Mike the Mad Biologist

One of the things that everyone has been talking about, including Obama, is slowing the growth in healthcare costs, what some have called ‘bending the curve’ (and if we bend it, will we Bend It Like Beckham?). But consider these per capita healthcare expenditure data from the OECD:

healthcarepercapita1

In case you missed, let me make this a little clearer:

healthcarepercapita2

Other than Canada and Norway, every other country in the OECD spends less than half of what we do per capita. And before someone starts talking about higher incomes in the U.S., Denmark has a higher median income than the U.S., but half the per capita insurance costs.

We don’t need to slow the growth of healthcare costs (the first derivative). We need to cut the cost of healthcare in absolute terms. Even if one views this from the perspective of percent GDP, we still spend far too much.

And virtually nobody seems to be talking about this.

Comments

  1. #1 Tony P
    September 11, 2009

    I bet you could get the U.S. per capita down to that of the UK if you outlawed the sycophants and hangers on otherwise known as the insurance and billing companies.

    Here is a good first step. Abolish the rule change during the term of George W. Bush. You know what I’m talking about, the one that let insurance companies and banks merge as one.

    That’s when it really started getting crazy.

    Second, a strong public option. Obama and the Democrats need to hear this loud and clear. It isn’t reform if the status quo is maintained.

  2. #2 bob koepp
    September 11, 2009

    Yes, absolute costs must be reduced, and pretty dramatically. Step one must be to reduce demand. If you look at the OECD stats on health status, you’ll see that the health of US citizens is only marginally better than that of countries which spend a tiny fraction of what we do on “healthcare.” I think the scare quotes are appropriate, since it’s pretty clear that a lot of what passes for healthcare in the US doesn’t materially affect health status.

  3. #3 Hank Roberts
    September 11, 2009

    But, but, we have the sleekest, best fed, most highly polished, nipped, tucked, tightened and well preserved rich people on Earth. Look at the ads in the New Yorker and New York Times for accessories.

    How can we maintain the top tenth of one percent in their iconic condition without draining the resources neeeded for their maintenance from those who are mere supporting actors and useless bystanders among the population?

    Remember, what’s important isn’t the flagpole, it’s the gilded eagle on the top. That’s what people are saluting.

  4. #4 D. C. Sessions
    September 11, 2009

    Bear in mind that as “public options” go, Medicare is a pretty good example — and the Medicare per-capita outlay is about $17,000 per year. Insurance companies have an average “medical loss ratio” of about 80%, so you can whack 20% off of the non-Medicare portion of the total if we went single-payer (everyone on Medicare).

    Since the private insurers base their compensation rates on Medicare rates, the providers wouldn’t see any changes. Net effect: about 15% off of the US total.

    The insurers don’t deserve any sympathy here, but there’s a lot more going on than the pay structure.

  5. #5 Troublesome Frog
    September 11, 2009

    Bear in mind that as “public options” go, Medicare is a pretty good example — and the Medicare per-capita outlay is about $17,000 per year.

    It’s also the system that exists to cover only the most expensive subset of a very strongly skewed distribution.

  6. #6 Scott
    September 11, 2009

    Recently, someone posted on one of these SciBlogs an excellent interactive graphic showing the cost of health care per person in the world by country, and in the U.S. by state. The costs per person per state seemed (in my memory) to correlate quite closely to (what I remember as) the obesity rates per state in the U.S: much higher in Texas, Florida, and the South in general, than elsewhere. I wonder: do we have a health care cost problem, or do we just have an obesity problem? It would be very interesting to see a comparison of the cost per person, versus the cost per pound of person. Or, as my wife put it, to see the correlation (if any) between the rates of health care costs and obesity. Yes, we have waste and 30% corporate overhead for private insurance, but do we have sicker people, too?

    Don’t get me wrong. I’m in favor of a single payer health system. Americans are entitled to a choice of affordable health care, not necessarily affordable health insurance. I just want to make sure that in an effort to sell the changes, we don’t fall into the same trap of distorting statistic to make a point.

  7. #7 llewelly
    September 11, 2009

    The list:

    United States … $7290
    Norway …………. $4763
    Canada …………. $3895
    Austria ………….. $3763

    Mike:

    Other than Canada and Norway, every other country in the OECD spends less than half of what we do per capita.

    3763 * 2 = 7426 which is greater than 7290.

    This is just a detail. Its impact on your thesis is small.

  8. #8 marktime
    September 11, 2009

    Do you think the amount spent on healtth care in the Mediterrenean countries reflects our diet?

    Unfortunately, the McObesity factories are making their appearance and are very popular here in Spain. Perhaps our cost will go up in the future. :-(.

  9. #9 toto
    September 11, 2009

    France not only has universal health care for less than half the US cost but.. they also do offer health care to illegal immigrants! Google for “aide medicale d’etat”.

    I guess Joe Wilson just confused Obama with Nicolas Sarkozy. I mean, they look so similar!

  10. #10 D. C. Sessions
    September 11, 2009

    It’s also the system that exists to cover only the most expensive subset of a very strongly skewed distribution.

    No question about it — and if I were trying to demonstrate that Medicare costs would be representative, you’d be right to ream me.

    My (poorly expressed) point was that Medicare reimbursement is already standard for everyone, and eliminating the insurance cut-off-the-top only goes so far. Do all of the above and we still have a hideously expensive system, so if we want more cost reduction we’ll have to look elsewhere.

    Where? Damnfino.

    (“Waste, fraud, and abuse” isn’t an answer. It’s just a ritual phrase.)

  11. #11 Troublesome Frog
    September 11, 2009

    My (poorly expressed) point was that Medicare reimbursement is already standard for everyone, and eliminating the insurance cut-off-the-top only goes so far.

    This is another interesting point. I hear all the time that Medicare reimbursements are so painfully low that doctors are becoming paupers dealing with them. Then, I look at my super-duper top-of-the-line PPO insurance plan that I get from work and notice that the reimbursement schedule (at least, the parts of it that I’ve seen) is just a duplication of the Medicare one.

    So what’s up with that? Is Medicare simply not paying out where private insurers are? I seriously doubt that. Where are the payers who are paying higher than Medicare rates that these doctors are supposedly flocking to?

    I agree with you that a public option on its own is highly unlikely to reduce our spending any more than the marginal competition from any new insurance player is likely to do. My support for it stems from the “more universal access to coverage” feature. Frankly, I’m willing to jump on to any halfway sensible Republican plan (if they offer one) that fixes the following things:

    1) Pre-exsisting conditions make some people uninsurable.
    2) Employer-sponsored group health care is an economic nightmare that needs to be eliminated. Its only benefit is helping with problem (1).
    3) Prices for medical procedures are a total mystery until it’s too late.
    4) Buying insurance is like playing cards with a card shark. It’s unlikely that you’ll win big. If you’re too expensive (i.e. you actually *need* the insurance payout), you may end up in a high-stakes game of “find the loophole” or as I like to call it, “Paperwork knife fight.” Insurance companies are good at this game, and losing it sucks.

    Fix those 4 problems and getting insurance to the uninsured gets easier. Maybe a public plan would become unnecessary. If somebody can propose a totally private system of regulation that will take a bite out of those issues, I’m all for it. Until then, I see the current reform plan as the best game in town.

  12. #12 ponderingfool
    September 11, 2009

    Part of what the public option is hopefully going to bring about is a change of the incentives for hospitals & doctors. Right now it is all about quantity of patients through the door and not quality of care. This favors tests and treatments that get patients in the door often. In addition covering the cost of the uninsured has to be covered some how, this further favors hospitals/practices to encourage patients to undergo profitable treatments, driving up costs. Cover the uninsured they get less expensive treatments (lowering costs) and there is less pressure to recommend costly treatments (further lowering costs). Ideally there is an increase in productivity in society as well as the previously uninsured get treated sooner and can work more effectively. The saved costs also being used to buy products and services, expanding the economy.

  13. #13 A
    September 12, 2009

    As Troublesome Frog noted, the private insurance doesn’t actually pay much; indeed when I was with BCBS, I remember that for any bill, my co-pay typically exceeded the amount actually paid by the insurance; the only advantage of the insurance was that the clinic etc. had to give a big rebate on the originally billed amount.

  14. #14 Rabelais
    September 12, 2009

    This data also shows that the US also spends more public money per capita than many of the countries spend in total – 45.4% of that $7290, or ~ $3310. Note that the per capita costs are adjusted for differences in purchasing power, I’m not sure what effect this has.

  15. #15 GiantHeadofPlexiglass
    September 12, 2009

    the only advantage of the insurance was that the clinic etc. had to give a big rebate on the originally billed amount.

    Uh, I’d call that a big advantage. Without the insurance, wouldn’t you have had to pay the entire originally billed amount?

  16. #16 GiantHeadofPlexiglass
    September 12, 2009

    What I’m gettin at is that you got value from your insurance equal to the difference in what you did pay compared to what you would have had to pay if the insurance company did not set the rates.

    The consequence, however, is that docs, nurses, med techs, janitors, hospital administrators, secretaries, first responders, motor pool mechanics, gardeners, HVAC techs, and the thousands of other people whose work impacted your most recent trip to the hospital cannot work for free, so they make up the difference in other areas, don’t they?

  17. #17 holomorph
    September 12, 2009

    llewelly @7: you mean 7526, right? (Just a detail…)