International Health-Care Comparisons: How About Them Apples

As long as we’re talking about health-care, a few thoughts about international comparisons.

The biggest knock against the United States’ health-care system isn’t that we spend so much, but that we appear to get so little value for money: based on aggregate numbers, Americans are less-healthy than many other major industrialized countries, in spite of spending lots more on health care.

Some of that is surely the combination of waste and free riding. America’s system provides fewer incentives to use the lowest-cost treatment than most other national health-care systems. That provides a greater incentive for pharmaceutical and device-makers to come up with new and expensive health-care products for the American market. Some of these products will be genuinely useful innovations and some will be copy-cat drugs and the like designed to extract IP-related rents without delivering much in the way of value. Other countries can then get the benefit of the useful innovations at much lower cost than Americans do, and avoid the wasteful copycat innovations.

A great deal of it is due to the fact that America’s health-care providers earn a lot more on average than those of other countries. But the big driver of this disparity is that America has vastly more specialists. And the big driver of that disparity is that everybody would like to see specialists more easily, and you can only do that if you have more specialists. And since America has fewer incentives for cost-containment, Americans get what they want (and pay for it), and people in other countries do more queuing. (And they do the most queuing in systems that employ health-care providers directly, which is exactly what you’d expect – when prices are driven down artificially by a monopsony buyer, supply dries up.) Measuring the value of being able to see a specialist more easily in America in terms of actual health-care outcomes isn’t going to capture everything that matters to the consumer. There’s some value, after all, to having the opportunity – and the coverage – to do everything you can to beat that cancer, even if the odds are, objectively, lousy. But it costs something – across a society, it costs a lot. This is exactly the kind of preference question that a diversity of insurance options – at different price points – should be able to resolve. Not necessarily at the lowest-cost point on the curve, mind you, but at a point that represents the aggregate preferences of consumers – provided those consumers are making decisions based on real prices, which would be the case in a functioning individual insurance market and is much less so today.

But some of it probably amounts to apples-to-oranges comparisons. It would be useful to look not merely at aggregate statistics but to break the statistics down demographically by race and by income. The United States has a much larger non-white population than the European countries to which we are usually compared; we also have a much higher percentage of the population living in poverty. I would expect that, if you compared poor Americans to poor French or German citizens, America’s health statistics would look pretty bad. I’m less sure how the comparison would look if you compared, say, the second income quintile of each country.

And then there are lifestyle questions. Obesity is rising across the globe, but it is a much bigger problem in the United States than it is in other industrialized countries. And obesity is a driver of a host of negative health outcomes that cannot really be ameliorated by the health-care system. Indeed, you would expect an epidemic of obesity simultaneously to be a drag on GDP (more people unable to work due to obesity-related health problems), a booster of health-care expenditures, and a driver of lousy aggregate health statistics such as low life expectancy. But is America’s obesity problem really caused by our health-care system? Not really, no – and our health-care system can’t really solve it either.

My strong suspicion is that demographic differences are a significant driver of the ways in which American health outcomes are inferior. Tackling the consequences of higher rates of poverty may require modifications to the structure of our health-care system – for example, it may well make sense for the government to provide directly on a “cheaper than free” basis certain basic services with large public health benefits, rather than merely providing subsidized or public insurance – but that’s not the same thing as blaming that overall structure for the disparities that exist. By contrast, I suspect that much of the higher cost of American healthcare reflects genuine consumer preferences; the question, though, is the degree to which those preferences are based on real prices. To the extent that they are not (and I think that’s to a very great extent), one solution would be to move in the direction of limiting the scope for consumer preferences – say, by eliminating private insurance. The other direction to go would be to move in the direction of making health-care consumers more aware of the prices they are paying when they buy insurance. That, to my mind, is the real center-left versus center-right divide on where to take the American healthcare system.