The Public Plan and "Honest" Competition

by publius

Greg Mankiw is concerned that a subsidized public option would be unfair to private health care providers:

If [it is taxpayer-subsidized], then the public plan would not offer honest competition to private plans.  . . .  The bottom line: If the goal is honest competition in the provision of health insurance, the public option cannot do much good but can potentially do much harm.

But that's not really the goal.  The goal is to provide the most people possible with the best possible health care.  There's no constitutional obligation to make sure no one is "unfair" to private health care providers.  In any event, according to critics, government-provided health care will lead to a parade of horribles, even with subsidies.  If those criticisms prove true, people won't opt for it anyway.

I assume what Mankiw is alluding to is that people justify the public plan by citing the need to keep private providers "honest."  The idea is that private market has not -- and will not -- provide an acceptable level of services without this competition.  But Mankiw seems to be using this argument to make the conceptually distinct argument that private providers, in turn, shouldn't be subject to supposedly "unfair" competition (i.e., publicly-subsidized plans).  But the latter doesn't follow from the former at all.

If the country opts for a public plan, and people vote with their feet because they like it better, why should we care?

Comments

[AIMAI]

I think this all goes back to the notion that private, employer subsidized health care plans are "free" in some sense. While a "public option" would have to be--gasp--paid for! by the public!

I'm not saying I believe that--oddly enough I know that my spouses' employer pays a lot of money for our so called coverage, and we pay a bundle too in co-pays, excluded coverage, and deductibles. But right wing economists have a hard time grasping this fact.

This is how I explain it to confused citizens. Say someone offered to total up all the copays, costs, and deductible related drains of your current health care plan and also told you exactly how fast your costs would skyrocket if you were forced to COBRA those payments, and then to pay out of pocket after you lose your job. And then they offered to compare it to a fixed tax that you paid on your income while you were working, for coverage that couldn't lapse or be denied in the event that you were too sick to work. How would those two plans, the "private" and the "public" stack up then?

As usual the right wing/pro industry people act like the system has no externalities already being borne by the public/consumer. But there are tons of costs that are shifted to the consumer precisely at the moment that they are least able to pay. Its just hidden from us by the same noise machine that pretends that people don't routinely have to declare bankruptcy over medical bills all the time.

Recently I heard a young doctor discussing his decision not to purchase some kind of extra disability insurance policy in case he became so disabled he could no longer work at all. He explained that he thought he wouldn't need such a policy because since his wife was also a doctor she could step up her work level and supply the "lost income" even if he did become fully disabled. No one on the nice NPR show explained to him that if one spouse is fully disabled the other spouse may need to *scale back* their work load to care for his needs and that it is that care, not the lost income, that is at issue for people with serious long term health needs. If even a doctor, in a two doctor family, has no idea how fragile their safety net is how can you expect congressmen and senators who have full public option health care, and rich pundits and right wing shills, to grasp how fragile it is for the rest of us.

aimai

aimai

[Pithlord]

The state can tax people. Businesses, including health insurance companies, can't. So public plans can have social costs much larger than the cost to the buyer -- it's just a matter of public policy.

But if the public plans costs are offloaded into the rest of the budget, then the fact the public plan wins the "competition" does not mean it has greater net benefits to the people who use it. Whereas if that is not allowed, then the results of the competition would show what the best model for providing health care is.

[publius]

but pith - you're just making a budget argument essentially. He's making more of a fairness argument. Under your argument, if public health care benefits offset these social costs sufficiently, I take it you have no problem with the PRINCIPLE of subsidies?

[TJ]

Since, in my opinion, there is about zero competition in the present setup, Mankiw's concerns are bogus. Unless, of course, competition means existing profits might be hurt.

[d'd'd'dave]

It seems to me that if the private insurance plans can't compete with the government one then they will choose not to play the game. This would lead to only one plan - the government one.

I suspect that is Obama's goal. It is politically easier for him to sell the idea that the government plan is one plan among many. Yet that will lead to a single plan

[Mark Thompson]

I don't think you're being quite fair to Mankiw here. He's saying that the public choice option is being justified as a cure to the purported symptom of lack of competition, but that no one with a knowledge of economics would consider such a justification honest. He's saying that the real diagnosis this problem seeks to cure must be something else - and indeed, this is precisely what you are arguing yourself.

[d'd'd'dave]

"There's no constitutional obligation to make sure no one is "unfair" to private health care providers."

That may be but the government has worked pretty hard in the past to break up entities that dominate particular markets.

[Sebastian]

" The goal is to provide the most people possible with the best possible health care. There's no constitutional obligation to make sure no one is "unfair" to private health care providers."

I don't want to presume to speak for Mankiw but when he speaks of unfair, I suspect it could be one of the following:

Unfair in the sense that it will provide the temporary illusion of overall savings, without actually producing such savings. For example, one of the reasons Medicare looks so cheap is because much of the collection and auditing/fraud prevention functions which show up in private insurers as administrative work are offloaded to other government departments (in this case Treasury and DOJ) and don’t show up in the Medicare budget.

Similarly, the government can achieve the illusion of savings by charging less than the actual cost and force doctors to make it up elsewhere. This is a classic in Medicare as well. Medicare doesn’t even charge cost for many transactions, so the doctors have to make it up elsewhere. This has led a) fraud to make up the difference, b) turning the whole thing into a mill to make up the difference, and/or c) charging private insurers/patients more to make up the difference. The first 2 are clearly bad in general. The third is sustainable only so long as you have a strong and large private sector to pay your costs.

A similar dynamic is on the way to playing out with the car companies. It is was generally considered that from worst to best the 3 US companies were Chrysler (worst by far), GM (pretty bad), and Ford (not really that bad though no peach for sure). It is absolutely clear that they can’t all survive, and that the US has a very significant overcapacity for car production that needs to be significantly scaled back. But now that the government has significant ownership interest in the worse 2, and can act to break the claims of bondholders and can assume pension obligations, Ford (the relatively good one) is going to be disadvantaged compared to the other two.

So the bad ones, gain political advantages over the good ones, because the government has committed to them. The more innovative company, which had the talent and good management to succeed is instead driven into a much worse position, and quite possibly forced into unneeded failure, because we were so focused on saving the worst one.

[Eric Martin]

"That may be but the government has worked pretty hard in the past to break up entities that dominate particular markets."

And if the government starts jacking the rates of health insurance after it gains a monopolistic grip on the market, let me know.

[Eric Martin]

"It seems to me that if the private insurance plans can't compete with the government one then they will choose not to play the game. "

The real reason private insurers can't compete is because private insurers spend enormous amounts of money:

1. Advertising
2. Hiring analysts to deny claims to sick customers
3. Litigating with customers whose claims were denied

The government doesn't need to spend that money because:

1. It's not advertising
2. It doesn't seek to maximize profits by denying claims
3. See #2 above

[Wagster]

Mankiw says that if the public option isn't going to be subsidized (as the Schumer compromise proposes, by the way) then why shouldn't anyone start a non-profit corporation to provide health insurance? This is extremely disingenuous. You might as well say, since the Post Office isn't subsidized, why not scrap it and have someone start a non-profit Post Office in its place. There are huge organizational and infrastructural hoops to jump through, that's why.

For so long we've heard economists say that the private sector is inherently more efficient than the public sector because of the magic of competition. Fair enough. Why be scared of having the government compete with the private sector then?

[publius]

Mark - that's a fair point. And yes, promoting competition per se is less of a concern than reaching a set of policy goals. But, I think it's still ok to call that "honest competition" -- it is competition intended to ensure that a set of policy goals get reached. Admittedly though, "honest" as the qualifier to competition can give the mistaken impression that it's all about keeping the free market going.

But to me, Mankiw seems to be embracing the idea of "honest competition" (not rejecting it as a rhetorical tool) -- he's just trying to expand it to justify an argument against subsidies.

[Sebastian]

"And if the government starts jacking the rates of health insurance after it gains a monopolistic grip on the market, let me know."

Or if quality declines, perhaps? Monopolies can have both problems.

"1. It's not advertising
2. It doesn't seek to maximize profits by denying claims
3. See #2 above"

As for 2 above, the government still operates under financial restraints, they are just different financial restraints--namely how much can they tax without getting thrown out of office. (See California and New York). There are all sorts of government agencies which end up going through nasty cost-cutting rounds that squeeze services to the community. Your assumption that such can't happen doesn't seem well founded.

Wagster. The Post Office is subsidized.

"Why be scared of having the government compete with the private sector then?"

See my car company discussion above. It isn't mysterious.

[Harald Korneliussen]

"The goal is to provide the most people possible with the best possible health care."

Everytime I see a phrase like that, I have to comment, sorry. "As much as possible for as many as possible" is not mathematically well-defined. It could mean either maximize the sum U1 + U2 + U3 + ... UN, or maximize min(U1, U2, U3, ... UN), where UN is person N's utility (level of health care here).

Possibly it could even mean something weird and complex in between.

[d'd'd'dave]

I heartily endorse what Sebastian said!

[John Miller]

" government-provided health care "

Can we please stop utilizing that term? There is only one health care system that would be considered "government-provided health care" in this country and that is the VA. What we are talking about is coverage for health care.

I agree with much of what Sebastian says (what a shock) but he does understate the Medicare cost regarding fraud and audit issues. Medicare does do audits and is currently in a major audit and recovery programwhere it is contracted with several private agencies to do major bill reviews of hospital payments.

If something illegal is involved, then the DOJ becomes involved.

A couple other points. Currently Medicare is reimbursing hospitals and similar facilities at cost or below. Where a hospital has a high percentage of Medicare patients, they are suffering a great deal. They are also suffering because fewer people have insurance at all.

Doctors are seldom being paid below cost but it also is not at a level which will make them a major profit either. This year's recalculation in Medicare payments has actually resulted in significant increases for general practitioners, family doctors, pediatricians and OB/Gyns while resulting in a reduction of payments to most specialists. Since most doctors are reimbursed by insurance companies on a fee structure based upon Medicare reimbursement this has impacted incomes.

Regarding a public option, I have no problem with it, and in fact would prefer a single payor system, although with a higher reimbursement rate than is currently given by Medicare.

[d'd'd'dave]

Eric:

I don't think it matters for what reason the private plans can't compete. If they can't compete then they'll disappear.

Of the reasons you gave.
1. I think the government plan will advertise, how else will people know about it?
2. The government will deny claims (ie ration service) to maximize profits (ie minimize costs).
3. Also the government plan will deny claims and people will have cause to litigate. If they cannot litigate because one cannot successfully sue the government then it is an area where private plans cannot fairly compete.

[Pithlord]

And if the government starts jacking the rates of health insurance after it gains a monopolistic grip on the market, let me know.

Ah, but the price you pay for government services isn't just the user fee: it's also the tax. Keeping that in mind, it is no longer so implausible that the government will be able to engage (if unintentionally) in a predatory pricing strategy.

[Eric Martin]

"I think the government plan will advertise, how else will people know about it?"

Nowhere near as much as private plans. Let me ask you this: How much does medicare spend on advertising? As opposed to most private insurers? Do people know about medicare anyway?

"The government will deny claims (ie ration service) to maximize profits"

Not on the same scale, and they won't need to hire the same number of employees to accomplish that. The government is not in it for a profit. Foreign governments with these plans in place do not engage in such practices on large scales, and we can pick the better options.

"Also the government plan will deny claims and people will have cause to litigate."

Not on the same scale. See above.

[Jay S]

Sebastion:"Wagner: The Post Office is subsidized."

Not according to them. See http://www.nalc.org/postal/perform/selfsufficient.html>USPS on the subject

Carry on.

[Eric Martin]

"Ah, but the price you pay for government services isn't just the user fee: it's also the tax. Keeping that in mind, it is no longer so implausible that the government will be able to engage (if unintentionally) in a predatory pricing strategy."

Yes, but it's not like single payer is some novel, untested, fanciful concept. It's been tried and implemented in several parts of the world. And, thus far, there has not been a rash of predatory pricing strategies employed by the governments in question.

[Eric Martin]

"There are all sorts of government agencies which end up going through nasty cost-cutting rounds that squeeze services to the community. Your assumption that such can't happen doesn't seem well founded."

Not that it can't happen, but that it doesn't. To repeat:

It's not like single payer is some novel, untested, fanciful concept. It's been tried and implemented in several parts of the world. And, thus far, there has not been a rash of denied services in any systemic sense.

[Eric Martin]

"Or if quality declines, perhaps? Monopolies can have both problems."

Quality of the health insurance provided? In a single payer system? Not sure I follow.

[d'd'd'dave]

OT

// I think it's still ok to call that "honest competition" -- it is competition intended to ensure that a set of policy goals get reached.//

This is at the heart of why I can't adopt liberalism, if Publius represents mainstream liberalism. To me, this is saying that a few people can set a policy goal, and then distort the free market (which is as democratic as anything can be) to achieve that goal all the while distorting the term 'honest competition'. It's honest if it matches the goals of those few people?

The government plan will offer lower prices than the private plans can offer. It will do it in a predatory fashion; not by being more efficient but by subsidizing its loss leader rates out of the general fund. In the course of time, private plans will be bled dry and disappear. The government plan will then, in a predatory fashion, pay providers less for services in order to decrease overall costs. In the course of time, providers will disappear.

To call this 'honest competition' is a huge lie.

[John Miller]

Right now there is very little litigation due to denied claims. There is some but it really is minimal. There are a lot of appeals and many claims initially denied by insurance companies are eventually paid.

Medicare does deny claims right now. There are a lot of services that aren't covered or have limited benefits.

And the idea that private insurance companies will go out of business is ridiculous. There is a good chance that there will a reduction from the 700 or so companies providing health isnurance right now, but there will still be a niche for them.

They will be able to provide supplemental coverage for the part of the bills that the government policy doesn't pay (that is done now with Medicare enrollees) or coverage for services that aren't covered by the public option (also being done currently).

That last paragraph is in reference to comments that the public option would turn into a single payor option.

And rationing which is occuring under the present system in not, in and of itself, bad. There are a lot of treatments given that are unnecessary and insurance companies should not have to pay for it. And the same would be true for a public coverage.

Personally, I wish that Medicare would develop a managed care component that truly look at the treatment and not the cost. It would raise administrative costs by about 2% but could reduce overall expenses by more than that.

[Sebastian]

"Not that it can't happen, but that it doesn't."

I'm not sure what you say doesn't happen. It sounds like you are saying that government agencies never (or charitably rarely) go through nasty cost-cutting rounds that squeeze services to the community, but they clearly do so I can't understand what you are saying.

"Quality of the health insurance provided? In a single payer system? Not sure I follow."

This is an odd comment too. Quality of health care provided by the insurance or whatever other payment method we are talking about. Does anyone care about the quality of 'insurance' divorced from the quality of the care they get?

[d'd'd'dave]

Eric

"not on the same scale" for all three answers.

You have more faith than I do in the government's ability to be efficient.

" And, thus far, there has not been a rash of predatory pricing strategies employed by the governments in question."

Uh ... have you ever taken a look at medicare reimbursement levels?

"And, thus far, there has not been a rash of predatory pricing strategies employed by the governments in question."

But you're talking about governments of OTHER counties aren't you?

[Eric Martin]

"But you're talking about governments of OTHER counties aren't you?"

Yeah, but what evidence is there that we would be worse?

"You have more faith than I do in the government's ability to be efficient."

No, I just know that the government doesn't need to advertise single payer health insurance because...well, why would they?

Look, the bottom line is, we spend more for health insurance than other nations. There are reasons why. These are some of them.

[Eric Martin]

"I'm not sure what you say doesn't happen."

What I say doesn't happen is: countries with single payer health insurance models generally do not deny insurance to its citizens via cost cutting measures. These entitlements are generally off limits.

[Eric Martin]

"This is an odd comment too...Does anyone care about the quality of 'insurance' divorced from the quality of the care they get?"

Wait, the issue was that the govt would have a monopoly on health insurance provision. You mentioned that the quality of that insurance could suffer, as quality suffers in monopolies.

Did you mean that by virtue of the government's monopoly on health insurance provision, quality of health care will suffer?

If quality suffers, it would be the result of increased access by American citizens creating demand that oupaces supply. But that's not a question of monopolistic practices of health insurance provision dragging down quality. And it would also be an indicator of how many Americans don't get the health care they need under today's system.

[Molly Malone]

Some things I'm having trouble wrapping my head around:

If, as projected, by this summer 50 million Americans will have no medical insurance;

if 62% of all bankruptsies are caused by medical bills;

if the high cost of employee health insurance is crippling small businesses;

if insurance companies are allowed to refuse to accept people with pre-existing conditions;

if the cost of private insurance has risen beyond the means of increasing numbers of Americans;

if hospitals, in order to continue to operate, must either refuse treatment for those who cannot pay or attempt to recoup their losses by passing the costs on to those of us who have adequate coverage, thereby increasing our own insurance costs;

and if those with no insurance, of necessity often do not seek medical care until a costly medical problem has arisen,

then my question is: Wouldn't it be more humane and less costly to have socialized medicine? What I'm having trouble understanding--aside from protestations from the insurance industry--is why this would be such a bad thing.

[Jay S]

Sorry Eric,
I think I'm mostly on your side, but the argument that quality of care could only be effected by demand exceeding supply is absurd.
There are many payment policies that have a direct effect on quality. Reimbursing inappropriately for different procedures, indeed pay for service (as opposed to salary) itself can have a bad effect on quality. There are ways for any insurance provider to adversely effect the outcomes of treatment.

[Eric Martin]

"then my question is: Wouldn't it be more humane and less costly to have socialized medicine?"

I would prefer single payer health insurance.

"Reimbursing inappropriately for different procedures, indeed pay for service (as opposed to salary) itself can have a bad effect on quality. There are ways for any insurance provider to adversely effect the outcomes of treatment. "

Care to elaborate on that? I'm not doubting your point, I'm just not clear on the specifics.

[Keifus]

"Fair?" Well, I admit a certain schadenfreude at the idea seeing our private insurance oligarchy squirming under the dangling sword of bankruptcy, worrying away the sleepless hours with the realization that even if some faceless government functionary finally gets around to stamping "approved" on their lifesaving (legislative) procedures, the experience is still going to leave them reeling.

It's not that I expect single payer to be more effective (unless you count the number of people covered, as well as the added security of separating it from continued employment)--bureaucracy is bureaucracy--it's that it costs less where it has been tried. And there's no love lost for those private plans.

[AIMAI]

Lets try to keep "health care" separate in our minds from "insurance." Single Payer Health care, as I understand it, substitutes tax payer based payments for health *care*, actually delivered to patients. This is sometimes supplemented with private *insurance* to cover the risk that the individual citizen will need or want services not ordinarily covered, or not covered in their entirety, by the government.

No one in this country loves their health "insurance" company. Because the insurance company is just a collection of anonymous bureaucrats and corporatist functionaries who contract with our employers to take premiums in advance of regular and irregular health care needs and which decides when and whether to disburse back those premiums in the form of health care services to us.

Its a form of legalized gambling in which my employer and myself pony up fairly large sums of money, with many large and small exclusions, and we essentially bet that either I will never need the more arcane and expensive pay off, or that if I do the insurance company will pay off without complaint a fee that is, potentially, many times the actual value of the premiums they have collected.

It is well said of the insurance business that if you can afford to stand the cost of the damages you shouldn't bother to insure yourself against extremely unlikely contingencies. Especially in a contract whose terms, being tied to your employment, are so easily modified by the insurance company to its benefit and your despite.

Health care--regular, repeatable, costly, predictable is a constant expense in people's lives. It just is. As is growing older and requiring more health care just to keep going and maintaining a semblance of health and productivity. Any system that is for profit and based on the "gamble" that you will pay more into the system than you need to take out is by definition a loser, either for you (as a consumer) or for the insurance companies (as for profit businesses). And that has proven to be the case. More and more we see that people are *underinsured* relative to their real health care needs--that is, they and their employers pay into the bottomless pit that is insurance co-pays and premiums but with better lawyers and more time than you have if you really need the most costly services the insurance company (or your employer) can terminate you and your coverage almost at will.

What that means in practice is that there is constant "churn" in the system as the insurance companies take the premiums for a while of healthy consumers, kick people out of the system as they get older and more expensive, and those people turn to medicare. For younger people I assume that once you have bankrupted yourself paying for COBRA and then get denied coverage for some pre-existing condition you end up, if you are lucky, on Medicaid.

In other words, there's already a "public option" in existence that handles the obscene fall out of the failures of the for profit system. Its just not working very well for people. All we want, those of us (unlike Pithlord!) who don't benefit from a single payer system, is an honest "public option" or better yet full Single Payer that creates a pool of payers as big as everyone who wants to join and pay in, while they are working, and which will not capriciously and for profit kick people out when they actually need the system.

aimai

[Tom Maguire]

"but pith - you're just making a budget argument essentially. He's making more of a fairness argument."

I think Mankiw is making an honesty argument. His concern is that:

(1) polls show lots of people are happy with their current coverage, but

(2) committed Dems want single payer and nothing else, which leads to the devious plan of

(3) offering a public plan ostensibly in competition with the private plans but actually subsidized enough to bury them.

The result - stealth national health.

Obviously, folks committed to single payer are OK with that result, but are they really OK with that process? After all, it does fail the Truth in Marketing test - if the votes aren't there for single payer, says Mankiw, let's not foist it onto people by trickery.

Or, if the votes are there, have the vote.

[Tony P.]

Portability is one "quality" of insurance. If I had the choice between two health insurance plans which were identical in all respects except that one is explicitly tied to my status as a resident of MA and the other is not, I'd go for the national plan. The freedom to relocate around the country without having to change health insurance is a "quality" I would value, being a freedom-loving kind of guy.

--TP

[Pithlord]

This issue is a live one in Canada.

The Supreme Court of Canada held that governments can't constitutionally prevent people from getting private insurance for publicly covered services if the public system has long wait times. Scarcity is a fact of life, so the public system has long wait times.

An interesting question arises, though. If the tax base subsidizes the public system (as it does in every Canadian province -- many of them have no healthcare premium at all), then that amounts to the government discouraging private insurance.

One solution would be to let the government subsidize health insurance out of general revenue, but require that it provide the same per capita subsidy to private providers.

[Wagster]

Sebastian, as has been linked to above, the Post Office is NOT subsidized by taxpayers. And it does compete (in package delivery at least) with the private sector.

Your car company analogy raises the specter that the government will interfere as they have in the auto industry... perhaps with a bailout, or political interference. If the legislation protected against this and ensured an even playing field, would you be okay with a public option?

[Tom Maguire]

From Eric M, 1:45 pm:

"Let me ask you this: How much does medicare spend on advertising? As opposed to most private insurers? Do people know about medicare anyway?"

Hmm. Everyone who looks at their pay stub is aware of Medicare. The new public option, unsupported by the taxpayer, may not have the same grasp on the public's imagination.

I don't see how the new public plan could get to a meaningful size (an risk pool) without a promotional budget and promotional (i.e., subsidized) pricing. Well, unless it is rolled out by Apple, maybe.

[Hartmut]

To a degree I have to agree with triple-d-dave (though for reasons he would likely not share). The fact that it works in other countries does not mean that it would work in the US. My reason: In other countries there usually is no major party that practically defines itself by being hostile to the mere idea. And since it can be expected that the GOP (or an offspring) will return to power one day, there will be a governemnt with the intent to sabotage the system as thoroughly as possible.

[Pithlord]

In response to Aimia, private insurance doesn't necessarily imply for-profit insurance. If for-profit provision wins out in a competitive market, it is because there are efficiencies that allow for the profits.

[russell]

A couple of brief comments.

First, as a matter of principle I have no issue with the government getting involved in making health care available to people.

Second, I concur with those pointing out that what we're talking about is not health *care*, but securing the means to pay for health care. In other words, insurance.

Third, it seems like an unbelievable stretch to describe what we have now as anything resembling a free market. Most people, by far, who have health insurance get it through their employer. That means for the normal consumer their practical range of choices is normally one or two insurance providers, with one or two plans per provider. The most common situation is one provider with your choice of HMO or PPO, with possibly an upcharge on your plan if you want to be able to go to providers outside of your plan.

The *purchaser* of health insurance is most commonly employers. I'm not sure what range of options are available to them, perhaps someone can chime in on that topic. My guess is that in most markets it is not very broad.

If you don't, or can't, get health insurance from your employer, you either get it from some public source (assuming you qualify) or you buy it directly. If you buy it directly, you either buy a catastrophic plan that will get you admitted to a hospital in the event of a true emergency, or you pay a *whole lot of money* for a more comprehensive plan that covers stuff like checkups, medications, etc. And I do mean a *whole lot of money*.

Unless you are very, very wealthy or have a truly spectacular insurance benefit from your employer, access to actual health care is *always* rationed, and anything beyond routine care must be approved and justified by at least your general practicioner before an insurance company will consider paying for it.

It would be interesting to speculate about what a truly free, non-near-monopolistic market in health care insurance would look like. My guess is that the current health care industry would find it just as objectionable as a single-payer public model.

Note that we famously pay more in public money for health care than any other OECD nation. Then, we pay about that same amount again in private funds.

Nobody has answered the question Sebastian asked about this a while back:

Why do we already pay more than any other similar nation in public money without covering the same proportion of the population, and also without getting equally good (let alone better) outcomes?

Finally, I recommend the article by Dr. Atul Gawande in the June 1 issue of the New Yorker on health care costs in McAllen county, Texas. They have the highest per-patient medicare costs in the nation, Gawande wanted to know why.

Cut and paste will get you there.

http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande

[russell]

Sorry, please strike the word "brief" in my previous post.

[Pithlord]

As to whether single-payer "works", I guess it depends on what you mean by that.

Healthcare is a perenial issue in Canada. As in the US, the costs are rising driven by both demographic factors and new medicines. The result is that it is eating into an unsustainable part of provincial budgets. However, costs are lower than in the US.

Having had a parent die in a Canadian hospital recently, I'd say middle class Americans would be in for a shock. Les Invasion Barbares gives you an idea (and it's a great movie, so you should see it.)

[Jay S]

Eric Martin: "Care to elaborate on that? I'm not doubting your point, I'm just not clear on the specifics."

Reimbursing inappropriately for different procedures - for example, in the move from surgical to drug treatments, drugs were often more effective but not compensated - think ulcer treatment.

indeed pay for service (as opposed to salary) itself can have a bad effect on quality - Think unnecessary tonsilectemys and appendectomies. Treatments have risk, unnecessary treatment entails unnecessary risk. If your compensation does not depend on the number of services performed, there is less incentive to do things that don't need to be done. I have heard from doctors that going to salary from a fee for service payment has made it easier to focus on what's right for the patient without the concern for making payroll.

There are ways for any insurance provider to adversely effect the outcomes of treatment. Think call for approval of emergency treatment, plus the issues above and any number of other ways an insurer can get in the way of necessary treatment or encourage unnecessary treatment.

To be sure, these things are happening now under the current systems, but there is no guarantee that single payer will avoid them or not make them worse. Indeed, single payer may introduce political risk, with controversial procedures not covered. I think single payer makes sense, but you can't wave off the potential for a bad implementation, either now or in the future.

[stonetools]

@Pithlord

So old people never die in US hospitals? Thanks for the news!

I'm sure that the Canadian system isn't perfect. But it is more perfect than a US system in which thee are 50 million uninsured Americans.

As for the public option, the Post Office example seems apt. There are quite a few companies delivering mail and packages, making money and competing. The bogeyman of a government monopoly is just so much Republican nonsense.

The car company issue is OTOH, in apposite.Its understand that its a special situation, and that the government plans to get out of the car business as soon as possible.

[hairshirthedonist]

I think one corollary to Jay S' comment is that what he describes also lessens preventive care, which is not as profitable to the provider as is after-the-fact treatment. If we're concerned with the amount spent on health care in this country, we should promote things like, say, getting your teeth cleaned regularly over fillings, root canals and extractions. (Dental examples seem more obvious to me, for some reason.) I'm not entirely sure how to promote preventive care, but salaried doctors might be a start.

[Eric Martin]

Jay S: I can see your point. Thanks.

[Sebastian]

Russel, thank you of reminding me of my strongest point. I'll quote the comment you were alluding to:

The US government already spends about 6.6% of GDP on public health care spending. See here

It already has public spending on health care comparable with Canada (6.7% of GDP, and very close to France (7.4% of GDP). It already spends more public money than the UK (6.4% of GDP). This looks even worse when you look per capita, because the US has a higher GDP per capita than almost all the comparable states.

The US government already spends more than enough to have the UK's rather crappy universal health care system.

The US government already spends as much on healthcare as Canada does, and doesn't cover any of the uninsured, or any of the privately insured. But Canada has universal coverage.

So for some reason, the US government has already proven that it doesn't provide cheaper health care, because it spends exactly as much as Canada, without even covering 1/3 as many of the people.

Until the reason for that can be explained, merely saying 'other countries do it' isn't taking that reality in to consideration.

(And the answer definitely isn't drug company profits. Even if you set the drug expenditures to ZERO you get a savings of about 10%. And no one believes that the cost of drug production, much less drug discovery, is zero.)

(Also note that the US GDP per capita is higher than the comparison countries, so its government percentage in GDP per capita is actually higher compared to those countries than the graph shows).

[AIMAI]

Pithlord,
What stopped you and your father from moving to the US to take advantage of our wonderful health care? I mean that sincerely. I know of no one of my English or Canadian friends who would move in order to get better healthcare--and that is especially true of the people who have chronic health care issues, or children with very signficant health care issues. In the case of people with children with asthma, cleft palate, and behavioral issues there is simply no comparison between the level of services provided by the state in either Canada or the UK and what parents routinely struggle to access here in the US. You simply have zero idea what you are talking about when you assure US citizens, who have actual experience of denial of service and long waits for availability *if their insurance company fights them* that they are better off than either canadians or people in the UK.

aimai

[Eric Martin]

"(And the answer definitely isn't drug company profits. Even if you set the drug expenditures to ZERO you get a savings of about 10%. And no one believes that the cost of drug production, much less drug discovery, is zero.)"

Do you have a link for that?

[Jay S]

Thanks hairshirthedonist,

I should have mentioned preventative care.

Part of the answer may be to compensate based on outcomes of patients over long term relationships, not just reimbursement for procedures.

Use of evidence based medicine, measuring outcomes over long time frames can help identify useful preventative care as well as best practices for treatment when prevention isn't enough. There are non profit groups doing this sort of work today, as well as a proposed government database to identify best practices.

Linking compensation to outcomes and use of best practices along with salary might provide better incentives for providers than pay for service.

[Sebastian]

I do, but if you're going to make me look it up I'll hope that you respond to the "our government already spends more than the UK does, and they get universal coverage" point.

As a point of logic it can't be drug costs unless you think they are about 200% the expenditure of everything else. (We spend as much as Canada in public expenditures but we cover about only a third of our population with public funds. [that is off the top of my head, but whatever it is it definitely isn't the universal system that Canada has, right?])

Here is one cite.

You should also note that administrative costs are only 7%. So even if we assume zero administrative costs and zero drug costs (both ridiculous of course) we only save 17% of the total health care budget. Which doesn't get us from who the government currently covers to universal coverage by any means.

Basically any plan that is focusing on those two areas to save enough costs to cover everyone is like Republicans focusing on earmarks to reduce the deficit--they are highlighting potential savings, yes, but meaningful savings, no.

And of course the 6.6% of GDP the government already spends ought to have at least some of the savings that you project for government programs already built in.

So why can't they provide universal coverage already?

[Suzii]

Although the postal service isn't subsidized by U.S. taxpayers, please note that employer-paid health plans *are* -- employer-paid premiums are tax-exempt income.

Well, mostly -- employer-paid premiums for a same-sex domestic partner are still taxed.

[Suzii]

Sebastian, one of the reasons health care costs more here is that nearly every health-care provider finds it necessary to employ highly skilled bureaucrats who can negotiate the red tape involved in extracting money from each of the various insurers, and each of the various insurers employs thousands of highly skilled bureaucrats to thwart that extraction.

[Sebastian]

First a correction. The public spending only covers about 26% of people in the US, I had guessed it was higher at 1/3.

One interesting (in a depressing way) fact you can get from the first link I provided (comparing GDP expenditures on health care for various countries) is on private expenditures.

The US spends about 8.1% of GDP in private expenditures on health care.

That alone (without any public expenditures) is more than Canada spends for its entire universal health care system. This covers about 69% of people in the US.

The public expenditures in the US are 6.6%, just under the amount that Canada uses for universal health care. This covers about 26% of people in the US.

Either the private OR the public expenditures in the US could cover the universal health care system of the UK and are within easy reach of Canada. Yet both together in fact only cover about 84% of the population.

(The US private amount alone covers the public AND private spending of Japan).

[Pithlord]

Aimai,

I'm not going to take offence at the "love it or leave it" line of argument, but it sounds odd coming from an American with leftist antecedents.

The world is a complex place, and I am not going to claim that American health care is better than Canada's across all dimensions. In terms of results, they are pretty much the same: life expectancy is almost the same. And the American system costs a lot more. It is, however, also more attentive to patient preference, as the experience of dying in a noisy room with several other people and nursing staff who can't be bothered to pretend to care whether or not you are in pain will bring home.

It is conceivable that your collection of Canadian friends are not a representative sample. Polling in this area is controversial, but roughly half of Canadians would like to see a private option -- despite constantly being told that they are unpatriotic to do so.

[d'd'd'dave]

It seems to me that a single-payer health system would probably be a long-term benefit to the economy. Such a thing would enable a cram down of overall medical costs 'for the public benefit'. The cramdown would decrease the overall profitability of the medical field. Such a thing would in time lead to the best and brightest choosing to train for other fields; perhaps business and engineering. The strength of those fields would increase which, i believe, would benefit the entire economy. Dumbing down the medical field might be a good thing after all.

[russell]

One other comment I'd make here is that US health care is (or at least seems to be, to me) amazingly focussed on *really expensive stuff*. Both in terms of high-tech whiz-bang stuff, and chronic disease management.

IMO figuring out how to fund more of the same, whether through public or private money, isn't really going to solve the problem.

We could make huge impacts on outcomes by doing a lot of simple, obvious things. Annual checkups for everyone, semi-annual for everyone under 18. Regular checkups and pre-natal counseling for pregnant women. Support for providing decent, fresh, unprocessed food to lower-income and/or urban populations. Public bike and walking paths, and public exercise areas. Tax and zoning law policy that encourages local food production. Free stop-smoking clinics.

Get sugar-water drinks out of the freaking public schools. How hard would that be?

This all falls under the general heading of *public health*, a concept that seems to have been totally forgotten. None of it costs a whole lot of money, and all of it has a huge impact on folks' overall health.

I'm not sure I completely agree with where Sebastian is going with his comments (although, then again, perhaps I do), but to his point the problem may well be less about *how we are paying* for what we do, and more about *what we are actually doing*.

Sometimes the reason you can't find a good answer is because you're asking the wrong question.

Just a thought.

[Jay S]

Sebastian,
In considering the cost of the 26% covered by the government, they include the oldest segment of the population and most of the end of life expenditures. They are going to be a very expensive group to cover compared to a younger group. It may not explain all of the costs involved, but private vrs public costs is apples to oranges in the US.

[d'd'd'dave]

Two words

Soylent Green

[Sebastian]

"In considering the cost of the 26% covered by the government, they include the oldest segment of the population and most of the end of life expenditures. They are going to be a very expensive group to cover compared to a younger group. It may not explain all of the costs involved, but private vrs public costs is apples to oranges in the US."

Absolutely. That is why I didn't try a strict comparison of the 69% the private sector covers to the 26% the public sector covers.

But the fact remains that Canada covers their entire population with the money that the US government covers 26% of their population.

[Greg]

I hear conservatives rail every day that the govt cant do anything right, so wouldn't you think they'd be licking their chops at the opportunity to compete with such a weak opponent??

I just wish conservatives came with 5 sided mouths so I could listen to them talk out of all of them at once.

[AIMAI]

Uh, pithlord, are you under the impression that americans are automatically given private rooms for their medical care? I can assure you that when my father had two thirds of his pancreas removed recently he was not in a private room for his recovery. And, somewhat astonishingly, people die here, in hospitals and old age homes, in astonishing rates--comparable even to Canada except where the poor and the indigent die at higher rates, of course!--and not in hospitals which rush to attend them.

The fact of the matter is that national health care brings up the health care available to the poor and the middle class, while making elective surgery and some things (if the taxpayers aren't willing to pay for it) more difficult to get for the wealthy than would be the case if *only the wealthy and the insured* could afford care.

Another issue, of course, is overall population density. I understand that in sparsley populated areas of Canada there are, indeed, sometimes long waits or people have to travel a great distance to be seen at hospitals. Incredibly, I know someone who drives 7 hours to the Shriner's hospitals that specialize in free medical care for her three children, each of whom has a severe bone problem. That's *seven hours* for a checkup. Seven hours for a scheduled surgery. She doesn't have health insurance at all--this is pure charity. Because that is all that they can afford.

As for the very sad story of your father--and it is sad--I recommend you hop over to Americablog where the proprietor has discussed *extensively* his father's long, grim, five year struggle with cancer and the insurance companies.

I've had four grandparents die in American hospitals and it was grim every.single.time.

aimai

[AIMAI]

Sorry,t hat was unclear. My friend who drives seven hours is in this country. My other aquaintance with similar problems with her child has all the costs associated with travel to her doctor paid for by the state--but she lives in Canada.

[Pithlord]

Aimai,

Really rich Canadians just go to the US and get what they need on a pay-for-service basis. The rest of us are stuck with the monopoly provider.

I am all in favour of using public money to ensure that the poor get adequate health insurance. I just think the median taxpayer should get to choose who he or she gets health insurance from. Somehow in other areas of life, consumer choice leads to better results.

[d'd'd'dave]

Greg

"I hear conservatives rail every day that the govt cant do anything right, so wouldn't you think they'd be licking their chops at the opportunity to compete with such a weak opponent??

I just wish conservatives came with 5 sided mouths so I could listen to them talk out of all of them at once."

This argument doesn't factor in the ability the government has to bear the cost of selling insurance below cost which is something the private sector cannot compete with. The government does so by exercising its taxing authority.

[russell]

"Two words

Soylent Green"

I'm holding out for a government-mandated program of five servings of fresh vegetables a day, preferably RAW with no seasonings whatsoever. If we have to inspect your droppings to make sure you're complying with the program, so be it.

By "fresh" I mean grown within five miles of your home, in certified organic soil, fertilized only with worm castings. The vegetables are to be picked by cadres of the Obama Youth as part of their "voluntary" (*nudge* *wink*) work assignments.

That will be followed by mandatory group calisthenics in community center parking lots, in all weathers. Yoga preferably, failing that interpretive dance will do.

You will be healthy, and you will like it!!

That's how we lefties roll.

[Tony P.]

Seb: But the fact remains that Canada covers their entire population with the money that the US government covers 26% of their population.

You mean "money per capita" when you talk about percentages of GDP, right?

From this table it appears that Canada supports 2.1 physicians per 1,000 people, the US 2.3 per 1,000. One way or another, privately or publicly, a doctor's income in either country is supplied by a bit fewer than 500 people. France and Germany are about 3.4/1000, by the way.

Now, physicians are not the only people paid out of the pot of money called "health care spending". But they are pretty key to "health care" delivery. The actual health care available to 500 people would seem to be about the same in either the US or Canada. So what is it that makes the Canadian system so terrible, or the current American one so great?

--TP

[OCSteve]

I hear conservatives rail every day that the govt cant do anything right, so wouldn't you think they'd be licking their chops at the opportunity to compete with such a weak opponent??

Opportunity? Its here and been here. It’s called Medicare. Someone said this week – let the government prove they can run Medicare efficiently and then we’ll talk… Why would I have any faith that they can handle what they are proposing when they can’t handle Medicare?

Medicare costs every working stiff 2.9% in payroll taxes. And it’s about to run a deficit. All this and it covers a measly what? 15% of the population? Then if you qualify you pay about 25% out of pocket for part B.

So should I assume I’ll be paying 19.3% in payroll taxes for a national plan, and then still have to pay out of pocket for decent levels of coverage?

(I’m for it BTW – I just have no illusions that the Federal government is capable of running it. We’ll have 2 GS-12 bureaucrats for every doctor or nurse delivering healthcare.)

[Suzii]

Pithlord, I agree with you that consumer choice and consumer satisfaction have significant value. What you may not understand is that in the U.S., consumers have almost no choice. It's not at all like choosing your favorite jar size, texture, flavor and brand of peanut butter from your favorite grocery.

Under employer-paid systems, some larger employers offer a choice of two or three group plans, but by no means a significant cross-section of insurers, let alone a substantial representation of the group plans those insurers sell.

People not under employer-paid systems can, of course, look at the individual policies from all the insurers in the market, but those insurers offer strictly limited arrays of their worst policies (highest premiums, highest deductibles, highest co-pays, lowest coverage) to anybody who has ever sought medical help for any ailment ever.

[Suzii]

Also, Canadians may think U.S. health care is a draw; folks down here might suggest that they go a little farther south: http://www.sciencedaily.com/releases/2009/05/090526140844.htm

[now_what]

OCSteve thinks it is fair to assume that medical costs for those who:

* are over 65

* have been receiving Social Security disability benefits for 24 months or are receiving Social Security disability benefits and are also the widow or child of someone who has paid Medicare taxes for a sufficient period of time

* have Lou Gehrig's disease

* receive a disability pension from the railroad retirement board

* have permanent kidney failure

will on average be the same as the medical costs for the general population.

What happens when you assume? Can anyone find any flaw in his argument, however small it may be?

[KCinDC]

Just came home to a letter from my awesomely efficient private health insurance plan. As usually happens when I go to a special ist, they've decided there's something wrong with the referral my primary physician sent them, and they're refusing to pay. So next week I (and hopefully my physician's staff) get to spend ages on the phone with their bureaucrats, trying to get them to violate their reason for existence, the essential principle of First Do Not Pay.

[Michael Cain]

"The US government already spends about 6.6% of GDP on public health care spending. See here"

Having read quickly through the linked article, some comments on this number. One, it appears to understate the federal spending on health insurance, as it doesn't seem to include insurance for federal employees. The "employer" share for those are paid with tax revenue. Second, it doesn't appear to include expenditures by state and local governments. There are undoubtedly some economies of scale that would be realized if a county with 100 employees could piggy-back on the federal plan with a million employees.

One of the obvious cost containments in other countries it the degree to which wages for medical practitioners are restrained. To the best of my knowledge, being a heart surgeon in most of the developed world gets you a lot of social prestige. In very few places outside the US does it almost insure you an annual income >$500,000 after you've been at it for a few years. IIRC, the median income for a specialist in the US is now >$450,000.

[hairshirthedonist]

See Sebastian at 5:20 PM and russell at 5:38 PM, then connect the dots. Our private system is doing no better than our public system in terms of efficiency. Maybe there's a bigger problem neither of them can overcome.

One piece of this puzzle in my mind, and maybe I'm overestimating it, is our infatuation with extending, even if minimally, the worst and last part of our lives. I'd rather have the last five or so years of my life be higher in quality than to squeeze another few weeks or months of misery out of it.

I know it sucks to die or watch someone else die, but there's no way around that. Better to spend resources on living better while you still can, I think, and to do things that lessen the resources needed for a given quality of life.

[now_what]

One piece of this puzzle in my mind, and maybe I'm overestimating it, is our infatuation with extending, even if minimally, the worst and last part of our lives

Why would the last part of your life be the worst? Every day you wake up is a gift.

Pain doesn't matter. The walls will close in. They have been closing in since you were 13 years old.

[d'd'd'dave]

"One piece of this puzzle in my mind, and maybe I'm overestimating it, is our infatuation with extending, even if minimally, the worst and last part of our lives. I'd rather have the last five or so years of my life be higher in quality than to squeeze another few weeks or months of misery out of it."

IMHO this occurs because the cost falls on others (via insurance or govt programs). If the cost of keeping a person alive for a couple more weeks fell on the loved ones of the elderly I think many more would opt to forego the last wildly expensive heroic efforts.

[russell]

"Pain doesn't matter."

Spoken like someone not in pain at the moment.

Just to follow up (truly briefly) on my comment upthread, it seems to me that one of the reasons health care here is so expensive is that we do a lot of really expensive stuff. Even when there are not-so-expensive ways to achieve comparable outcomes.

It's not at all clear that it adds significantly to the overall quality of life.

But it does make some folks great big heaping buckets of money.

In terms of outcomes, we'd probably do better just giving everybody two nice fresh apples a day and paying everyone to walk fifteen miles a week.

No joke.

Not that I'm any example of shining health and self-discipline. I'm just trying to point out what seems to be to be kind of the elephant in the room.

[liberal japonicus]

Accumulated wealth, baby. As Willie Sutton is supposed to have replied when asked why he robbed banks, 'cause that's where the money is.'

[now_what]

Spoken like someone not in pain at the moment.

Being in pain is a matter of degree.

[russell]

"Being in pain is a matter of degree."

See my earlier comment.

"To the best of my knowledge, being a heart surgeon in most of the developed world gets you a lot of social prestige. In very few places outside the US does it almost insure you an annual income >$500,000 after you've been at it for a few years. "

"Accumulated wealth, baby."

The Gawande article from the New Yorker that I cited upthread is an interesting read.

"IMHO this occurs because the cost falls on others (via insurance or govt programs)."

That's an interesting point.

Certainly if we limited the health care available to anyone to only what they could pay for out of their own, personal pocket, costs would go down. They'd go down because a lot of people would die or otherwise suffer from treatable illnesses, but they would go down.

Is that a better way to handle it?

[now_what]

See my earlier comment

My browser got an out of memory error from it.

[russell]

"My browser got an out of memory error from it."

Perhaps your own memory will do in a pinch.

[now_what]

Perhaps your own memory will do in a pinch

I'm not in a pinch at the moment.

[Gary Farber]

Being in a pinch is a matter of degree.

[Greg]

OC Steve

The problem is, they (priv insur) are NOT competing with medicare for the same group of patients that medicare covers. The most expensive group of patients, the elderly, is who medicare covers.

Medicare IS more efficient, it costs way less in administrative costs. The actual out puts are controlled by medicare but the inputs are not.

Health care is expensive, at the level our society demands it. Its time for us as a group to just bite the bullet and say we are going to do it for EVERY American, cost be damned.

[Sebastian]

"Medicare IS more efficient, it costs way less in administrative costs. The actual out puts are controlled by medicare but the inputs are not."

But more efficient than what? The UK covers their entire population with less money than our government spends covering 26% of our population. Canada covers their entire population with almost indistinguishably more than our government spends on covering 26% of our population.

It seems to me that general appeals to the efficiency of the US government don't really stand up in the face of that fact. I'm not saying we can't do government provided health care. I'm saying we darn well better figure out what we are doing wrong with current government provided health care first.

[Sebastian]

"Medicare IS more efficient, it costs way less in administrative costs."

Which are 7% of health care costs.

Even if Medicare required zero administrative costs, that isn't enough.

[hairshirthedonist]

"One interesting (in a depressing way) fact you can get from the first link I provided (comparing GDP expenditures on health care for various countries) is on private expenditures.

The US spends about 8.1% of GDP in private expenditures on health care.

That alone (without any public expenditures) is more than Canada spends for its entire universal health care system. This covers about 69% of people in the US."

But, Sebastian, why do you discuss this problem as though it's particular to government coverage in the US when you pointed out up-thread that our private expenditures are ridiculously high? It seems that something else is at work here. I hate to write this in today's political environment, but you could argue that it's regulation, in part, given the content of the article you linked. But I don't think that's nearly the whole story (though I'm not sure what is).

[hairshirthedonist]

Just in case it's not entirely clear, the quoted part in my previous comment is from Sebastian's 5:20 PM 6/5/09 comment, which is the up-thread comment I was referring to.

[Sebastian]

I don't discuss this problem as though it's particular to government coverage. That is why I said:

"The US spends about 8.1% of GDP in private expenditures on health care.

That alone (without any public expenditures) is more than Canada spends for its entire universal health care system. This covers about 69% of people in the US.

The public expenditures in the US are 6.6%, just under the amount that Canada uses for universal health care. This covers about 26% of people in the US.

Either the private OR the public expenditures in the US could cover the universal health care system of the UK and are within easy reach of Canada. Yet both together in fact only cover about 84% of the population."

I don't know exactly what is going on. I *suspect* that it involves much higher doctor salaries, much more intensive last-month-of-life therapy, and quite a bit of visiting the doctor when you don't need to by some in the insured population.

But whatever it is, Eric's appeals to "the government is more efficient" and "well they do it in other countries" seems to ignore the fact that yes they do it in other countries, but our government already spends as much as they do for universal coverage in other countries. And in addition our private sector spends more than they do for universal coverage in other countries.

The usual bugaboos appealed to are administrative costs (7% of health expenditures) and drug costs (10% of health expenditures). Neither are even close to big enough to account for the fact that the US (public plus private) spends an 200% on health care compared to everyone else to cover only 75% of the people or that the US government spends 100% of the amount other countries spend but manages to cover only 26% of the population.

[Tony P.]

Okay, Sebastian, what's YOUR guess? If "the usual bugaboos" are not enough to explain the discrepancy, what does?

As I pointed out to you before, we support about as many doctors per capita as Canada. Doctors are the spigot through which medical services flow. American doctors don't have more hours in a day than Canadian ones. So the answer cannot be that we get twice the strictly medical services per capita as Canadians get. Maybe we count more things in "health care spending" than Canada does?

By the way, it's not correct to say that the 14.7% of GDP the US spends on "health care" only "covers" 75% of the population. That 14.7% is what we spend on all the health care that 100% of the population receives. The uninsured may receive less-than-adequate medical services, but such services as they do receive are paid for out of that 14.7% of GDP.

--TP

[Sebastian]

"Okay, Sebastian, what's YOUR guess? If "the usual bugaboos" are not enough to explain the discrepancy, what does?"

I already made my guess in the post you quote:

"I *suspect* that it involves much higher doctor salaries, much more intensive last-month-of-life therapy, and quite a bit of visiting the doctor when you don't need to by some in the insured population."

[Tony P.]

Sorry, Seb; I should have read more carefully the first time.

The first part of your guess (doctors get paid more in the US) seems plausible enough. The second (end-of-life care) and third (unnecessary care) seem redundant. We do not have extra doctors providing that extra care; we only have 10% more doctors per capita than Canada does, not remotely twice as many.

Still, I suppose every little bugaboo contributes a bit to the overall cost difference. Ten percent more doctors, higher incomes for those doctors, a few percent more for paper shuffling, some profit for the insurance companies, and pretty soon it adds up to twice the expenditure per capita.

So, let's say we DO manage to identify the components of the difference. And let's say we want to reduce the difference. Would we need to actually change any of those components (e.g. doctors' incomes, insurance company payrolls and profits) to achieve the reduction, or not? Would the changes need to be towards, or away from, the practices of lower-cost nations?

--TP

[Kenneth Almquist]

Sebastian asserts that administrative costs account for 7% of health care spending, which sounds implausibly low to me. An article in the August 2003 issue of the New England Journal of Medicine states that administrative costs make up 31% of health care costs in the United States. For Canada the corresponding percentage is 16.7%.

Regardless of whether administrative costs account for 7% or 31% of health care costs, Sebastian is right to assert that differences in administrative costs cannot, by themselves, explain why health care costs so much in the United States.

The URL for the New England Journal of Medicine article is http://content.nejm.org/cgi/content/short/349/8/768

[Brett Bellmore]

"We do not have extra doctors providing that extra care; we only have 10% more doctors per capita than Canada does, not remotely twice as many."

But, who says doctors in the US and Canada are working the same hours? If doctors in the US were working long hours, and those in Canada putting in 40 hour weeks, it could account for a big part of the difference.

AND partially explain why the doctors in the US were making more money...

[Hartmut]

Well, the SOP for doctors is not to work longer but to 'do' more patients in the same time (i.e. dedicate less time to the individual patient), at least that's the way it is done over here. And if US patients go more often to the doctor (I exclude pshrinks here because that never became really fashionable over here) than German ones, then US doctors have to possess time compressors. Otherwise they'd have to work 168 hours per day ;-)

[Brett Bellmore]

"Otherwise they'd have to work 168 hours per day"

And only lawyers can manage that.