Health Care Factoid

--by Sebastian

We spend a lot of money on health care in the United States.  About 15% of GDP, in fact.  Quite a few countries get universal health care with much less than that.  And as we all know, the US doesn't have universal government coverage.

But the overall figure hides another very important figure.  The US government already spends about 6.6% of GDP on health care.  The interesting thing about that number is that it is about what the governments of most other Western countries spend on health care for their much more universal systems.  The OECD average is only 6% of GDP.  The UK spends 6.4% for their universal system.  Canada spends 6.7% for their universal system. 

Essentially the US government already spends enough money to have a universal system, but only actually covers about 27% of the population. 

And this isn't a story of the triumph of the free market in the US.  The private sector spends 8.1% of GDP and covers only 69% of the population.  8.1% of GDP is enough to cover the universal public spending of every country other than Germany.  And with Medicare and Medicaid taking many of the oldest and sickest patients, the private systems aren't even necessarily covering most of the expensive patients.

So what is going on here?  Both the government and the private sector already spend more than enough money on their own to each cover the expenditures of a universal system.  I honestly don't know.  But I find it surprising that the fact that our government already spends enough money to cover the universal systems of almost any other Western nation doesn't get discussed much.  It has enormous  policy repercussions for both sides of the debate (universal health care advocates might want to examine why the government doesn't already provide universal health care considering the money it spends, and private health care advocates should do the same).

My guess is that 3 things contribute to the discrepancy: doctor salaries (much higher in the US), futilely spending too much on that last month before death (anecdoteally much higher in the US, I'd love to see useful comparison statistics), and overuse of the system by the middle class which has private insurance, for trivial matters because they don't see the costs other than a copayment.  But this is just a guess.  I don't really know, because for whatever reason the discussion of "why don't we have universal health care, our government and private systems EACH spend enough for it compared to other countries" hasn't been raised.

UPDATE:

Just to head it off, here are some things that don't explain it.

Drug costs.  They are higher in the US, but the main reason people complain about them is because it is the one area where the average person is exposed to the true cost of health care.  In fact they only represent about 10% of overall health care costs. 

Medicare has the oldest and sickest people.  This is probably true, but doesn't change the fact that the governments of other countries cover their oldest and sickest 27% plus every other person in their country for about the same cost as the US government covers only 27% of the population.

Administrative costs.  Same cite as Drug Costs suggests 7% administrative costs (and depending on what other professional services means that may be 17%).  In either case you have to realize that other countries have administrative costs (so this number isn't going to zero) and that even if it were all waste, it doesn't come close to covering the gap.  Private plus public spending in the US is more than double that of other countries.  Admin costs would have to be almost 60% of total spending to make that up.  Whatever the exact number is, it isn't anywhere near that. 

Comments

[Gary Farber]

"Finally, I never said people would hate a NHS system, only that they don't want one (two different things)."

Just so you're not generalizing.

[Jesurgislac]

jack lecou:Thing is, it's not the state plan that's being heartless, it's just the statistics: chances are such a transplant would only extend her life a few months, and it's terrifically risky at that. And even more terrifically expensive.

Whereas a good friend got a heart transplant on the NHS just on 12 years ago. Extended his life by 11 years. Believe me, I consider every day of those 11 years to be not wasted.

Every treatment is a case of cost benefit analysis, which makes sense to accountants and actuaries (and you and me), but not a whole lot to people who are holding on to the barest hope.

Absolutely. But on the NHS, you get more, and pay less.

Cool, isn't it?

[tgirsch]

cleek:

Here's my main problem with your analysis. We now no longer have a word that means what "factoid" used to mean. More importantly, however, we don't have a word that means what "unique" used to mean, and that's a much more common word to have perverted.

[/hey you kids, get off my lawn]

[Jesurgislac]

tgirsch:[/hey you kids, get off my lawn]

kids: "Young goats, or the young of a similar animal, such as an antelope".

lawn: "A light cotton or linen fabric of very fine weave."

Be nice.

(Oh! It is a very nice word indeed! It does for everything. Originally perhaps it was applied only to express neatness, propriety, delicacy, or refinement – people were nice in their dress, in their sentiments, or their choice. But now every commendation on every subject is comprised in that one word.)

[tgirsch]

Jes:

Point taken, however I don't object to words that have multiple meanings when context can easily convey which meaning was intended. With both "factoid" and "unique," it's not so clear. "What's unique about X..." Is it actually unique, as in one of a kind, absolutely nothing else like it? Or is it simply unusual? In all likelihood the speaker means the latter, leaving her with no single word she can use if she means the former. People even say "truly unique" when they mean "highly unusual" as opposed to, you know, unique.

[Damien Neil]

You might be OK with not covering Liver Cancer, until you get Liver Cancer.

I don't know the details about liver cancer, so I can't comment there. I am, however, entirely okay with my health care not covering extremely expensive, high-risk procedures that will at best extend my life by a month or two. And I'll still be okay with it if I find myself with a condition that could be treated by such a procedure.

I'm going to die someday. I don't need someone to pay millions to put that day off by an extra sixty days.

[chmood]

I have friends in the UK (one of them a medical research fellow (if that;s the term) @ Oxford) who are proud of, passionate about, and quite happy with the NHS. Having heard on of them debate another friend on the benefits of universal health care, my domestic friend (defense industry, high security clearance, listens to talk radio all day, brain the size of a planet) could scarcely come up with more than "duh, socializzum *BAYUD*".

This led me down the path that convinced me that opponents to fundamental health-care reform in fact know nothing about health-care or reform (or socialism)

[Madrocketscientist]

I will give the UK NHS it's due, over the past 10 years they have made considerable strides in improving the system (look at patient surveys in 2000 versus today and it's a marked difference).

This does not mean I think the NHS would work in the US right now as our society is rather different from the UK. Hell, our society differs greatly across a couple hundred miles (look at the contrast of people in WA, where Eastern WA and Western WA are very different places with widely varying schools of political thought).

IMHO, an NHS system would work best if it was decentralized. Each state runs it's own program with the fed providing $x/person and the state making up any difference. The fed has no say over what is or is not treated, or how the program is run (except to investigate frauds and abuses of the system). What works great in MA may be useless in WA.

[Gary Farber]

"Hell, our society differs greatly across a couple hundred miles"

Fortunately, Great Britain is blessed with a famously homogenous culture.

[Jesurgislac]

This does not mean I think the NHS would work in the US right now as our society is rather different from the UK.

Yes, people just don't need healthcare in the US the way we need it in the UK. Y'all are quite happy spending twice as much to get far less because you've got these weird metabolisms that, um, suck healthcare up into your humps and save it for hard times so it doesn't matter that you lose your health insurance when you lose your job: you just live on the stored healthcare in your hump. Simple.

Society is so different in the US. I'd really rather not be told "sorry, no visits to the doctor for you until you've got another job, and by the way, that expensive co-pay on the medication you take daily, you now pay the full price: you can't afford it? too bad". But society is so different in the US that people don't mind doing without healthcare between jobs! Amazing.

[Lewis Carroll]

"IMHO, an NHS system would work best if it was decentralized. Each state runs it's own program with the fed providing $x/person and the state making up any difference. The fed has no say over what is or is not treated, or how the program is run (except to investigate frauds and abuses of the system). What works great in MA may be useless in WA."

M.R.S.,
Sounds like the Canadian system. A pro-Canadian system comparison here:

http://www.commondreams.org/view/2009/06/07-0

As far as the profit motive goes, I agree with the commenters who say it provides an incentive (at least an additional one beyond the desire to help people, recognition, Nobel Prize etc.) for furthering research. In my opinion though, we have outdated patent laws that actually decrease efficiency by stifling competition once new discoveries are made. So while I think the profit motive currently works well to ACHIEVE new treatments, it actually works AGAINST their wide application. Yes, property rights are important, but I think in areas that can be classified as public goods (as many health care innovations are), there is a good argument to be made that they should not be proprietary and their sales should be subject to competition among manufacturers based on price.

And there is a way of preserving the profit motive as a driver of research, without subjecting the discoveries to a patent restriction: lump-sum prizes. There is still the problem of deciding what treatment innovations for which to award prizes (something that is less problematic in a nationalized system like the UK), but it's a way of providing financial incentives for research whose fruit will immediately be in the public domain and subject to competition based on cost to manufacture, market, ship etc. (I read about the idea in an essay by Dean Baker some years ago and it sounded intriguing)

[Hartmut]

Regarding NHS vs. Liver Cancer:
Why should it be either-or? All plans that I know of see the standard healthcare system as covering the basics (unconditionally) and special treatment in reasonable cases (open to discussion in detail). That does not preclude to get private extra coverage for extraordinary circumstances.
As an example: Over here the dental health care is partially separated from other medical stuff (in Switzerland it is completely separate btw). The standard dental health insurance covers the basics (e.g. amalgam fillings) but require copayments for anything going beyond (e.g. gold inlets or polymer fillings*). But it is possible to buy an 'add-on' insurance that will make up for the difference. Most people decide to stay with the basic model but that may change in the future (when we go into the Swiss direction as some politicians propose).

*since (new) amalgam fillings will likely become illegal in the not too far future there will have to be a change though. I guess polymer will become the new standard.

[Bernard Yomtov]

Brett,

I've never had health insurance that lifted a finger to provide me with incentives to change my lifestyle. (Which isn't awful, but could be better.) Why is this?

Because the incentive is not there. The payoff on changing your lifestyle is years, maybe many years, in the future. It comes from the reduced chance of diabetes, say, or heart disease, ten or twenty years from now.

But from the insurance company's point of view there is little payoff, because you quite likely won't be their customer then. You'll have changed jobs and insurers, or be on Medicare, so even though your lifetime medical costs drop, the insurer doesn't get much of the benefit. So why should they give you a discount if you lose weight?

This is why, as I wrote above, I think we need to see health insurance as a lifelong proposition, not a year-to-year deal like car or homeowners insurance. That improves the incentive structure of the insurer. It also lets us level premium payments somewhat, so the cost of insurance doesn't become overwhelming as you age.