Monday, January 7, 2008

US Wasting Money on Health Care

At the ASSA/AEA meetings my wife and I picked up the latest UNDP Human Development Report 2007/08. The numbers are really for 2005, but interesting nevertheless. So, the US was then second in real per capita income (has since slipped behind Norway to third), and was first in per capita spending on health, at over $6,000 per person. Only three other countries over $4,000, with highest income Luxembourg a bit over $5,000, and Norway and Switzerland each barely over $4,000. However, more striking is that the US is top in the world in percent of GDP spent on health care (from both public and private sources), at 15.4%. Second is "Occupied Palestinian Territories" at 13.0%, followed by Malawi at 12.9%. There are several other poor countries above 10%, with only two high income ones so, Germany at 10.6% and France at 10.5%.

You all know where this is going. So, US life expectancy, 77.9 years, is now tied for 29th in the world, with places like Costa Rica doing better. Last time I saw these figures, the US was tied for 17th, not so hot, but a lot better than 29th. The US is tied for for 30th on infant mortality at 6 per thousand and tied for 34th on maternal mortality at 11 per thousand. I think that is plenty for this post.


Anonymous said...

I don't have the latest latest numbers so my numbers are one or two years older than yours. But lets look at them based not on "rankings" but on real ages. Costa Rica has a life expectancy of of 78.8 with the US having a life expectacy of 78.2. So Costa Rica is doing better? Yes but only by .6 years. Even if you take the top (Japan) the difference is still only a few years. I argue this is a meaningless measurement. Now you can't get into an argument over infant mortality unless you can tell me how each country computes those numbers. Because that is all over the board.

Personally I believe that we are spending too much on health care but your numbers do nothing to prove it. said...


I agree that there are some problems in measuring infant mortality, and so some of the countries supposedly doing better than the US may not be. I am not sure about the maternal mortality numbers either.

However, I think life expectancy numbers are pretty accurate. The gap between Costa Rica and the US may not be all that great, but the gap with the top performers is more on the order of four to five years, which is pretty great. What we have is a bunch of areas where the US is clearly not doing as well as at least almost all the other high income countries, where data is more reliable, and yet we are spending not only more in actual terms, but in percent of GDP terms. This is an outrage.

Of course there is a political subtext. Much commentary suggests that what we need is more "free markets," that they are the way to get costs down. But, in fact, pretty much all of those other high income countries that pretty unequivocally outperform the US in health outcomes while spending clearly smaller percentages of their GDPs on health care, also have higher perecentages of their health care provision being made publicly. I am not for "socialized medicine" that shuts down the private sector, but some kind of move to universal, public health insurance is just so obviously sticking out of this data that I think that it is hard to refute.

And, back to Costa Rica again, I have sometimes seen the same people who argue for more free markets arguing when confronted with some of these things as saying "Well, Japan does well because they are Japanese, and Sweden does well because they are Swedes, so look at Minnesota" (which does have the greatest life expectancy of any US state). So, this is in effect a racist (or at least ethnocentric) argument: Those countries do well because they have healthy "master races" in them. Even if Costa Rica's numbers are not as good as claimed, the very fact that they are near on par with the US, pretty much blows this racially or ethnically oriented argument out the window (and, yes, I know, Costa Rica does have a higher percentage of "Europeans" than do the other Central American countries, but it is not full of Nordics and Japanese).


Anonymous said...

Do those "cost of health care" dollar amounts include the costs associated with 3rd party payers in this country?

Are there any measures of the quality of life related to medical issues? For example, are US seniors leading better lives before they drop dead a few years earlier than other nationalities? It's likely that hi-tech testing has something to do with higher costs, but what about hi-tech remedies like titanium hips and knees, which are all the rage these days? said...


I think the costs include all the third party ones. No, quality of life issues are not addressed at all, although I would suggest that they sneak in the back door of things like life expectancy, to the extent those numbers are reliable. Old people with crummy life quality tend to die sooner.


Anonymous said...

Has anyone done any work regarding the cost components of medical care across economies. To lump everything under the title of health care gives us no indication as to the greatest contributors to that cost. I've read that the costs of administering Medicare is significantly lower than the costs of the private insurance companies. If that's true, and if it is further demonstrated that other countries have much lower administrative costs, then such would be the best argument for taking helath care funding out of private insurance company control. said...


The answer is "yes," indeed I know that the literature is enormous, although with some of it much disputed. We are now running into the fact that while I posted here on this and sort of keep an eye on this, "health economist" is not in fact one of the all-too-many professional hats I actually wear, so I am not very good at citing the lit on this in detail. It is my impression, however, that your comment about mediare admin costs versus those of private insurers in the US is correct, with not all that many people seriously contesting this point, although I think there are some who do.


Anonymous said...

I am sure that the insurance industry and its servants in the Congress, (is that Joe Lierberman at the helm of service to the trade?) would dispute any data which lends support to the unnecessary waste of money which is the result of private insurance plans to cover basic health care. it borders on criminal that our congressional representatives continue to play the game of charades that such a system of guaranteed profitability to private enterprise represents.

And they produce nothing. Nor does private insurance limit health care costs. They have plenty of limits on health care service, and any moneys saved is for the profitability of the insurer.

Anonymous said...


so 0.6 years of life expectancy is trivial?

keep that in mind when they tell you you have six months to live.

Myrtle Blackwood said...

Barkley, I tend to think that there is much more waste of resources in the US than in Australia. It has been my personal experience to be discussing medical concerns with citizens in the US. The differences Australia and the US with respect to the provision of health services and the relative cost of drugs is remarkable. Many US citizens find it a struggle simply to get to a specialist and the cost of medicines is extraordinarily high in the US compared to here.

However studies are showing Americans to be far sicker than the British and I think that the reason for this goes beyond the inflated cost and restricted access to medical services over there (er..where you are).

There's an interesting article on this topic entitled 'High anxiety: what ails the world's big spender on health' at:

YouNotSneaky! said...


I think the anon's (perhaps ill expressed) point is that that kind of a difference can be attributable to measurement or sampling error. So it's more like a doctor telling you "you've got 6 months to live, give or take half a decade". Still, the fact that a country which is much much poorer than US like Costa Rica even comes within the 'error' band of a very rich country like US is telling. Which is why Barkley is (as usual) generally correct.

Anonymous said...

I think that a key point of wasted money is being over looked. Money
wasted is money spent, which in turn is money earned. The wasted money, whether health care or military spending or classic boondogle, is ending up in someone's bank account. I'd be curious to know the profit margin on those expenditures that are generally agreed to as wasteful spending. Political contribution and lobbying has a purpose and has a cost. That cost is certainly well covered by the profitability of waste money earnings.

It doesn't go away because it is profitable to some group, usually a small group with out sized influence. Is therer really any other motivation behind the drive to privatize all retirement savings, especially social security? Waste on a national level is a political issue. So long as the political establishment
is able to share in the waste its not going away.

Eleanor said...

I just did some quick checking at Wikipedia. According to the UN, the US is 38th in life expectancy, behind Cuba at 37. Costa Rica is 30. I then checked per capital income. According to the CIA, via Wikipedia, the US is 6; Costa Rica is 59; and Cuba is 117.

I looked for Cuba, because I know it's a poor country, and I know one of Cuba's responses to the loss of Soviet support was to invest massively (given their resources)in medical care and education.

Per Wikipedia and the UN, Cuba is # 5 for literacy, the US is 21, and Costa Rica is 63. said...


I am not sure, but I think the source I am using is a bit more recent than your Wikipedia one, which is based on numbers updated in 2006. In mine, Cuba is slightly behind the US at life expectancy of 77.7, definitely a miniscule difference.

From time to time I cite Cuba's good stats in this area on conservative or libertarian blogs. I usually get some furious responses about how their data is rigged or otherwise unreliable. I confess that I do not completely trust their numbers, but in fact Cuba is well known for having pretty good medical care and education, with generally good results in both areas, especially compared to their per capita real GDP, estimated in the UNDP at $6,000 per year, compared to nearly $42,000 for the US.


Eleanor said...

Barkley -- I hope it didn't sound as if I was doubting your figures. I just wanted to check on Cuba, since I know the country is poor and has invested in health care, even while undergoing a severe economic crisis; and the easiest way to check on Cuba was to go to Wikipedia.

Wikipedia gave three lists for per capita income -- from the IMF, the CIA and the University of Pennsylvania. I could only find Cuba on the CIA list. I don't know if this says something about Cuba's stats or my eyesight.

Anyway, the point is, you can do a lot with not much; or you can do very little with vast wealth.

The health stats for Minnesota are good (I think) because we have historically invested in education, social services, health care and the physical fabric of our society. This changed under the current Republican administration. Now our bridges fall down. Our rate of economic growth is slowing. We will probably begin to die young. said...

Because of the nature of its economy, many outfits do not even try to estimate Cuba's GDP. It is definitely messy and fuzzy when one does so, no matter the method.

It is also the case that official stats have had the US and Cuba very near each other on medical outcomes for quite some time, whatever may be the realities.

Again, I would remind folks. Sure, one can say .6 years is not a big deal given statistical noise and all that. But there are now quite a few countries that have over 80 life expectancies, a more than two year difference. Even if one wants to diss that, I would say those longer life expectancies say something about the quality of life, and it is the US that has the record of spending huge amounts of money trying to stretch out life using extraordinary methods that involve awful quality of life, when people are on the verge of death and would rather go, but have not signed a living will or whatever, and no family member is able to overcome the Christian fanatic medical personnel ("no assisted suicides in this hospital!").

Anonymous said...

not sneaky

thanks. sometimes it's hard to tell.

i have been tending in the wrong direction on health care of late. it seems to me we have gone from wanting to help poor people who need health care to wanting to help poor insurance companies who need customers.

i understand the need for healthy people to pay for insurance while they are healthy so the money will have been collected by the time, should the time come, when they need it.

but the mandates approach seems to be more about getting the money than controlling costs or seeing to it that the poor have the money in the first place.

and while i'm rambling i'll go on to say that i think some sort of dedicated minimum wage increase is a better place to find the money than tax transfers.
but, if i remember, that's where you and i came in.

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