Wednesday, March 11, 2009

Health Care: Doing Less With More

This graph, from Jacob Funk Kirkegaard of the Peterson Institute illustrates, that the US spends far more than any other country on health care, without achieving better outcomes: He writes:
It was therefore encouraging that the recently passed $787 billion stimulus package included $1.1 billion for funding comparative research into the relative efficiency of different drugs, medical devices, or surgical procedures for treating the same specific condition. The aim is to steer healthcare expenditures toward the most cost-effective treatment methods. This type of comparative analysis is often revealing.

However, given the scale of the cost challenges facing the healthcare system, the scope of the comparative cost analysis program in the stimulus package was strikingly timid. A far more informative comparative analysis would focus on contrasting the costs of different healthcare systems rather than just treatment options; in other words between the levels of total healthcare spending versus outcomes in different countries.

Not only is the US system seemingly inefficient in a static sense, the problems are expected to get worse over time. The CBO projects massive growth in federal spending for medicare and medicaid: Note that this is largely due to "excess cost growth" - that is, health care costs continuing to increase faster than inflation; the aging of the population makes a relatively minor contribution. While the CBO's projection is for the federal programs, rising costs will only make things worse for the employer-based private system as well.

Therefore, its good that the administration is taking the issue on, once more.... Matthew Yglesias says a political compromise might resemble the Swiss model.


Milton Recht said...

There is an apples and oranges comparison in the statistics. For cultural reasons, the US has the highest teenage pregnancy rate in the developed world by almost an order of magnitude.

Teenage pregnancies have a very high incidence of low birth rate babies, premature birth babies, and high infant mortality rates. Premature and high-risk births are the major cause of lower life expectancy numbers in the US and are the cause of expensive medical treatments in pregnancy and infants. Premature births also account for extra medical costs during an entire life. The increased teenage pregnancies also account for the higher US infant mortality rates and lower average life expectancies.

A restructuring of medical services costs will not decrease the incidence of teenage births in the US.

Normalizing the comparative medical costs for an equivalent number of high-risk teenage pregnancies and births removes a significant amount of the excess costs in the US medical system.

A 2000 World Health Organization ranked the US number 1 for the quality and responsiveness of its health services. Canada was ranked 7th.

Studies show that outcomes from heart attacks, including life expectancy, are much better in the US than other developed countries with a greater government role in health services, such as Canada.

Social costs, which are real costs to a patient and employer, are not included in cost comparisons. For example, wait times for diagnostic procedures and treatments are much shorter, sometimes by months if not years, in the US compared to other countries with a socialized medical system. The delay in treatment (sometimes denial) can affect job efficiency, absenteeism, etc. Moreover, there are social costs to discomfort and increased risks to delay treatments that are not included in medical costs. For example, US doctors tend to use newer, more expensive antibiotics that cover a broader range of bacterial infections as compared to UK doctors. UK doctors use older antibiotics, which are cheaper and less effective. In the UK, if the prescribed antibiotic is ineffective, the patient has to take time off to see the doctor for a second time. The dollar value of the social cost of missing work for a second doctor visit is not included in international medical cost comparisons. Additionally, the dollar value of the extra days of discomfort is not included in the medical costs.

Properly adjusting the medical costs data for international comparison removes most of the apparent excess costs of medical services in the US. When comparisons are apples to apples in international medical systems, the US looks much better in terms of costs and outcomes.

Bill C said...

Thanks for the comment. That's alot to put on teenage pregnancies. But I do agree that it makes sense to think about how our other social problems contribute to health care costs.