Americans spend more money each year on health care, in both absolute terms ($6,350 per person) and as a percentage of GDP (15.2%), than anyone else in the world. (OK, the Marshall Islands spend 15.4% of their GDP on health care, but that's only $294 per person.) (link)
European countries spend an average of $1,652 per person on health care each year, or 8.6% of GDP. (link)
Yet the US ranks behind most European countries (link) -- in fact, behind about three-fourths of all developed countries (link) -- in life expectancy.
It's not surprising that we have so little to show (in terms of health) for all of our extravagant spending on health care. As it turns out, once certain basic health care needs are met, there's no correlation between additional spending on health care, on the one hand, and improved health, on the other. Marginal spending on health care tends to be either useless or worse than useless. We could maintain similar life expectancy and quality of life if we slashed our medical care in half.
How can we slash our medical care in half? How can we get people to stop wanting more and more and more health care services?
I propose that we nationalize the health care industry. If doctors' offices were run more like the DMV, people wouldn't want to go there so much.
Here's my argument.
1. In the U.S., more spending on health care does not mean better health.
From this article in The New Yorker:
McAllen is in Hidalgo County, which has the lowest household income in the country ... McAllen has another distinction, too: it is one of the most expensive health-care markets in the country. ... In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars. ...
El Paso County, eight hundred miles up the border, has essentially the same demographics. ... Yet in 2006 Medicare expenditures ... in El Paso were $7,504 per enrollee - half as much as in McAllen. ... There’s no evidence that the treatments and technologies available at McAllen are better than those found elsewhere in the country. ... Nor does the care given in McAllen stand out for its quality. ... The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine. ...
In a 2003 study, ... Elliott Fisher, examined the treatment received by a million elderly Americans diagnosed with colon or rectal cancer, a hip fracture, or a heart attack. They found that patients in higher-spending regions received sixty per cent more care than elsewhere. ... Yet they did no better than other patients, whether this was measured in terms of survival, their ability to function, or satisfaction with the care they received. If anything, they seemed to do worse. ...
And from a 2003 article in the Washington Monthly:
Where specialists are abundant, they find elders to treat--and Medicare pays, spending, for example, $50,000 more per patient in Miami than Minneapolis, as my colleague Shannon Brownlee recently wrote in The Atlantic. But according to John Wennberg of Dartmouth Medical School, elder persons living in regions where the use of specialists is high have no greater life expectancy than their counterparts in regions where it is low.
The reference to Miami and Minneapolis comes from this study:
In Miami, average inpatient Medicare spending on people in their last six months of life was about double Medicare spending in Minneapolis; average ICU days were nearly four times higher. What are the implications of such differences for the efficiency of health care? In this paper, we used Medicare claims data to document the extent of these variations across 306 hospital referral regions in the U.S. We did not find strong evidence that the spending differences were due to underlying variation in health levels across regions. Nor did we find evidence of any benefits from higher spending levels; regional survival rates following acute conditions like AMI (heart attacks), stroke, and gastrointestinal bleeding were not correlated with more intensive health care spending. ... In sum, our results suggest that ... regions providing more intensive care are not gaining net health benefits over regions providing less care ... .
Finally, these observations are from a couple articles in the Annals of Internal Medicine:
1. The more inpatient-based and specialist-oriented pattern of practice observed in high-spending regions largely explains regional differences in Medicare spending. Neither quality of care nor access to care appear to be better for Medicare enrollees in higher-spending regions.
2. Medicare enrollees in higher-spending regions receive more care than those in lower-spending regions but do not have better health outcomes or satisfaction with care.
The biggest and most carefully controlled study on this topic was the RAND Health Insurance Experiment. I started a thread on it a couple years ago. The gist is that when people have to pay for medical care on their own, they buy substantially less of it than when a third party is paying. But they get the same results in terms of their health. The extra health care has no benefit.
2. Indeed, a great deal of spending on health care is completely useless.
From David H. Newman, M.D. at the NYT blog:
The practice of medicine contains countless examples of elegant medical theories that belie the best available evidence.
* Recent press reports detailing the dangers of cough syrup for children have noted that cough syrup doesn’t work. True: No cough remedies have ever been proven better than a placebo, either for adults or children. Yet their use is common.
* Patients with ear infections are more likely to be harmed by antibiotics than helped. While the pills may cause a small decrease in symptoms (for which ear drops work better), the infections typically recede within days regardless of treatment. The same is true for bronchitis, sinusitis, and sore throats. Unnecessary antibiotics are still given to more than one in seven Americans each year for these conditions alone, at a cost of more than $2 billion and tens of thousands of serious adverse medication effects requiring treatment.
* Back surgeries to relieve pain are, in the majority of cases, no better than nonsurgical treatment. Yet doctors perform 600,000 of these surgeries each year, at a cost of over $20 billion.
* More than a half million Americans per year undergo arthroscopic surgery to correct osteoarthritis of the knee, at a cost of $3 billion. Despite this, studies show the surgery to be no better than sham knee surgery, in which surgeons “pretend” to do surgery while the patient is under light anesthesia. It is also no better than much cheaper, and much less invasive, physical therapy.
More on knee surgeries to treat arthritis in this Washington Post article:
One of the most common surgical procedures performed in the United States — arthroscopy to treat arthritis in the knee — is useless. ... [The] findings are being published in today’s issue of the New England Journal of Medicine. ... The study marks the second time a major study has questioned the operations, which can cost about $5,000 and are done on hundreds of thousands of Americans each year.
See a couple more Washington Post articles here and here. (The latter is a book review.)
All of this suggests that we could probably slash our health care spending in half without sacrificing our health. But how do we do that?
3. Nationalizing health care will reduce people's demand for it.
There's an analogy here to religion, I think. Larry Iannaccone is an economist who studies religion, and he has determined what Adam Smith and David Hume had both predicted: if a country nationalizes its religion, people will lose interest in it. Preachers on the government payroll will give sermons that are a lot more boring than preachers who have to rely on taking up a collection.
Iannaccone observes in this paper:
Among Protestants, at least, church attendance and religious belief both are higher in countries with numerous competing churches than in countries dominated by a single church. The pattern is statistically significant and ... visually striking. Church attendance rates, frequency of prayer, belief in God, and virtually every other measure of piety decline as religious market concentration increases. The relationship remains strong even after controlling for income, education, or urbanization.
Looking at [the data], one immediately spots the exceptionally low levels of religiosity in the Scandinavian countries and, conversely, the high level of religiosity in the U.S. As predicted by [Adam] Smith, these extremes correspond to different market structures. A single state-run (Lutheran) church dominates the market in every Scandinavian country. In contrast, the United States enjoys a constitutionally mandated free-for-all in which hundreds of denominations compete and none has special status.
In developed, first-world countries, the pattern is very strong: the more the government is involved in religion, the less religious the populace becomes. State-run religion just isn't very fun, so the demand for it is weak.
There is some evidence that the same holds true for health care. From a 1998 study:
Like previous studies, this one concludes that aggregate income measured by Gross Domestic Product per capita is the statistically most important factor in cross-national variation in health care expenditures, and that the aggregate income elasticity exceeds one. However, the data analyzed in this study also show some evidence that public financing of health care services is associated with lower expenditures per capita, and that countries with fee for service as the dominant form of remuneration have higher expenditures. The examined relationships appear to be temporally stable over the three years except for upward shifts, and there is no indication of statistical misspecification.
4. Conclusion
A large fraction of the health care we purchase apparently doesn't do as much good as many people think it does (as measured by results). Our life expectancy has improved by about 30 years over the last century -- but only about five of those years are due to improvements in medicine. Most of it comes from better hygiene, better workplace safety, and better food inspections. (link) (Most of the improvements from medicine involve vaccinations.)
Americans are spending twice as much on health care as most developed countries, but we still rank quite poorly in longevity.
As with religion, a competitive health care market in the U.S. has put it at the head of the class in terms of innovation and customer satisfaction (for those with adequate insurance). Modern medicine has discovered all kinds of new treatments for diseases that nobody even knew existed a few decades ago. (See the Washington Post articles linked to above.) Cures (or preventative measures) focusing on such fancy new "diseases" as high cholesterol have been hugely profitable for pharmaceutical companies, but probably a waste of time and money for everybody else.
We'd probably have a similar life expectancy and quality of life if we weren't so enthusiastic about spending other people's money on health care. How do you make people less enthusiastic about something? Cut out the innovative marketing, the friendly service, and the convenience. In other words, put the government in charge!
European countries spend an average of $1,652 per person on health care each year, or 8.6% of GDP. (link)
Yet the US ranks behind most European countries (link) -- in fact, behind about three-fourths of all developed countries (link) -- in life expectancy.
It's not surprising that we have so little to show (in terms of health) for all of our extravagant spending on health care. As it turns out, once certain basic health care needs are met, there's no correlation between additional spending on health care, on the one hand, and improved health, on the other. Marginal spending on health care tends to be either useless or worse than useless. We could maintain similar life expectancy and quality of life if we slashed our medical care in half.
How can we slash our medical care in half? How can we get people to stop wanting more and more and more health care services?
I propose that we nationalize the health care industry. If doctors' offices were run more like the DMV, people wouldn't want to go there so much.
Here's my argument.
1. In the U.S., more spending on health care does not mean better health.
From this article in The New Yorker:
McAllen is in Hidalgo County, which has the lowest household income in the country ... McAllen has another distinction, too: it is one of the most expensive health-care markets in the country. ... In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars. ...
El Paso County, eight hundred miles up the border, has essentially the same demographics. ... Yet in 2006 Medicare expenditures ... in El Paso were $7,504 per enrollee - half as much as in McAllen. ... There’s no evidence that the treatments and technologies available at McAllen are better than those found elsewhere in the country. ... Nor does the care given in McAllen stand out for its quality. ... The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine. ...
In a 2003 study, ... Elliott Fisher, examined the treatment received by a million elderly Americans diagnosed with colon or rectal cancer, a hip fracture, or a heart attack. They found that patients in higher-spending regions received sixty per cent more care than elsewhere. ... Yet they did no better than other patients, whether this was measured in terms of survival, their ability to function, or satisfaction with the care they received. If anything, they seemed to do worse. ...
And from a 2003 article in the Washington Monthly:
Where specialists are abundant, they find elders to treat--and Medicare pays, spending, for example, $50,000 more per patient in Miami than Minneapolis, as my colleague Shannon Brownlee recently wrote in The Atlantic. But according to John Wennberg of Dartmouth Medical School, elder persons living in regions where the use of specialists is high have no greater life expectancy than their counterparts in regions where it is low.
The reference to Miami and Minneapolis comes from this study:
In Miami, average inpatient Medicare spending on people in their last six months of life was about double Medicare spending in Minneapolis; average ICU days were nearly four times higher. What are the implications of such differences for the efficiency of health care? In this paper, we used Medicare claims data to document the extent of these variations across 306 hospital referral regions in the U.S. We did not find strong evidence that the spending differences were due to underlying variation in health levels across regions. Nor did we find evidence of any benefits from higher spending levels; regional survival rates following acute conditions like AMI (heart attacks), stroke, and gastrointestinal bleeding were not correlated with more intensive health care spending. ... In sum, our results suggest that ... regions providing more intensive care are not gaining net health benefits over regions providing less care ... .
Finally, these observations are from a couple articles in the Annals of Internal Medicine:
1. The more inpatient-based and specialist-oriented pattern of practice observed in high-spending regions largely explains regional differences in Medicare spending. Neither quality of care nor access to care appear to be better for Medicare enrollees in higher-spending regions.
2. Medicare enrollees in higher-spending regions receive more care than those in lower-spending regions but do not have better health outcomes or satisfaction with care.
The biggest and most carefully controlled study on this topic was the RAND Health Insurance Experiment. I started a thread on it a couple years ago. The gist is that when people have to pay for medical care on their own, they buy substantially less of it than when a third party is paying. But they get the same results in terms of their health. The extra health care has no benefit.
2. Indeed, a great deal of spending on health care is completely useless.
From David H. Newman, M.D. at the NYT blog:
The practice of medicine contains countless examples of elegant medical theories that belie the best available evidence.
* Recent press reports detailing the dangers of cough syrup for children have noted that cough syrup doesn’t work. True: No cough remedies have ever been proven better than a placebo, either for adults or children. Yet their use is common.
* Patients with ear infections are more likely to be harmed by antibiotics than helped. While the pills may cause a small decrease in symptoms (for which ear drops work better), the infections typically recede within days regardless of treatment. The same is true for bronchitis, sinusitis, and sore throats. Unnecessary antibiotics are still given to more than one in seven Americans each year for these conditions alone, at a cost of more than $2 billion and tens of thousands of serious adverse medication effects requiring treatment.
* Back surgeries to relieve pain are, in the majority of cases, no better than nonsurgical treatment. Yet doctors perform 600,000 of these surgeries each year, at a cost of over $20 billion.
* More than a half million Americans per year undergo arthroscopic surgery to correct osteoarthritis of the knee, at a cost of $3 billion. Despite this, studies show the surgery to be no better than sham knee surgery, in which surgeons “pretend” to do surgery while the patient is under light anesthesia. It is also no better than much cheaper, and much less invasive, physical therapy.
More on knee surgeries to treat arthritis in this Washington Post article:
One of the most common surgical procedures performed in the United States — arthroscopy to treat arthritis in the knee — is useless. ... [The] findings are being published in today’s issue of the New England Journal of Medicine. ... The study marks the second time a major study has questioned the operations, which can cost about $5,000 and are done on hundreds of thousands of Americans each year.
See a couple more Washington Post articles here and here. (The latter is a book review.)
All of this suggests that we could probably slash our health care spending in half without sacrificing our health. But how do we do that?
3. Nationalizing health care will reduce people's demand for it.
There's an analogy here to religion, I think. Larry Iannaccone is an economist who studies religion, and he has determined what Adam Smith and David Hume had both predicted: if a country nationalizes its religion, people will lose interest in it. Preachers on the government payroll will give sermons that are a lot more boring than preachers who have to rely on taking up a collection.
Iannaccone observes in this paper:
Among Protestants, at least, church attendance and religious belief both are higher in countries with numerous competing churches than in countries dominated by a single church. The pattern is statistically significant and ... visually striking. Church attendance rates, frequency of prayer, belief in God, and virtually every other measure of piety decline as religious market concentration increases. The relationship remains strong even after controlling for income, education, or urbanization.
Looking at [the data], one immediately spots the exceptionally low levels of religiosity in the Scandinavian countries and, conversely, the high level of religiosity in the U.S. As predicted by [Adam] Smith, these extremes correspond to different market structures. A single state-run (Lutheran) church dominates the market in every Scandinavian country. In contrast, the United States enjoys a constitutionally mandated free-for-all in which hundreds of denominations compete and none has special status.
In developed, first-world countries, the pattern is very strong: the more the government is involved in religion, the less religious the populace becomes. State-run religion just isn't very fun, so the demand for it is weak.
There is some evidence that the same holds true for health care. From a 1998 study:
Like previous studies, this one concludes that aggregate income measured by Gross Domestic Product per capita is the statistically most important factor in cross-national variation in health care expenditures, and that the aggregate income elasticity exceeds one. However, the data analyzed in this study also show some evidence that public financing of health care services is associated with lower expenditures per capita, and that countries with fee for service as the dominant form of remuneration have higher expenditures. The examined relationships appear to be temporally stable over the three years except for upward shifts, and there is no indication of statistical misspecification.
4. Conclusion
A large fraction of the health care we purchase apparently doesn't do as much good as many people think it does (as measured by results). Our life expectancy has improved by about 30 years over the last century -- but only about five of those years are due to improvements in medicine. Most of it comes from better hygiene, better workplace safety, and better food inspections. (link) (Most of the improvements from medicine involve vaccinations.)
Americans are spending twice as much on health care as most developed countries, but we still rank quite poorly in longevity.
As with religion, a competitive health care market in the U.S. has put it at the head of the class in terms of innovation and customer satisfaction (for those with adequate insurance). Modern medicine has discovered all kinds of new treatments for diseases that nobody even knew existed a few decades ago. (See the Washington Post articles linked to above.) Cures (or preventative measures) focusing on such fancy new "diseases" as high cholesterol have been hugely profitable for pharmaceutical companies, but probably a waste of time and money for everybody else.
We'd probably have a similar life expectancy and quality of life if we weren't so enthusiastic about spending other people's money on health care. How do you make people less enthusiastic about something? Cut out the innovative marketing, the friendly service, and the convenience. In other words, put the government in charge!
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I'd bet good money that Enbrel will absoutely be available for you under nationalized health care. Tax dollars are still green ... the Enbrel manufacturer will still accept them. Nationalized healthcare does not equal "everything expensive goes out the window".
I agree here as well, and thought the New Yorker article had some very good points. I would be open to Nationalizing if it would solve something but I don't understand how it helps.Under a Nationalized structure will doctors be paid the same regardless of the amount of work they do? If not, they will always be incented to perform more procedures. Even more so if they will paid less per procedure as a Nationalized system would imply.
I'd bet good money that Enbrel will absoutely be available for you under nationalized health care. Tax dollars are still green ... the Enbrel manufacturer will still accept them. Nationalized healthcare does not equal "everything expensive goes out the window".
I'd bet good money that Enbrel will absoutely be available for you under nationalized health care. Tax dollars are still green ... the Enbrel manufacturer will still accept them. Nationalized healthcare does not equal "everything expensive goes out the window".
Shouldn't cost the patient a dime. I'm thinking of a U.K.-style NHS in the U.S., not some universal insurance scheme.
UNder your proposal....health care overall would DRAMATICALY and TRAGICALLY be ruined. The whole idea of insurance is to spread out the risk, so that nobody gets ruined by a lack.WHy would we want to put anybody in a positonn (or risk putting OURSELVES in the position) of not being able to get a critical life-saving procedure done because we can't afford the 10K pricetag???? Your solution is not just untenable, but I find it irresponsible, particularly coming at the end of what was a generally well thought out and reasonable post.
I'd bet good money that Enbrel will absoutely be available for you under nationalized health care. Tax dollars are still green ... the Enbrel manufacturer will still accept them. Nationalized healthcare does not equal "everything expensive goes out the window".
I'd bet good money that Enbrel will absoutely be available for you under nationalized health care. Tax dollars are still green ... the Enbrel manufacturer will still accept them. Nationalized healthcare does not equal "everything expensive goes out the window".
