Thursday, November 10, 2011

Health Care Costs

We have known for a while that the United States spends a lot on health care. What is interesting is that the direction seems to be moving in the wrong way both in terms of life expectancy and cost:

You can see that not only is the United States the outlier when it comes to spending, but we are moving in the wrong direction: we are becoming more of a spending outlier, and we are drifting down from the average life expectancy into the lower group (currently surpassing only Turkey, Hungary, Mexico, Poland, and Czech Republic).


The other thing you see is that our life expectancy gain was the absolute lowest of the whole group (and we weren’t starting from a particularly high level, as you can see in the previous chart).

Ordinarily, you would think there should be convergence across countries. Since other countries spend less and live longer, you would think that we would learn from them—global competition, you know. But instead we’re moving the wrong way on both dimensions.

The article and neat charts are worth looking at in their entirety.

Now, it is true that there can be a lot of reasons for low life expectancy and high medical costs. It could be that the environment in the United States makes us much more accident prone, for example, requiring both higher spending and more fatalities.

But, in general, it is uncomfortable when the most important metric of health care outcomes (all cause mortality) is so uncorrelated with cost. This suggests the possibility of productivity improvements. I read a lot of the Incidental Economist, who try to explain these issues. But I admit that I tend to come away confused.

The major comparison is often Canada. It is a bad reference on a lot of levels (as they have their own issues). But they have similar culture, ethnic diversity, large geography, heavy use of cars, high levels of obesity and yet they are improving on both metrics (from a lower level of cost and higher life expectancy at baseline).

Why is health care the one area that we aren't willing to look at how other countries have been successful and try to steal ideas?

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