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The Healthcare Crisis is Global


US healthcare is even more expensive than we realized, and we have the graphs to prove it. Below are just three of many graphs comparing the costs of healthcare in various countries. They come from the annual survey of the International Federation of Health Plans via Ezra Klein’s Wonkblog:








One typical reaction to these graphs is to argue that we need more price controls to hold down rising costs in healthcare. Liberal wonks like Klein often gesture in that direction. This is how Sarah Kliff, a contributor to Klein’s Wonkblog, put it:

We have a lot of examples to look at where governments have successfully held down the rate of health-care cost inflation. Most of them do that through some version of price controls, where the government sets the rates that doctors can charge for various services […]

Rate-setting has a pretty decent track record in holding down health-care inflation but less of a stellar scorecard in American politics. In a way, the success of rate-setting makes pretty simple sense: When the government has the final say on how much a medical procedure costs, it’s pretty easy to hold down the price.

But even in countries that have adopted some form of price control—most on these graphs—prices are still rising, even if in absolute numbers their systems are cheaper than ours. Take this graph from the Commonwealth Fund that charts the rise of healthcare costs internationally from 1980 to 2008:

International Comparison of Spending on Health 1980-2008 - Commonwealth Fund

Many of the countries pictured in the above graph—UK, France, Canada, and Australia, for example—use some form of price control. But, as you can see, healthcare spending is rising everywhere regardless of whether the country uses rate setting or not.

Price controls in the US might save us some money in the short term, but they wouldn’t address the long term causes driving spending here as well as abroad. To do that would requires the kind of technological innovation we often highlight on this blog. Smart healthcare policy needs to focus on promoting the development of new technologies and delivery systems. Unfortunately, a price control regime involves the kind of bureaucratic controls and politicized decision making that slows or blocks innovation.

The US needs to get a better handle on prices even as we open the system up in ways that can accelerate the technological changes that are our only long term hope. This won’t be easy, but it is the only way forward that doesn’t lead to disaster.

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  • ojfl

    This was something that people should have known when we passed Obamacare. From the data from the OECD that was always the case. One thing that is not in these graphs is that some of the arguments to pass the law are not valid. Like the one where it says the US spends more than any other country. That was obvious since the early 60s. Also the graphs do not show that the rate of increase of health expenditures in the US is on a par with other countries in the OECD, with single payer or otherwise. Another things that is not shown in these graphs is that the expenditure per capita divided by the income per capita is fairly constant across countries. That shows that the US is not as bad as people claim it to be. The only solution to healthcare inflation is not, as Ezra Klein points out, price control. The solution is to use the only two forces known to men to reduce prices for anything, competition and economies of scale. That requires price exposure and individual control of expenditures, not centralized control.

  • John Burke

    With all due respect to Klein and his source, even presenting three levels of US prices probably does not factor out the distorting effects of the absurd nominal hospital and doctor rates that almost no one ever pays. To take two huge chunks of patients — Medicare and Medicaid beneficiaries who number around 75 million — their plans pay as little as 5 or 10 cents on a dollar of hospital billings and often no more than 30 cents on a dollar of doctors’ fees. While I’m sure actual payments are still higher than in other advanced countries, I think that is largely attributabls to better quality of care and higher physician incomes, both of which seem to me to be worth paying.

  • bannedforselfcensorship

    Do these charts control for per capita income? For example, I would guess that doctors make less money in those countries than in the USA. And nurses. And everyone else. Thus when you compare medicine or military spending, or anything else, you have to factor that in.

    Secondly, what do those quartile numbers mean? Does than mean that in 25% of cases the costs are close to Europes…which might be geographical as well – cheaper charges in cheap states while the top quartiles represents expensive states? It might also represent the absolute top of the line care at the Mayo clinic that attracts many FOREIGN patients. The super rich, etc.

    Finally, are these costs ever adjusted for price controls in Europe that would immediately go away if we too had price controls. I’m referring to drug companies making big money in America while Europe free rides. Without big money prices in America, the global average price would rise to make drug companies the same amount of money.

    My suggestion would be that we pass a simple law that requires single pricing for drug companies. No super low price for European monopsonies and a high price for us. This would reveal to everyone the true price for drugs and not conceal these behind different price schemes.

    I would also like to see that for procedures within the US market. No super low price for Medicare to be subsidized by regular insurance. Then we could see if “single payer” like Medicare would really save money. I doubt it would save much.

    I also suspect the salaries paid in the medical field in America are the highest in the world, and this is why are costs are so high. Foreign doctors come to America for a reason and not the other way round.

  • JT

    I suspect that there are several areas that can help and be looked at with lowering unneeded medical costs in the US. New technology will help. A re-examination of the now older expensive drugs and procedures used, that offer little if any benefit, would be beneficial. Greater competition, offering choices to patients, with incentives to save money, will go a long ways too.

    I suspect also that there is a greater resistance to change in the health care industry from females. I suppose this resistance to be somewhat similar to how black Americans view the social blue model, and jobs found in government service. I’ve found the greatest champions of the current health care system to be women typically. Likely this is in part due to many women viewing hospitals and the health care industry as sources of employment. With nurses, administrators, and now doctors in large part being females, it’s an industry that has long been staffed by women over the ages.

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