Wednesday, December 23, 2015

Public subsidy of health care costs

This is Joseph

I was reading a fact checking article, and I encountered a very important set of cost estimates that bear repeating.  The OECD estimates health care costs.  It's not surprising that total US health care costs are very high.  What I found more useful to think about was the amounts that the United States ($4,197), the United Kingdom ($2,802), and France ($3,247) spent in terms of public support for health care.  Yes, the US already leads in government provided health care costs (as well as being more than double total costs for either of these countries).

Now I know that this example doesn't give many clues as to how to fix these high costs.  However, it does really start to make the question of whether market forces are really reducing costs in the health care sector seem critical.

I should also point out, that the UK has a very lean system and people may legitimately question if it is too lean for emulation on this side of the pond.  It works, but it makes some painful choices,  However, French health care (almost exactly half in total cost what the US pays) has a very good reputation (even among Libertarians) and may be a place where we can learn a lot about how to decrease total heath care expenses while keeping up the higher level of service that is a clear revealed preference in the United States.

The last piece here is the cost of innovation.  It's a complex topic, but it is clear that some cases of increased costs for medical services, like drugs, are not entirely about innovation but may involve some elements of profit-taking as well.  Insofar as there are innovations that won't exist if Americans do not subsidize them (thus making life better for everyone), it is worth asking if a) this is really the best way to generate these innovations and b) if there is not a way we couldn't average the costs out among other advanced nations based on treaties (it's got to be worth a try, right?).

Happy Holidays!


  1. Don't worry ... the TPPA has a whole chapter on American pharmaceutical companies getting rid of the low cost buying systems in other countries in order to screw over those people for their own profit.

    Pharmaceutical companies not only profit take on a heroic scale where ever they can but their research isn't aimed at making the health of people better or else they would be researching very different things. Their sole aim is researching drugs that will make them the most profit.

    And other countries do subsidise American technology - a lot of the brightest and best of every country goes to America to do research. If counties had kept their brightest and best at home then post-war America would have looked very different.

    1. That is an interesting point. The US research world has an extremely international character, doesn't it?

  2. I am confused. You observe that French health care is "almost exactly half in total cost what the US pays". Okay, I am willing to believe that. But earlier in the post, you said this"
    "What I found more useful to think about was the amounts that the United States ($4,197), the United Kingdom ($2,802), and France ($3,247) spent in terms of public support for health care."

    I assume those are per capita costs. 3247 is not even close to half of 4197 though.

    1. Ellie,

      The costs quoted are those spent by the government in health care. If you click through the link, you can note that the US also has a lot of private spending

    2. Ah, you meant total costs of total (per capita) of $8,713 for the US, $3,234 for the UK and $4,123 for France. That makes more sense.

    3. Not really. Money is money?

      Certainly in Canada for many things we have no co-payment or actual private payment so the public expenditure vs private makes little sense for many things.

      Drugs (outside of a hospital) are usually private but open heart surgery costs the patient nothing at point of reception.

      Or to use a simpler example. I went in to my doctor's for a flu shot, handed in my health card and that was that. No other immediate cost.