Yglesias channels his inner Robin Hanson

Matt Yglesias offers wisdom on cutting health care spending.

Still, though waste is a huge element of our insurance spending, insurance-related waste is a relatively small portion of the overall waste–about 14 percent. The biggest chunk of excess spending we’re involved with is spending on “outpatient care.” We pay doctors more than other people do, our doctors order more tests than other doctors do, our tests are more expensive than other people’s tests, and we have many more relatively expensive specialists and relatively few relatively cheap GPs. And we have nothing to show for it.

The prospects for changing this, however, don’t look great to me. People don’t like insurance companies. Taking them on is popular. And nevertheless we see how difficult it is to really hurt their interests. Now imagine taking on the doctor lobby. More money is at stake. And doctors have a much better public image. And doctors and there families are a much bigger voting block than insurance executives and their families. And on top of that, people have a very strong mistaken intuition that getting lots of tests and seeing lots of specialists is in their interests.


"our doctors order more tests than other doctors do"

This arises from litigation risks that are not present in other countries and has a solution that is obvious but unreachable.

The rest of Matt's "complaints" are really just ways of saying our medicine is better. He is wrong about having" nothing to show for it," since our cure/survival rates for most serious diseases (cancers, cardio problems) are higher than in other countries.

Ah progress. But their main complaint is still about paychecks.

And it's so hopeless because the solution must be politics and politics is hard because of those dumb or evil opposition people. And the government has nothing to do with the supply of medical personnel or where research dollars go or how hard device and drug approvals are to get. Damn doctors.

what's funny is you aren't pointing out that doctors run more tests (and charge more money) because things like basic office visits -- where a good doctor good dignose without a test -- isn't compensated fairly by medicare and the insurance companies.

Running a test when you already know the result is a waste, but if if the the alternative is a $40 office visit (before taxes and expenses) what are you going to do?

Mr. Pertz,

Do you know that we have something to show for it because you've broken down every group in the country and made the relevant comparisons and therefore don't have to rely on something as blunt as life expectancy data?

Regarding the "very strong mistaken intuition" about tests and specialists...if you are sick and your primary care doctor cannot figure out what is wrong with you, a common experience, you will want to see whatever specialist and get whatever test you can. It is rational and may save your life. Even a specialist will often not be certain about your diagnosis, so you may want to see another. It seems to me that these discussions about costs often assume much more certainty in the practice of medicine than actually exists.

It says a lot about Tyler that he takes (or pretends to take) seriously partisan hacks like Yglesias.

BTW, Barkley Rosser is the intellectual equivalent of a Cleveland steamer.

This arises from litigation risks that are not present in other countries and has a solution that is obvious but unreachable.

I'd like to see some data to prove that off repeated claim.

In particular, the US health care system is something like 50% to 100% more inefficient, ie., more expensive, than competing health care systems with worse outcomes. And it isn't clear what is different about the US legal system that accounts for this inefficiency relative to France, Switzerland, Japan, Norway, Sweden, Canada, Britain, et al. Do you think that adopting the British legal system in the US would drastically cut the cost of health care in the US by at least 50%?

I went in to my GP's NHS surgery for my seasonal flu jab this morning. I fell into conversation with an American in the waiting room. "How long will I have to wait?" she asked. "Oh, my room was running 10 minutes early, I'm just waiting for my wife" I replied. "There's more than one room at work?" she asked.

Ah, preconceptions.

>This arises from litigation risks that are not present in other countries and has a solution that is obvious but >unreachable.

>I'd like to see some data to prove that off repeated claim.

Working in Mammography in Europe, I can give you a good example. If you do a Screening-Mammography in Europe, you will recall about 2-3% (but not more than 5%) of you patients for a second examination or an ultrasound. Every Radiologist knows that in this way we are missing around 10-20% of cancers that could be seen in the mammogram, but we chose not to follow up, as we do not face a risk of litigation (and the guidelines of the European Societies support this view).
Most of the American Radiologists I know have a recall rate of between 10 and 20% for screening mammography due to the risk of a lawsuit for a missed cancer. And as these second look exams are usually more expensive than the standard Mammography (most of the times it is Mammography and US and possibly MRI) this would increase the cost of mammography by about 20% or even more.
In Addition you have to have an insurance against malpractice claims: what I hear of colleagues in the US, they often pay around 100.000USD a year (compared to less than 5000USD in the European countries I know). So you have to add 100.000 to the paycheck of your radiologist to compensate for the legal system. If this would not increase the cost of a medical system, I don't know what would do. (If you are interested in literature about this topic, I can give you loads of it, but I think this is too much for this topic)

One additional point I would like to bring up is the positive externalities from the US healthcare system. As a lot of novel technologies are still paid for in the US, these are introduced into the marked there as well. When they are established and the price for the system drops, the Europeans (and the Canadians probably as well) profit from the work done in the US. An example I think of currently is PET/CT scans. These were not paid for by the insurance companies in most European countries, so you have to be either in a (small) trial group or you have to pay for the PET scan out of your pocket. The experience in the US after a few years showed, that the PET/CT is advantageous and cost effective in certain kinds of carcinoma (e.g. head and neck cancer) so that the insurance companies start to pay for the PET/CT in these patients. But the experience, that the scan was useful in these patients, was first made in the US, where the insurances paid for all the scans -even the ones that finally turned out to be useless. So if the US healthcare system would adopt the European or Canadian method of payment, we would either end up paying more in Europe to get these new methods or (which is more probable) would end up with less improvements in healthcare than we could have had.

So in conclusion, the US healthcare system might look less efficient at first sight, but there is a lot of unseen to be discovered (as Bastiat would say).

I should add that I don't think subsidizing doctor's education is really that wild of an idea, since we already have apparently successful systems by which scientists' educations are largely publicly financed. (And one could argue that this explains in part the wage discrepancy between say PhD scientists and MDs, when the perception is if anything the scientists have the rarer skill set.)


It isn't only, or even primarily, a question of genetics. It is a question of culture. However, you haven't even demonstrated that the children of immigrants from those countries have worse outcomes in the US than the same generation in the home country. However, I don't really doubt that one or two generations living in the US causes one to adapt the my culture's eating and physical activity habits, not to mention all the other non-healthcare factors, forever ignored by liberals, that affect longevity statistics.

What would happen if American adults stopped drinking fizzy sugar-water, and drank like grown-ups - beer, wine, water, milk, tea, as appropriate?

"we have nothing to show for it"

A while back, Radley Balko posted about a study that showed survival rates of several types of cancer were markedly better in the US. Someone who I recall as being an EU doctor said that the test wasn't fair because the US system tests and detects earlier because they have more imaging equipment, etc. [That would be the point, or at least another point in favor of the US system, wouldn't it? Anyhow, ...] If true, then it isn't that we don't have "nothing" to show for it, just that it isn't showing up in the one statistic that people want to use as "the" standard for health care outcome: life expectancy. But as has been repeatedly pointed out, the US LE suffers from higher rates of homicide and accidents. Meanwhile, smoking is falling here and obesity is increasing in the EU.

BTW, isn't it interesting that we are told on one hand that medicine is far too complex for the average person to navigate without AMA-approved hand-holding and that it is impossible to score the performance of any one doctor, and on the other hand that the health care system is so simple that it can be summarized with a single measure?

"Single payer system would address this type of problem and others."

Could you provide any kind of substantiation for that? Did you actually read Yglesias' article?

Just as the medical malpractice system at 0.5% of health care costs is esimtated to have both a direct (40%) and indirect (60% due to "defensive medicine") component, health insurance companies have both direct (administrative) and indirect (poor provider compensation rate management) components. The indirect costs excess the direct ones.

To take one recent example, someone I know was transferred from one hospital to another in the same hospital system, because one was a preferred provider for his system and the other was not. Ambulance cost: $400. Cost of going to two hospitals instead of one: $7,500. Quality of care impact: Negative.

I’m not sure what you mean by “taking on the doctors†. There are plenty of ways of addressing this issue without “taking on the doctors.† The doctors are part of the solution. And yes, people have the mistaken idea that more tests are good. But that doesn’t mean they’re entitled to them!

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