Wednesday, January 23, 2013

Health Care spending

I often worry that comparison between the United States and Canada understate the room we have to improve health care costs.  But Matt Yglesias points to a health care chart showing spending per capita by the government in the United States and Canada:
This is the chart that I think ought to dominate the conversation about public sector health care spending in the United States and yet is curiously ignored. The data show government health care spending per capita in the United States and Canada. The United States spends more. And that's not more per person who gets government health insurance, it's more per resident. And yet Canada covers all its citizens and we don't. That should be considered shocking stuff, and yet I rarely hear it mentioned.

Even odder is that the most recent time I heard it mentioned was Valerie Ramey talking at the American Economics Association conference in San Diego and her conclusion was that this showed U.S. health care needs free market reforms. The more straightforward interpretation, I would think, is that the U.S. needs to make its system more like Canada's. It's important to note that the example here is Canada. Not some radically different society. Not some far-off distant land. And the gap is actually growing.

In 2010, the Canadian government was spending roughly ~$3,000 per capita and the US government was spending ~$4,000 per capita.  Not per beneficiary, but per capita!! 

Now Canada is not some sort of dystopia without private medicine.  Emergency services are fully covered but it was common when I was last there to go to a private clinic for health care like an X-ray to avoid the queue in the public options.  But this is still catastrophic coverage for all citizens, which is an impressive feat. 

At the end of the post, Matt talks a little about the less innovation counter-argument.  Closely related is the MD shortage argument.  Now there are two responses.  One, is to note (as Matt does) that we want health care costs to go down in the United States and that this will have bad effects as well as good effects. 

But the second is more compelling.  We could just invest money in medical research and in awarding prizes for drug discovery.  It would make innovation costs transparent and separate it out from rent-seeking and administrative costs (which would be lower in the single-payer insurance or out of pocket expenses world). 

As for educating MDs, we can steal a leaf from Canada and subsidize education a wee bit more and lower wages will still have no trouble attracting people to a high status and still relatively high pay profession.  No solution is perfect, but why is this one not being debated?

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