are not allowed to charge them more based on factors like their illness presentation, zip code, or education level.

Insane ER bills are basically a function of mandates (legal or social) that we bill everyone the same for any indirect costs. If you want your ER bill to reflect the actual costs you personally represent you are going to have to make society and the law be okay with a system that results in the poor, sick, and disadvantaged getting billed more.


189 belisarius July 21, 2017 at 11:52 am

There are at least 3 main reasons what the government should not be involved in health care.
1) If it’s free, people will take or use it more. With little direct financial cost to them, most people will use the medical system more rather than less.
2) Health and quality of life are, for the most part, subjective. The pain or disability that one person might live with daily and adapt to, another person will stop working or trying and let the taxpayers take care of them. No one, let alone a government agency, can know exactly what a person is going through with their state of health.
3) An American citizen should not have to pay a fine to be alive.


190 Random Critical Analysis July 21, 2017 at 11:52 am

Ken Schulz on RE: range restriction. I understand the concept perfectly well, but
(1) it’s not *that* range restricted (a fair number of these countries spend ~2x others)
(2) the same patterns, centering on zero, are found year in and year out (increase in life expectancy much more consistent with time/technology gains)
(3) same results are found it we look at change in NHE per capita vs change in life expectancy over the past 30 some years.
(4) the pattern is very consistent with rapidly diminishing returns, once countries spend enough to pay for highly efficacious/time tested medicine for nearly everyone that needs it, the remaining expenditures just doesn’t go nearly as far (and countries become increasingly willing to fund things like orphan cancer drugs that only add a few months at high cost).
(5) the differences in NHE between US and the handful of other relatively rich OECD countries are also often overstated. As compared to Switzerland, Luxembourg, and Norway US spent ‘just’ 35%, 50%, and 51% more whereas countries like Norway and Luxembourg spend more than twice as much Israel and Malta and see significantly shorter life expectancies
(6) it’s also consistent with quasi-experimental in the US vis-a-vis expansion of care, insurance coverage, etc (and better designed observational studies).


191 hoonose July 21, 2017 at 11:54 am

As a long term practicing general internist I can tell you a few things I’ve noticed over the years that may be important. Beginning in the early ’80’s I/we began to see a movement towards specialty centered vs primary care. It really took off fast with invasive cardiac procedures. Many more frequent procedures as compared to other countries, and yet the data on improved patient outcomes was not there. And this effect ballooned and then also moved over to other medical sub-specialties. So we are now left with a more invasive and technically oriented medical specialty culture of doctor care and patient desires. Much more expensive, and probably with some better outcomes for a minority of patients. But at much greater cost. Whereas previous to this migration, I referred a minority of sub-specialty patients out, now this process is the norm. So instead of 10% of my patients seeing another sub-specialty doc, a much larger proportion see multiple. I honestly don’t know how this compares to other countries.




192 Engineer July 21, 2017 at 11:55 am

Re: comp for docs in the us vs Europe, how does comp for university profs compare between us and Europe?


193 indybones July 21, 2017 at 11:57 am

the modes of consumption for health care are completely different from those i would associate with “American consumerism”. Jeff R hinted at this.

tyler, does the USA consume a similarly disproportionate amount of car insurance, homeowners insurance, or other products that are consumed in a similar mode? these goods appear to me distinctly different from the way we love to spend of everything else.


194 Random Critical Analysis July 21, 2017 at 12:20 pm

I don’t have good international data on these other insurance products handy right now, but US consumption across other broad sectors tracks very much with this comprehensive measure of consumption. US actually consumes more of most things and does so in a way that is very consistent with its AIC and prevailing patterns.

The incentives in US health care, i.e., consequences of 3rd party payment schemes (both public and private), are broadly similar to the rest of the developed world. US seems to ration somewhat less, but I think this is largely a product of differences in material living conditions.


195 Bob from Ohio July 21, 2017 at 12:10 pm

We are spend more on health care like we spend more on most things. We are richer than nearly everyone.

Look at GDP (PPP) per capita. All the countries above us are tiny and largely petro-states.

Americans demand more in just about everything. Health care is no exception


196 Boonton July 21, 2017 at 12:18 pm

This kind of reminds me of stories that run along the lines of “the policy to increase MPG’s that cars get failed”. Their explanation is something like “when people got cars that got 10% more miles to the gallon, they started driving 9% more!!!! “.

This, however, is a failure of analysis. Say I drove 100 miles every week and had to buy five gallons of gas. Now I got a car that gets 22 miles per gallon instead of just 20. First, I have saved 0.45 gallons per week since I can drive 100 miles with a bit less than 5 gallons of gas. Second, what do I do with my savings? I have lots of choices…an extra coffee at Starbucks, more pay per view movies on cable…or driving around more. So if I end up driving 110 miles per week, the fact is the improvement in MPG has benefitted me.

Now consider health interventions. I drink beer, eat cake, gobble down fast food all week. Lots of ‘health interventions’ may be deployed. There are drugs to help my blood sugar, weight, blood pressure, etc. But my ‘outcomes’ may be equal to or worse than someone else who simply does not have the options that I have. Perhaps they have less money for happy hours, they living in a culture that makes fast food meals less common and less accepted, perhaps they have to work jobs that require more physical activity and don’t have entertainment options that make leisure hours consumed by more sedate activity.

In other words, sometimes lifestyle improvements can increase costs in other areas. Consider “when I grew up we didn’t lock our doors”. Well if you grew up where everyone had just about nothing why invest in a serious door lock? The moment you fill your house with toys, electronics and valuables you suddenly discover you have to start spending on ‘security’. Are you outcomes worse? Not really.

So this question really requires norming populations on more than just age but a host of other differences. How many calories do Americans eat versus, say, French or Germans? I suspect we eat more. So perhaps we are ‘spending’ some of our improved health interventions on more interventions to accommodate consumption elsewhere.


197 Evans_KY July 21, 2017 at 12:37 pm

For-profit HMOs and Direct-to-consumer advertising. This is a marketplace whose sole purpose is to drive consumption and profit.

Combined with greater wealth/security in the US, the exponential expansion of prescription drugs (isomers and biologics) and the use of advanced technology.The growth is not surprising.

Suggestion for next article: Why do Americans spend so much on war when we are continually unsuccessful? My answer would be much the same.


198 Moishe Pipik July 21, 2017 at 12:50 pm

I’m fairly conservative, but I wouldn’t mind a “universal” safety net of sorts, with a high deductible ($10,000 per year or event like cancer or being hit by a car) and very basic coverage. And the only way to make this work is to may everyone pay into it, or buy a plan, similar to how auto coverage is done.

That being said, if they allow insurance to be denied for just one pre-existing condition, it could useful for consumers and profitable for insurance: being overweight and obese.

If the overweight and obese were denied access to this universal safety net, it could be made to work. And if an overweight or obese person wants coverage, he can simply eat less. It would cost him nothing.

See https://www.theatlantic.com/health/archive/2013/11/obesity-not-old-people-is-making-healthcare-expensive/281444/ for an overview on how much of a burden obesity is.

Until we can talk rationally about this elephant in the room, we’ll never solve our healthcare problem.

(I’m 5’10” and 150# at age 54.)


199 msgkings July 21, 2017 at 1:35 pm

“elephant in the room” – I see what you did there

But seriously, obesity is not purely about eating less. For many their bodies are genetically pre-programmed for it, and others it’s epi-genetic, but it’s not always just a matter of putting the cupcake down. It’s not that simple. (I’m 6’0″ and 185 lbs over age 40 so I’m not skinny but I’m fine)


200 Moishe Pipik July 21, 2017 at 2:49 pm

Matter isn’t created out of thin air. Every study that looks at “diet resistance” shows it doesn’t exist.

See this New England Jorurnal of Medicine highly-cited study http://www.nejm.org/doi/full/10.1056/NEJM199212313272701

It concludes: “[A]ll the obese subjects we studied who had a history of self-reported diet resistance had appropriate energy expenditure, but they misreported their actual food intake and physical activity.”

In other words, “fatties gonna fat”. That’s fine, but the rest of us (actually a minority now) shouldn’t have to pay for it.


201 msgkings July 21, 2017 at 6:38 pm

But many of the fatties can’t be morally condemned for their condition, any more than you would say ‘leukemia kids gonna leukemia but the rest of us shouldn’t have to pay for it’. The whole point of a collective goal of providing health care is the healthy subsidize the unhealthy, because it could be you or a loved one that needs it next.

Now, I agree that there’s plenty of lifestyle improvements that will reduce the number of fatties, but how we get there isn’t easy. It’s an anti-liberty/nanny-state/super-nudge issue. How far are we going to let the powers that be decide what people are allowed to eat and drink? People (well really the industry people) fight soda taxes good and hard, for example.

Hey if it were easy we’d have solved it. Agree on the main idea, biggest bang for the buck is finding a way to get obesity back to 1980 levels.


202 Boonton July 21, 2017 at 5:24 pm

Alaska had an interesting response to the prospect of 40% premium increases on the Obamacare exchanges. They created a fund of about $50M and told insurance companies if they had a certain number of patients with extreme cost events (cancer, heart attacks, things like that I suspect), they could tap the fund for reimbursement.

It worked quite well since 40% increases dropped to 7%. I think a benefit is that the “sick” are still getting insured by the same plans as the healthy. The incentive for the insurance company is to find ways to treat those who are sick at less cost instead of trying to push the sick out of the pool leaving them in a “risk pool ghetto” like Ted Cruz would see set up instead. For not much money you could get almost total universal coverage with just a few tweaks in the existing law.


203 Hazel Meade July 23, 2017 at 11:47 am

What’s going to stop people from adding more and more stuff to the “very basic” coverage, until it turns into the ACA?


204 Cana'jun eh July 21, 2017 at 12:53 pm

The biggest (single) benefit I ever received from free health care was a hip replacement that I got for the price of the bus fare to the hospital in Southern Ontario. Best piece of mechanical work I ever had done …on anything!

Running Healthcare as a commodity service works for about 95% of all conditions. It would work a lot better if the medical community could get it’s head around ‘privacy issues’ and start making all patient care completely computer driven. Do you think a blind, double amputee really gives damn about anybody knowing that he has diabetes? Would I worry that someone might know I had BPH just like 90% of the other over-70 dudes? If ‘I’ can be a 64 character hash for Bitcoin why cant I be one for the Healthcare system. Here is my name, address and phone f9e095a60044543a91e9e0237b46205180ddcb191167b5850a653cc97c282954
I’ll send $10 (sorry Canadian$) to the first person who calls.

With an algorithmic approach and data mining, the Single Payer system has vast possibilities for fine tuning costs and paring the ‘budget creep’ endemic to all one-payer systems. Imagine Google Health Metrics! But the biggest benefit would be to potentially turn Medicine on it’s head and make healthcare physician-driven rather than patient-driven on a country-wide scale. Oh my…that’ll upset all the Libertarian/free choice duffers, “if I have cancer I certainly don’t want anyone suggesting it to me until I am ready to decide that I have it!”

In the USA, healthcare is not the commodity service it could be, it is just a Business.
I’m not a Doctor or an Economist, just a Patient.


205 Liudvikas Bukys July 21, 2017 at 1:05 pm

Nobody is keen to spend lots on “health care” at monopoly prices, e.g. antivenom for $39,000/dose that can be had in Mexico at $100/dose. All of those anecdotes of outrage add up. And the everyday price collusion causes less outrage but that adds up too.


206 Liudvikas Bukys July 21, 2017 at 1:07 pm
207 R Richard Schweitzer July 21, 2017 at 1:11 pm

Eventually, Tyler Cowen will take this examination into the real social context of our times;

As his Bloomberg piece discloses, he intends “consumption” of services, materials and facilities – which generate COSTS.

When the consumer meets those costs (by some method) the consumer “spends” on healthcare. To the extent the consumer’s disbursements do not fully meet (cover) those costs, they are REDISTRIBUTED in some fashion. So, it is not “spending” that drives costs, it is the availability of redistribution.

The social context of our current times is calling for REDISTRIBUTION OF COSTS at many points”

“AFFORDABLE” housing.
” insurance
” higher education
” childcare
” healthcare

Those (and more) all call for redistributing the costs of each as an item of “spending” by the specific consumers.

In previous contexts we have had “Share the Wealth;” followed by
redistribution of production (incomes), which is about to peak (running out of “other’s” incomes); but, we will not run out of COSTS so long as consumption is not constrained by something similar in effect to true spending capacities.

The original PPACA (O-Care) attempted to transfer the commercial insurance system operation from redistributing the **Costs of Risks** to the actual redistribution of the **Costs of Care.**

Semantically; it is NOT “spending” at issue, it is consumption and dealing with the distribution of the costs of consumption.


208 asdf July 21, 2017 at 2:35 pm

It seems like this whole analysis revolves around the following:

1) The US has more “disposable income” then some straight-line extrapolation of GDP would yield.
2) If we change the denominator to “disposable income” then things don’t look as bad.

That seems really strange to me. We all agree that this additional healthcare spending isn’t 1) useful and 2) is usually third party and 3) is non-transparent.

So what’s the point of having additional “disposable income” if we spend it all on fairly worthless medical treatment. We are certainly disposing of it I suppose.

The point of getting rich is to have a better life. Not bid up a set of zero sum resources (doctors time, pills that take pennies to make, fixed real estate in SF, college tuition, etc).

If we aren’t actually getting anything for this extra spending the question to be asking is why all this extra wealth that could be used to buy things with marginal value is being spent on things that clearly don’t seem to have much marginal value. Changing the denominator and saying “we are only wasting wealth in proportion to wealth we have” doesn’t really fill one with admiration for the US system.


209 Glenn Hefner July 21, 2017 at 3:09 pm

Everything I’ve read – and while it’s a lot it’s fairly limited to public market equity research – is that on a per capita basis Americans’s utilization is NOT materially more than other nations. While America, uniquely, has a large swath of its population that under-utilizes healthcare, due to poor access and very high out of pocket costs, overall utilization is more or less at peer-level. We can conclude therefore that those fortunate enough to have decent access to healthcare in the US use more relative to other countries.

But the fact of the matter is that healthcare system in the US per GDP is roughly twice that of peer nations is because costs are roughly double. And why does it cost more? Because:
It’s for-profit at nearly every level; we can get rid of that.
Because a capitalist system of healthcare doesn’t work; consumers don’t know what it will costs and really can’t shop around;
Doctors make MUCH more in the US;
Lawsuits are more plentiful and more costly;
The same drug costs roughly twice in the US than elsewhere. Why – because “competition” is less effective than negotiating against one buyer.

Tyler doesn’t appear to have an open mind about this. I’ve spent 9 years in Europe, 7 years in the Middle East, and roughly 30 in the US. Anecdotally, the costs are much higher and the quality in the US is no better, while “the system” is unfair and inferior.

The one thing we can say with certainty, thanks to the US healthcare system: for those countries that want expensive healthcare, resort to capitalism.

Why does this matter so much now? Because healthcare costs are crowding out discretionary income, and worsening the US economy.


210 JWatts July 21, 2017 at 5:08 pm

“Because: It’s for-profit at nearly every level; we can get rid of that. Because a capitalist system of healthcare doesn’t work;”

Most of the OECD’s health care system is for profit.


211 Random Critical Analysis July 24, 2017 at 3:08 pm

> Because healthcare costs are crowding out discretionary income, and worsening the US economy.

And yet as a share of consumption the US is broadly on the same trend as the rest of the OECD. Similar patterns are also found with adjusted household disposable income


212 Random Critical Analysis July 24, 2017 at 3:10 pm

> But the fact of the matter is that healthcare system in the US per GDP is roughly twice that of peer nations is because costs are roughly double.

According to the best available evidence, both price levels and volume of health expenditures rise with income, and the US is roughly where we’d expect it to be. Likewise, the data for long term (past 30-40 years) and short term in the US suggests only a small fraction of the overall rate of real (inflation adjusted) increase can be explained by actual inflation whereas technological improvement, volume, etc explain much, much more. These estimates use indices that likely miss real quality improvement within existing types of treatment and thus probably overestimate health inflation some.


213 Random Critical Analysis July 24, 2017 at 3:11 pm

(some relevant links removed from prior article to deal with moderation system)




214 Bill July 21, 2017 at 4:20 pm

+1 See my link to OECD data above.


215 Bill July 21, 2017 at 5:32 pm

My +1 was to Glen’s comment above.


216 Frederic Bush July 21, 2017 at 4:26 pm

If your theory is that societies that spend more on things other than healthcare spend more on healthcare, shouldn’t the graph be comparing healthcare spending vs non health care spending? You seem to be correlating health care spending with itself in this graph.


217 Jay July 21, 2017 at 9:44 pm

Buuuuuuuuuuuuuuuuuuuuuuuut………………… “the US spends more on education per pupil than other OECD countries and we get worse results. The solution is obviously to lower costs”. So says the non-hypocritical progressive who doesn’t worship labor unions.

I just thought of a hilarious way to flip the health insurance/care debate in America upside. Get most of the healthcare delivery industry to unionize and make them a reliable voting block for the “left”. Then we will see how many lefties really want to cut healthcare expenditures the US and how many righties want to cut healthcare spending all of a sudden.


218 byomtov July 22, 2017 at 5:21 pm

we shouldn’t take the lower health-care spending in many European nations as a sign of better health-care policy. It’s a reflection of a broader cultural difference.

I don’t suppose McArdle has any serious evidence to back this up. Rather, as so often, claiming that something is a matter of culture really means you don’t know what causes it.

This is sort of an information cascade. McArdle said so, so Cowen repeats it, and pretty soon lots of people are running around citing them and others who repeat them to “prove” it’s a “well-known fact.”


219 Jose Duarte July 24, 2017 at 12:37 am

Tyler, your consumption model doesn’t seem to apply here since **most Americans hardly spend anything on health care**. It’s a third-party payer system, said payer being an insurance company or government program. We do not consume health care the same way we consume other goods – we get it mostly for free.

A third-party payer system will inflate costs relative to normal, priced market goods. (See also college tuitions, which very few students pay for out of pocket.) I say “priced” because health care is normally not priced from the perspective of the consumer/patient. Prices are extremely hard to come by, and most people don’t care because they don’t pay the price (which will turn out to vary depending on the insurance contract, Medicare rules, etc.)

People will consume more of something if they don’t have to pay for it. American overconsumption of health care can be explained by the fact that they don’t have to pay for it. Europeans don’t have to pay for it either, not directly. This might suggest simple socialism is more efficient than our layered, contorted, over-regulated mess of a system. Of course, a free market health care system is likely to outperform them all on many relevant outcomes.


220 Random Critical Analysis July 24, 2017 at 3:01 pm

> It’s a third-party payer system, said payer being an insurance company or government program.

While I agree 3rd party payment contributes substantially to the overall level of national health expenditures, these sorts of systems are found throughout the developed world and they do not operate in a vacuum. Put differently, society still makes these decisions on the margins with respect to the amount that it has (or thinks it has) to spend even if these are happening collectively, through subsidy of 3rd party payment systems that raise the expenditure level above that which people would otherwise consume. In fact, the lags in the public and private policy response in response to changes in consumption or disposable income explain why we don’t see instant response (and help explain why including other controls in OLS etc obscures the raw elasticities that are found otherwise…)


221 Tom Warner July 24, 2017 at 7:03 pm

Jose Duarte is right on. At the same time I think Tyler makes a valid point. Americans typically aren’t splashing out on credit on healthcare, but the spendiness of our healthcare system nonetheless reflects our spendy consumerist culture.

What I’m less sure about is Tyler’s comparisons to Norway and Luxembourg (and I would add Switzerland) – the European countries with higher GDP per capita than the American average, albeit less than our similar-scale wealthier areas. When I last looked at the stats these had healthcare spending profiles that were quite similar to the US. Their spending on last year of life was closer to the US than to other European countries.It’s not just the richer US spending more per capita on healthcare than Europe, there’s a practically universal curve of healthcare spending/capita rising faster than GDP/capita.

Using PPP is a big mistake. PPP attempts to cancel out differences in costs versus real value, which is the meat of the topic. Moreover it’s wildly inaccurate at what it attempts and so really just introduces a lot of noise.

Another often overlooked difference in US versus European healthcare costs is the vastly higher US spending on care for military veterans.


222 Random Critical Analysis July 24, 2017 at 9:09 pm

> When I last looked at the stats these had healthcare spending profiles that were quite similar to the US.

The reliable data I have seen strongly suggests the distribution of health spending spending in the US is very similar to other developed countries across multiple dimensions [e.g., by income, by age, end of life share, skewness of spending by individuals, etc)]. The US is much less distinct than people believe it to be (especially amongst high income countries) and many aspects that people stress are much over-emphasized (e.g., the share accounted for by end of life care).

> Using PPP is a big mistake. PPP attempts to cancel out differences in costs versus real value, which is the meat of the topic.

I’m not sure I quite agree, RE: “noise”, but which PPP are you referring to precisely? For most of my analysis I used standard economy-wide (GDP) PPPs to adjust NHE. This a pretty common approach and some sort of PPP is needed to adjust for spatial price differences. I also presented data from OECD’s health PPPs since they’re much more reliable measures of international cost differences than that which is usually discussed and generally reasonable approximations of truth (even if imperfect), however I didn’t present expenditures adjusted with health PPPs (unless denoted as “volume”) or anything like that…..


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