In a piece at Bloomberg Noah Smith complains that reducing costs is the sine qua non of health care reform:
Why is it so hard to agree on a health-care plan? One obvious possibility: Reform plans feel as intolerable as the status quo while lacking the promise of lowering costs. The U.S.’s uniquely dysfunctional hybrid public-private system has resulted in the country devoting a much higher share of its output to health care than its rich-world peers…
Advocates of single-payer plans tend to assume that switching to national health insurance will reduce costs. This assumption features in both Warren’s and Sanders’s proposals. There is some justification for this. Health care in Canada, which has a single-payer system, costs much less; if the U.S. spent the same percent of its gross domestic product on health care as its northern neighbor, it would save more than $1.34 trillion a year.
I’ve been arguing that the foremost objective of health care reform should be to reduce spending for the last ten years now. Welcome to the fight, Mr. Smith.
Note that nobody has proposed that we adopt Canada’s system or, indeed, anything resembling Canada’s system. What has been proposed are systems with greatly expanded coverage, less “skin in the game” for patients, and overblown estimates of the savings from lower administrative costs.
Canada spends about half what we do on the administration of their system but everything in Canada’s experience tells us that economies of scale are fully realized at fewer than 50 million people covered and our knowledge of bureaucracies is that their costs increase exponentially with size.
Dare I mention that Canada is tremendously demographically different from the United States? We haven’t been as homogeneous as Canada since the 19th century if ever.
Here in the United States we spend more on infrastructure, defense, and education than anybody else, too. That’s not because we have a fragmented hybrid system.
What we don’t have is the one thing most needed for health care reform to reduce spending: a commitment to cutting spending. Politicians don’t want it, patients don’t want it, and providers don’t want it.
” Health care in Canada, which has a single-payer system, costs much less;”
I wish people who don’t know much about health care wouldn’t write stuff like this. What they should say is that every other country with first world quality care has much cheaper care than we do, and they all have much more government involvement. Link goes to our infrastructure spending as a percentage of GDP.
https://www.statista.com/statistics/566787/average-yearly-expenditure-on-economic-infrastructure-as-percent-of-gdp-worldwide-by-country/
Steve
Why is “infrastructure as a percentage of GDP” the right measure? Why is it important at all?
Whatever, it doesn’t contradict what I said: we spend more. And even if we do spend less than China, we’ve been spending more for longer. That makes a difference. You can only build the same road once.
Switzerland doesn’t have “much more government involvement” than we do and they spend about 30% less than we do. Health insurance is compulsory there and they don’t have anything resembling Medicare or Medicaid. But Switzerland is tiny and consensus-oriented. Social cohesion makes a difference in what is possible.
“What they should say is that every other country with first world quality care has much cheaper care than we do, and they all have much more government involvement.”
Not universally true.
And if we are going to spend trillions remaking our healthcare system on that basis, we should first definitely determine if that “link” is actually causal or not. Without that, the argument looks tautological at best.
“Why is “infrastructure as a percentage of GDP†the right measure? Why is it important at all?â€
It isn’t. As a first cut per capital does. Then you need to correct for demographics (age). Then lifestyle. Then quality of care. Then the social view on paying for the aged……..
It borders on a fools errand.
“Why is “infrastructure as a percentage of GDP†the right measure? Why is it important at all?”
We spend a lot more on infrastructure than Luxembourg. Any measure of infrastructure spending that doesn’t account for differences like population is pretty meaningless. Note that I am not saying that per capita spending is the best to fall possible metric, but it is a heck of a lot better than a raw total number, or we are back at Luxembourg again.
“Switzerland doesn’t have “much more government involvement—
I guess you could quibble about the “much” if you want, but the Swiss govt is involved in health care at a level that wouldn’t be tolerated in the US. It requires everyone to have health insurance. (The libertarians would be hopping mad already.) You are required to send up to 8% of your income, and if you still cant afford insurance the government picks up the rest. For everyone! Better than Medicare or Medicaid. The govt sets the requirements for the basic insurance you must have, so the insurance companies do not compete based upon services. Even Medicare Advantage gets to do that. The government sets a minimum deductible and maximum out of pocket (no maximum out of pocket for traditional Medicare). The government subsidizes, directly, the public hospitals. The government sets the age stratifications and, if memory serves, it sets the rules for health stratification the companies use to set rates. No deductibles or co pays for pregnancy related care except for room amenities. This is just partial list of government involvement. (This is with the caveat that much of this is from books read over the last 15 years so there may have been changes.
“actually causal or not.”
Correlation is not cause, but when the correlation is 100% it becomes difficult to tell the difference. There is also supplementary evidence like Singapore. They decided to try to use market methods to reduce costs. Failed pretty badly. When providers worked in a market based system they figured out they could push the more expensive care to make more money. Spending increased. Surprise, surprise, surprise! Then when you look at the costs of care in other countries, those which have some elements of market based care or private insurance tend to be the more expensive plans.
Steve
The belief that it is possible to cut bureaucratic costs is utterly delusional. It is of the same category as the belief that the regulatory system can be made rational or less intrusive, or that there is fat in government budgets. One person’s fat is another’s steak. Try cutting Chicago teachers’ salaries to something like the national median household income of $56,516 (as of 2015).
The Europeans and Canadians curtail costs by denial of and rationing of treatment, especially in the areas of drugs and advanced imaging equipment, like MRI’s. They can do this, because all European countries and Canada (and Australia, New Zealand, Japan…) are top-down authoritarian societies, in which the people are adapted to being controlled.
The only way to cut medical costs is to reduce medical care. Try that.
I guess the degree of government involvement is a matter of perception. The Swiss aren’t setting 700 some-odd prices and processing provider bills as we are. They are processing statements from employers and individuals but they need to do that anyway. It is canton (state)-based, uniform, and equitable. And it was agreed to by referendum as most Swiss law is.
Under the Swiss system incentives tend to be aligned properly whereas in ours everybody is incentivized to do more for spending to increase.-
Dave
What Swiss based incentives exist that result in the desire to reduce costs? For example:
To not image every issue that presents itself.
To take a risk that observation rather than immediate intervention is the preferred course of action. And without fear of lawsuit if the most aggressive, and costly, standard is not followed.
To allow the clearly terminal to pass instead of “do everything you can docâ€.
And so on.
I think you are concentrating too much on some details. The big picture is that the Swiss government dictates that everyone must have insurance, then they provide the financial support and subsidies to make sure that happens. It dictates what all of the insurers must cover. We do nothing like that. Setting some prices for 15% of the population pales, I think, compared to telling insurance companies they have to cover everyone, what they cover, then providing the financial support to make that happen.
“The Europeans and Canadians curtail costs by denial of and rationing of treatment, especially in the areas of drugs and advanced imaging equipment, like MRI’s.”
An absence of knowledge about health care in the rest of the world leads people to say stuff like this. The number of MRI machines in the US is driven by profit as they are money makers. An MRI in the US costs much more than anywhere else, so they are a profit center. In particular, MRI machines that are owned by physicians are more heavily utilized. So we do a lot more MRI studies and each individual study costs a lot more. But, we dont have better outcomes to show for all of that money spent on MRIs. To take this a step further, the Japanese are actually the world leaders in MRI usage. Their studies cost much less than ours. Their outcomes? About the same.
So most of the stuff about rationing is not true. Besides, what we really want to know is outcomes and our ROI with health care spending. Sometimes, for example, spending more in one area will reduce overall spending.
Steve
Let me introduce you to the Affordable Care Act:
or, said another way, we do precisely what you say we don’t. And, as noted in the quote, the states, which have the primary responsibility for regulating insurance, also mandate what must be covered, prices, etc.
As I noted before, I think this is a matter of perception. You see our system as not much government involvement, I see it as a lot of government involvement.
Those only apply to new plans formed after the ACA so it doesn’t apply the majority of insurance plans in the country and it largely only applies to individual and small group plans (a few things like the age 26 retirement for children is required by large plans). Even for individual and small group plans there is a lot of flexibility for states to set levels and amounts of care for those essentials.
https://www.healthinsurance.org/obamacare/essential-health-benefits/
That compares with the Swiss where their rules apply to everyone and they set the level of care everyone must meet.
Steve
or, in other words, you exaggerated and we do do something like that.
We have a hybrid private-government health care system. Of course we do something like that, just not nearly on the same scale. Which gets back to my original claim. All those other countries have much more govt involvement. We have some. The others have a lot.
OT- Since you often write on rare earths link goes to a list of minerals we import and how much.
http://conversableeconomist.blogspot.com/2019/11/us-dependence-on-imported-minerals.html
Steve
“All those other countries have much more govt involvement. We have some. The others have a lot.”
I guess it depends on what you mean by “government involvement” which can mean a lot of different things.
I think what I said before stands – if we are going to reorganize our healthcare system to include more “government involvement” then proponents need to define what that means exactly and demonstrate that the increased government involvement is the defining factor necessary to bring about the promised benefits.
Merely pointing out that other countries have more “government involvement” and also have lower costs and good care doesn’t prove anything and it’s not evidence that proposals that include greater government involvement here will either work or improve things.
There are at least two big differences between how we manage infrastructure, military and education funding and how we manage health care funding in the USSA.
First of all, only healthcare is principally financed through insurance. How ridiculous would it be to involve insurance in funding of infrastructure, military and education! We might as well institute sex insurance. Insurance adds some 25% cost on top of the cost of medical care, as in provisions of the ACA.
Secondly, we finance health care through tax-deductible contributions in employer-provided insurance, whereas the others are financed through general income and property taxes, though as usual the breeders are heavily subsidized by non-breeders, particularly in the case of education.
Curious but wasn’t able to find numbers on other developed nations having laws like EMTLA. Not that it’s bad, but free riders are a burden and a cost anyway you frame it.
Developed nations with first world quality dont need EMTALA since they have universal health care already. You only need EMTALA in a place where you dont have universal health care.
Steve