This is a bit of a false narrative. 99% of healthcare is not emergency room, imminent bleeding out. I believe we should have government provided true emergency care for everyone (just like we have fire and police, right?), but for non-emergency stuff (which is most of healthcare), people do have time to shop around and find the best deal for them. The best deal might involve joining a health club like Aetna or Kaiser (these are not insurance, by the way), or it might be saving your money in a bank and paying for stuff piece by piece by yourself, just like we do for just about everything else we need to survive in this world.
A lifetime supply of insulin is much more expensive than setting a broken bone. We are not all equally likely to have cancer or respiratory disease.
Of course people should still have insurance (possibly government provided?) for the very rare and expensive surprises (just like a house fire is rare and expensive).
> regulatory capture, intellectual property
Ostensibly would seem that relaxing regulation and (more importantly) abolishing or heavily weakening medical patents would help drive down costs.
Can you imagine if tech companies could patent their products the same way medical companies do today? Uber would no longer have to worry about finding a moat, their moat would simply be their patent on "digital ride sharing provided by dynamic pricing to predict demand and position supply" (or some similar conceit). Smartphones would all be expensive and Apple would have a monopoly on multi-touch phones with capacitive displays and built-in app-stores.
If food companies could patent food the same way drug companies can patent drugs that they prepare, bread would be expensive and you wouldn't have store brands and generics to keep the price of the fancy Whole Foods bread in check.
Fine, it is a "dramatic illustration" but for even ordinary, ongoing medicine, the average consumer isn't in a position to evaluate the choices involved, there a natural advantage whatever health care provider is in the area, necessary regulation create severe barriers to entry and so-forth.
>the average consumer isn't in a position to evaluate the choices involved
Why? Once again I completely disagree with this narrative as well.
There are many, many, many examples of people who go to a hospital and ask at every point whether the services being provided are "in-network" for their insurance company, and yet still find themselves being billed for "out-of-network" services because of some assistant to a doctor or someone who was consulted outside the patient's presence. It's a minefield, even for people with patience and a clear head, which doesn't describe the majority of people seeking medical care.
A quick search turns up a few examples: - http://www.news-gazette.com/news/local/2019-01-20/wondering-... - https://www.consumerreports.org/health-insurance/states-work... - https://www.prlog.org/12766040-hbma-adopts-policy-framework-...
This is a very common issue, so common it is receiving legislative attention.
Oversimplifications don't serve anyone, and mischaracterizations are unhelpful and unwelcome.
How could a consumer be in a position to evaluate their physician (and the entire health care process)? The knowledge required is huge. Moreover, once you have an adversarial market situation where the competitors use any means available to present themselves well, the ability of the consumer to do these evaluations will further decline - after twenty years of ecommerce, determining if a random thing I buy on Amazon actually has value is still hard, still a crapshoot (I don't mind having to be careful buying a random thing on Amazon, that's reason tradeoff. For something that could threaten my life, it's not a reasonable tradeoff). But bad health care products and services can kill you.
The usual answer is "we'll find a third party to do the evaluating" but unless that's actually the state, at which point things pointless, you will still have all the corruption of today - insurance companies are the evaluators and aggregators of health care services but they ultimately can't control prices (they can limit services provided but aren't really limiting the price for the services - they don't have an incentive to do so since they take a cut of the services).
Most advanced industrialized nations have a state-run health care system and pay on average half of what the US pays. Health is naturally quite complicated but it isn't impossible to get right. The fundamental problem is that an adversarial system, where every provider has an incentive to wrangle their presentation and to wrangle their position in the regulator system, means, in the specific case of health care, pseudo-competition plus regulation as we have now, doesn't lower costs or increase productivity, it just produces a tide of dubious opportunism as one can see from current conditions.
And a look at present US health would show things are pretty bad - costs are approaching 20% of GDP and given that this is double that of equivalent advanced industrialized nation, that means we're spending 10% of the entire GDP on some combination of waste and inefficiency.
The U.S. is not an outlier with regard to healthcare consumption when you factor in household income[1]. GDP is the wrong metric to measure against.
[1]https://randomcriticalanalysis.com/2018/11/19/why-everything...
That seems clearly wrong given that with US now having a GINI coefficient, high level of income inequality, median household income would be a better thing to measure health care spending, since every individual has to spend money on staying healthy.
The argument generally seems wrong too. The need for health care isn't elastic - if someone need care, they need care and people going without needed health care is a humanitarian crisis (a situation that the US is arguable in - see the people giving free dental in a stadium a few years back).
> That seems clearly wrong given that with US now having a GINI coefficient, high level of income inequality, median household income would be a better thing to measure health care spending, since every individual has to spend money on staying healthy.
The author responds to that criticism in the following comment[1]:
>> Two, I don’t understand why you’re using mean rather than median AIC throughout.
> Several reasons.
> 1) We don’t have good internationally comparable statistics for income or consumption at various points in the distribution...
> 2) When I’ve looked into this I have not found measured differences in the distribution or the median to be particularly informative...
> 3) This makes sense because there is approximately no relationship between individual income and health spending in the developed world, including the United States...
As for your second argument:
> The argument generally seems wrong too. The need for health care isn't elastic - if someone need care, they need care and people going without needed health care is a humanitarian crisis (a situation that the US is arguable in - see the people giving free dental in a stadium a few years back).
I'm not sure I follow your argument. RCA is saying that, as a country, the U.S. spends more on healthcare because we consume more health care than other countries. The U.K. kept their prices low for a long time only because the NHS engaged in intense rationing[2].
[1]https://randomcriticalanalysis.com/2018/11/19/why-everything...
[2] https://i1.wp.com/randomcriticalanalysis.com/wp-content/uplo...
Also, if there's no measured difference in individual household income versus health care spending, well then maybe his pet theory comparing average household income and health care spending isn't very applicable either.
2) "RCA is saying that, as a country, the U.S. spends more on healthcare because we consume more health care than other countries."
That argument is either wrong or tautological. The US spends more on health care for worse outcomes, as many studies have shown. If this person means we buy better outcomes, they are wrong. If they are saying we buy more stuff labeled health care, maybe true but that's because the system is bad, not good.
There are two distinct claims here.
(1) National health expenditures are overwhelmingly determined by the resources available to households, as measured by consumption or disposable income (not individual income), and these same measures effectively explain why the US spends much more than other countries.
(2) The increase in health spending in the US, as in other countries, has overwhelmingly been driven by an increase in the volume or quantity of healthcare consumed. While healthcare prices have risen they have generally not risen much faster than incomes have in the long run (especially not overall, but even when disaggregated somewhat), and thus cannot substantially explain why the share of income or consumption allocated to healthcare has risen overtime (indeed, the indices published by CMS and BEA indicate that had the quantity of health per capita remained constant the share would have actually fallen over time). This is also mirrored by related indicators, such as the vast rise in the health workforce, slow growing wages in healthcare (average healthcare wage approximates national average and hasn't increased for decades), and so on.
> The US spends more on health care for worse outcomes
So-called health "outcomes" are substantially endogenous (lifestyle, social influences, etc) and these factors vary systematically between countries. Moreover, health expenditure is almost certainly subject to rapidly diminishing returns and there is little to nothing to suggest the broad outcomes people typically cite (e.g., life expectancy) improve systematically with expenditures amongst countries in the developed world.
https://i2.wp.com/pbs.twimg.com/media/DUwPBxoXUAEMCxy.jpg
The pattern of rising expenditure with little or nothing to show for it on the margins in these broad measures may be regrettable, but my point is largely being driven by increasing disposable income, as opposed to idiosyncratic features of the US healthcare system. It sure seems like people really don't like to cut spending in practice and ultimately reject aggressive rationing conditional on income levels.
It seems that if we want to fix our satisfaction with our healthcare situation (in the U.S.), we have to fix a couple of issues:
- we have to mitigate the "endogenous factors" that contribute to poor health outcomes (i.e. people have to live healthier lifestyles).
- we have have to find a way to encourage people to self-ration their own medical spending in a way that doesn't adversely affect their own health outcomes.
Do you think a more free-market based approach to healthcare consumption would fix these issues? How do we address lack of information? How do we address the motivational issues that lead us to both live unhealthy lifestyles and to spend money on unhelpful medical care?
edit: fixed formatting
You're not responding to the complete argument. RCA has looked into finding median measure of income, and not found them relevant to the discussion because (as he says in the third point of the argument) the rich do subsidize health care for the poor.
> Also, if there's no measured difference in individual household income versus health care spending, well then maybe his pet theory comparing average household income and health care spending isn't very applicable either.
But again, mean income is relevant because the important thing is how much a society as a whole puts into the healthcare system. Average is meaningful when the rich subsidize the poor.
> 2) "RCA is saying that, as a country, the U.S. spends more on healthcare because we consume more health care than other countries."
> That argument is either wrong or tautological. The US spends more on health care for worse outcomes, as many studies have shown. If this person means we buy better outcomes, they are wrong. If they are saying we buy more stuff labeled health care, maybe true but that's because the system is bad, not good.
According to RCA, AIC isn't just correlated with spending, but also "the vast majority of socially relevant outcomes and their covariates." [1]
[1] https://randomcriticalanalysis.com/2018/11/19/why-everything...
EDIT: fixed wording in my first response
ADDENDUM: There are charts that show life expectancy to be lower in the U.S. than other developed countries, but that has to do with factors other than the quality of healthcare[2].
[2]https://randomcriticalanalysis.com/2016/11/06/us-life-expect...
As lliamander already mentioned, I addressed this on my blog. Several quick points:
1) International comparisons of health spending overwhelmingly relate directly to mean health expenditures (e.g., per capita, % of GDP, etc). Even if you know nothing of this area it seems most reasonable to compare mean health spending to mean material living conditions (disposable income or consumption)!
2) Individual income and health expenditures on behalf of individuals (i.e., not just OOP) are effectively uncorrelated within countries in the developed world (including the United States). There are clearly large national level effects independent on one's place in the national income distribution, which are exceptionally well correlated with mean income (r^2>0.9), and we shouldn't expect to income of the median person to be terribly informative.
3) We know healthcare to be heavily socialized in the United States and throughout the developed world. Mean income is a much better indicator of overall financial wherewithal than median income. The median just doesn't make much sense from a theoretical point of view. Moreover, estimates of the income distribution and the medians are surely subject to greater measurement error and issues of comparability between countries, so there are practical issues with this as well.
4) More practically speaking, I've run many different regressions using medians, various indicators of income inequality, etc and found little to nothing to suggest the income distribution is an important independent predictor. The r-squared and various goodness of fit indicators suggest these metrics perform less well than the National Accounts-based means I have used for disposable income and consumption. In multiple regression on these necessarily smaller samples (which are easy to over-fit) the coefficient/effect size of these distribution-related indicators are rarely significant, don't significantly improve model fit, and would almost certainly be rejected in lasso or the equivalent.
https://randomcriticalanalysis.com/2018/01/20/on-the-relevan...
5) With other aggregate consumption/expenditure statistics, such as food, housing, transport, entertainment, etc the fit is also (unsurprisingly) much better with my statistics than cross-sectional comparisons of median income, so I'm not sure why you would expect one of the most socialized and most elastic categories of expenditure at a national level (~1.4 as a function of GDP) to be any more favorable for the distributional perspective.
https://rpubs.com/random_critical_analysis/oecd_2014_consump...
We may never get it 'right' but we can aim for 'better', and have consensus on what the metrics are. By many measures the US isn't even in the top 10 for health metrics. Given what we pay (hard dollars and % comparison against other countries), that's crazy.
1. Laws can correct this.
2. A large segment of consumers paying out of pocket would also result in competitive pressure for hospitals to disclose prices.
Fwiw, I don't have this problem with smaller medical clinics.
Your natural monopoly claim is incorrect. People have choices as to where they get their healthcare, at least in the US. You can always claim a monopoly if you make the criteria strict enough but obviously in the US today people have a great deal of choice as to which healthcare providers they use. Even in an emergency (at least in larger metro areas) ambulances actually have choices as to which hospital they take the patient.
>The thing about employer-funded healthcare after WWII is that for a few decades, that health care was restricted to the Blue Cross/Blueso Shield monopoly [1]
You link to a wikipedia article which says > In the 1960s the U.S. government chose to partner with Blue Cross and Blue Shield companies to administer Medicare.[6]
What about the 20 years before that?
People don't realize that a lot of American industry in 1960s and 70s was "regulated monopolies" (Health care, airlines, trucking, telephone, etc). These provide a lot of the benefits that social democracy provides in Europe but was less obviously "socialized".
And similarly, the huge sea change that happened with Reagan breaking regulated industries wasn't and isn't noticed as the huge change that it was (and it is still reverberating through this society).
The thing is, health care is "natural monopoly", it's a situation where competition is meaningless at the point when a person shows up bleed at the emergency room. The process of "opening health care for competition" from the 1970s onward grew a hundred poisonous rent-seeks in every part of supply chain, from medical equipment operators to hospitals to insurance companies. Blaming just insurance companies is a bit misguided after all this. Certainly they play a part but the basic structure of private health care just naturally goes this way unless it either seriously regulated or nationalized.
[1] https://en.wikipedia.org/wiki/Blue_Cross_Blue_Shield_Associa...