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?
Posted by Tyler Cowen
marginalrevolution.com
Comments
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.
Posted by: anonymous at Oct 30, 2009 6:16:29 AM
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American healthcare is expensive because:
1 - Insurance fraud. Particularly on Medicare and Medicaid, but everywhere else too.
2 - Litigation. Malpractice insurance, unnecessary tests and procedures.
3 - Consumer disconnect with cost. No need for anyone to offer you 20% off on your MRI -- someone else is paying for it.
You'll notice that LASIK eye surgery is getting cheaper and cheaper every year, while the cost of everything else is skyrocketing. Why? LASIK is not covered by insurance, so #1 and #3 do not apply.
Anyway, the US government has no incentive to lower medical costs for consumers. Indeed, that would greatly harm their efforts to take over the healthcare sector.
Posted by: Jim at Oct 30, 2009 9:18:38 AM
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.
Posted by: Candadai Tirumalai at Oct 30, 2009 9:27:23 AM
Great comments so far but no one has mentioned monopsony concentrated buying power. Also didn't Europeans pay less for health care even before government go so into paying for it?
Posted by: Floccina at Oct 30, 2009 9:29:50 AM
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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?"
Posted by: Yancey Ward at Oct 30, 2009 11:56:39 AM
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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.
Posted by: Simon Kinahan at Oct 30, 2009 5:39:43 PM
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