Why do other countries care more about health care cost control?

Ralph Sisson, a loyal MR reader, asks me:

Why do the other first world countries focus on costs more than we do? They also pay for care, for the most part, via insurance. Even countries with the same level of personal income focus more on costs.

Putting normative questions aside, let's focus on the positive comparison.  I can think of a few factors here:

1. Americans have the "anything I want, whenever I want it" mentality of consumer spending.  Look at Sunday closing laws in Europe.

2. Because of an accident of history, we covered old people first with government $$ and that set a precedent.  It's especially hard to say no to people who are close to dying and that got us out of the habit of saying no.

3. Americans are more likely to have a "can do" mentality than are people from most other countries.

4. Americans are more likely to have a self-image of being the richest people in the world and not facing financial limits.  We derive more of our self-esteem from this self-image.

5. Compared to some Asian cultures, the more individualistic American approach lends itself to the view that an individual life must be extended at all costs.

6. The U.S. regulatory climate tends to be more pro-business, which in this context means pro-doctor and pro-hospital.  Those people are always willing to tell us to do more and spend more and we seem always willing to listen.

7. Tying health insurance to employment makes it harder for people to see what they are really paying and how much it lowers their net wage.

You can try the cross-sectional approach but with France and Switzerland as other big per capita spenders, I am not sure where this leads.  The fully governmental systems, such as in the UK, have low expenditures but it's also an open question whether low prices and low quantities will follow from the same explanatory factors.

Any thoughts?


8. Americans are much more litigious, damages are decided by juries (and there is practically no upper limit on the amount), and forum shopping and gaming the jury selection process can be used to greatly increase the probability of a "favorable" outcome. There's little incentive to save other people's money if all it gets you is sued.

9. In the US, when push comes to shove it is judges who end up making most of the final decisions about what is to be spent and for whom, and they interpret most everything as a "right", without any regard to cost. In other countries, budgets are set by legislators or civil servants, with the understanding that it is necessary to allocate limited resources by balancing competing worthy causes and carefully prioritizing.

10. Political gridlock in the United States (including checks and balances, and the de facto need to have a 60% supermajority to pass anything in the Senate) makes it nearly impossible to reform or fine tune anything. Given the law of unintended consequences, in any system some things will inevitably go wrong -- and then they remain broken indefinitely. Any legislation must find unanimous approval not only in the White House and both houses of Congress, but among a large number of idiosyncratic activist judges with personal agendas and de facto veto power.

""anything I want, whenever I want it" ...a "can do" mentality": thank God that these character traits can be reliably distinguished from a brattish impatience.

when health care costs are covered by income taxes, as in many European countries, containing costs to avoid even higher marginal tax rates is imperative

The way the budget process works makes a big difference. In Canada the provincial governments ultimately set the heath budget, and the ministries of health are forced to make do with it. There are of course political pressures to increase it, to cover more things, etc. But the budget process seems to do a better job of keeping that under control.

I suspect it's similar in many other countries: the powers that make the ultimate budgetary decisions are more insulated from the political pressures than in the US.

7 squared. And don't forget the opportunity cost of not having "portable" or independent insurance when changing jobs, careers, etc.

I have just read this "pending on the NHS increased greatly, but the quality of the output didn't". This is not my understanding at all. The UK was just spending too little and heading for a crisis. Waiting times have come down dramatically in this time.

Like most healthcare systems, the NHS is riddled with problems, and I don't doubt that the extra funds could have been spent better. The NHS sure brings out the libertarian in me, but not if it becomes a pretext for throwing off social responsibilities. I would love to see a more devolved model, within the framework of a commitment to universal coverage.

But one thing the NHS has undoubtedly succeeded in doing, though a variety of factors connected mostly to its size, is restrict the beast's appetite.

High-fructose corn syrup?

Doctors have higher status than insurance company or government bureaucrats. We like the people who raise costs, and we don't like the people who try to control them.

I think #1 applies more broadly to health spending. Americans are not willing to compromise on their health care, and expect (rightly so?) that everything be done to determine and/or solve their current health issue. When you are sick, you want to get better, not think of how much it will cost to get better. With the explosion of new tests and treatments in the medical field in the last 20-30 years also comes the explosive cost of these tests being performed on every patient.

While you can cut fat out of the system and shift the means that health care is paid for, in the end we as a society expect more care than we can pay for. Until that mentality changes, all other reforms are just band-aids.

You said "putting normative questions aside" and then proceeded to make 10 normative statements.

In the United Kingdom you are much less likely
to get unnecessary medical tests and procedures
(an obvious cost-saver) but you may get necessary
ones a little later than an American would be
comfortable with: you may have to wait 4 or 6
weeks for a cancer biopsy. The British are a
more stoical, even pessimistic people. I
remember that a cancer patient leaving the
hospital in a wheel-chair after a gruelling
round of treatment saying in response to the
attendant telling him that the treatment would
be easier next time, "If there is a next time."
Not every one trusts the arrangements of the
National Health Service. One might have the
kind of insurance that pays for a private room
in a public hospital. Another might have much more
more comprehensive private insurance. Both are
responses in part to the fact that the NHS
constantly has to juggle the money available to it.
A famous long-distance runner developed pancreatic
cancer, which was treated for a while, but then
he was told it was the untreatable kind. The runner
replied that he was a fighter, paid for his own
treatment, and lived another six years.

#6! #6! #6!

"6. The U.S. regulatory climate tends to be more pro-business, which in this context means pro-doctor and pro-hospital. Those people are always willing to tell us to do more and spend more and we seem always willing to listen."

Anyone who's been paying attention to the drafting of this health care legislation should strongly suspect #6.

Also, read Paul Starr's "The Social Transformation of American Medicine."

The fact that American health insurance came about guarding against the catastrophic, catching family members in the "Just SAVE them" moments of their life. Being pro-active about health is relatively recent.

How much Americans spend on healthcare has never been the right question so most of the points you make are immaterial. Did we enact legislation when everyone started spending more and more on personal computers when they were first adopted? Luckily no, and eventually the prices came down while greatly improving the quality.

The question has always been is whether we are getting our money's worth. Unfortunately that can't be answered on a societal level as each individual has different healthcare expectations and needs. And the further away the individual is removed from making their own decisions with their own resources the less likely you will achieve quality for your money.

This is part of the problem with the American system. By slaving insurance to their employers most people have little direct cost control measures to work with. It's difficult to change an insurance carrier right now if your not satisfied with the outcomes. Combine this with the fact that all plans have to offer essentially the exact same things by law and the ability to price discriminate becomes even harder. The only efficiency gains that can be made are by the insurance company by dening coverage or claims. Not a very popular way to save money obviously.

I imagine in countries that essentially vote for healthcare funds, a large portion of the population is relatively content as they have slightly more direct control over costs in a kind of ham-handed way. While a minority are significantly less happy because they have little influence on funding for their own care as they may want to spend more or less, or on different treatments and procedures.

They more postive direct control by the consumer is what will bring costs down and quality up. And if there is concern about those in the lower tier of coverage or who have none then just subsidize them directly. No need for 1000+ page labrynthine legislation.

"I imagine in countries that essentially vote for healthcare funds, a large portion of the population is relatively content as they have slightly more direct control over costs in a kind of ham-handed way. While a minority are significantly less happy because they have little influence on funding for their own care as they may want to spend more or less, or on different treatments and procedures.

They more postive direct control by the consumer is what will bring costs down and quality up. And if there is concern about those in the lower tier of coverage or who have none then just subsidize them directly. No need for 1000+ page labrynthine legislation.'

!) In other first world countries they pay much more attention to costs. In France they post the cost of each procedure right on the wall most places. It is an active issue there all of the time, not just when reform is being considered.

2) That certainly is not what I see (second paragraph). Consumers respond very well to the Taj Mahal syndrome, the lavish surgicenters springing up everywhere, the remodeled hospitals with the fancy floors and chandeliers in the lobbies. Look around. Our hospital deliberately pursued a low costs strategy for years. DID NOT WORK. We jacked up prices, put up the chandeliers and business came pouring in. The next time you go to Europe or go to Japan, look around. You just dont see that level of spending. They seem much more aware of the costs and determined to hold them down.

My question is not so much why are costs higher here, but why dont we seem to care as much?

I think it would be interesting if commenters asked themselves this- "How would I spend the $10,000 if my company gave it to me instead of spending it on health insurance?"

Yancey wins the thread!
What will people do with that 10000 indeed?

I think the litigation angle gets overplayed. We have a private risk management system in the US. Private attorneys settle medical issues using the courts as a nuetral arbiter. Within our system you could lower litigation by simply lowering the amount of instances that require risk management, put another way, less medical mistakes. Medical mistakes happen, medicine is practiced by fallible humans. In our system the money to fix the situation has to come from somewhere.

7. Tying health insurance to employment makes it harder for people to see what they are really paying and how much it lowers their net wage.

No one is interested in controlling a cost that they think is paid by someone else. If people were guaranteed that lower insurance premiums would show up in higher paychecks for themselves (or lower taxes), they would be more focused on controling health care costs.

Speaking as a foreigner who lives and works in the US, there is definitely a cultural difference in attitudes to healthcare. This is endlessly fascinating for me because I grew up in Scotland, and its extraordinary that two countries with otherwise such similar cultures differ some much on this one point. Aside from what Tyler mentions, I've noticed two things in particular:

1. Americans overwhelmingly believe that "health care" is effective in improving health and the best choice when faced with health problems. I've always believed that doctors and hospitals are an unpleasant last resort, and than many health issues have a underlying cause that's beyond the reach of medicine. I grew up around people who considered anything above rare use of medical care a personal weakness (for the record I don't think this is universally true, although I do have a residual suspicion of people with mysterious untreatable ailments).

2. Far more things are considered to be "health care" here. I can't get of the fact that Chiropracty, which is completely medically and scientifically baseless, is covered by many insurance plans. What's next, homeopathy? Its cheap I suppose.

At one point I thought this was a complex cultural issue. Now I think its almost entirely down to the tax break for health insurance, and exacerbated by the tie of the tax break to employment. People don't see the cost, anyway have no control over it because they can't choose their own plans, and even that aside, all other things being equal, its more tax efficient to consume (insured) "health care" than other goods you might otherwise prefer.

Shorter version: Ironically, costs are high in part because demand for health care is a lot more price elastic than you might think. When its nearly free of financial cost (because giving it up doesn't actually make you better off) people consume far more of it than is efficient.

>The CBO says that medical malpractice accounts for only 5%-9% of medical costs.

And they're lying.

Depending on the study in question, they are talking only about insurance payouts or malpractice insurance premiums. Nowhere do they include the fact that a doctor who needs to give you a $200 treatment ends up giving you a $350 treatment just for fear of being sued.

But in any event, I'd love to hear you blithely accept the fact that you have to pay 9% more for your gasoline, or your cable bill, or your groceries, just so lawyers can profit.

10. Americans are more used to getting what they want, be it an MRI or a new iPod, and hang the costs. If worst comes to worst, they'll just go into debt. People from other countries go without when it comes to iPods, and since you can't really go without medical care, they kick and scream to bring the cost down.

11. Americans simply refuse to believe that we will all die, thus spending huge amounts of money in the hope of repeating a perennial Hollywood plot line, including all the special effects which it entails.

Huh? Health care is most definitely not considered a "business like any other". What other products do we get primarily through our employers, and almost entirely ignore prices? You already have your wish; people think that health care should be free and everyone should get whatever they want, and it's certainly not something that we should buy on our own. The result is exactly what you should expect.

Personally, I pay everything out of my own pocket, including $9400 a year for individual insurance to cover the costs that I might have in excess of $5000 a year.

But you must think that it was an idyllic world before prepaid health care was instituted in the US. A time when most people didn't get care for most things because they couldn't afford to pay the bill on delivery of service. That was an era when consumer credit was new, and provided by the manufacturer.

But I bet you think it was stupid for GM to be a banker to sell cars, for GE to be a banker to sell radios and TVs and household appliances? How do you think GMAC and GE Capital got started? You either saved up before hand, or you didn't get what you wanted. Or needed.

The hospitals and doctors, each as a community group set up what became the Blues as prepaid health care to spread the cost of doctor and hospital visits over the entire week in small payments, just like GE allowed you to take home the TV and watch it while making small payments.

And by the way, the industrial revolution was built on employers providing housing and food and clothing - they needed to do that to get the workers they needed.

I agree that the construction of health care as a free good (because the real costs are never seen and everyone assumes that those costs claimed of insurance are inflated). A second issue nobody has mentioned is related to the medicalisation of American society - that is, any problem is often seen to have a medical (often pharmacological) solution - not all problems have solutions and managing the situation and helping the person with the issue understand better their own body and what they can do is an effective mechanism for avoiding medical intervention.

The assumption of a medical cure existing is apparent, for instance, in the very different orientation to chemo and radiotherapy in cancer. In most developed countries two or three courses of treatment would be the max but in the US far more cycles are acceptable despite evidence which indicates very limited additional benefits.

The other point to raise about the NHS (and other systems where the government is both the primmary funder and primary provider) is that they have had huge impact on increasing equity in access to health care.

In the NHS you will never wait more than 2 weeks for diagnostic tests (including biopsy) for suspected cancer.

Could it be that in spite of all pretenses and assertions to the contrary, the U.S. is actually the most cultured and civil country?

I think its the same impulse that causes us to send money and food to every hellhole that throws insults our way until they have a tsunami, typhoon, or some "man made" event that imperils their citizenry.

We are better at putting our money where our mouth is...

Don't forget race & ethnicity.

In the countries that have successful national health care, how many are far more homogenous than America? In France with all its new members, how much of the anger directed towards them is due to their consumption of government benefits? Look at the US - why were people worried about illegal immigrants possibly being covered under reform?

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