The Big Lie of US Health Care

I like to keep an eye on the comparative health-care statistics that the OECD publishes annually on the costs and medical outcomes of industrialized nations. It makes for fascinating (and frustrating) reading, especially when you bear in mind how convinced opponents of so-called Obama-care are that the U.S. has the superior health-care system.

Well, on the majority of indicators that’s just not true. About the only indicator the U.S. leads on is expenditure.

The OECD releases the comparative figures in June. I’m late this year. According to the OECD, U.S. health-care costs have increased yet again. The country is spending now 17.4 per cent of GDP on health. The U.K. is spending 9.8 percent and Italy 7.9 percent.

No doubt that massive gap benefits Americans in terms of outcomes and life expectancy or in the number of doctors, say, per 1000 of population. If you thought that, you’d be wrong. Americans will live longer on the whole than Mexicans or Turks, who can expect to live respectively until they are 75.5 and 73.4 years old. Americans on average will make it to 78.1. But they lag behind Britons and Italians with their national health-systems. Britons outlive Americans by 14 months. And Italians can expect to live for 81.4 years.

And the density of doctors? In the U.S. there are 2.4 physicians per 1000 people. Italy, again, is better with 3.4.

Agreed, the Italian diet is healthier than most Americans enjoy, what with all that fresh simple food, excellent red wine (good for the heart) and low-fat diets. But Britons? They live as unhealthily as Americans!

The fact is, of course, Americans are not getting value for money for what they pay; despite paying a lot more than others their life expectancy, access to physicians and medical outcomes are lagging. A lot of the increased cost in the U.S. is tied up with the expenses of medical education and insurance. Tort reform would presumably help to reduce costs. The greed of the U.S. medical profession is also a clear factor.  Another factor is the sweetheart deal big Pharma gets in the U.S., where prices, unlike in Europe, are not really negotiated.

Strip out “socialized” medicine for a second. Even when it comes to private insurance comparisons the U.S. doesn’t look good. My private health-care insurance costs me $600 a month in the U.S. (And try to get reimbursed when you pay up front. I am still waiting for Aetna to pay the contracted share of some dental bills after filing a claim 5 months ago). In Italy, a good policy costs me 1700 euros a year. That’s about $2400 a year compared to $7200.

Oh, by the way, maternity costs are basically free in Italy whether you pay into the state system or not or whether you have private insurance or not. And, unsurprisingly, Italy does much better when it comes to infant mortality rates. According to the OECD, infant mortality runs at 3.7 per cent per 1000 births, while in the U.S. it is 6.7 percent.

So even when you take out arguments about morality and fairness and social solidarity, the U.S. still doesn’t compare well. The plain fact is in the U.S. there’s an inefficient allocation of resources when it comes to the health-care system. In short, there’s a market failure.

 

Prager Myths

Dennis Prager comes out with several myths about the U.S. health care system (oh sorry, Dennis, the health insurance system) to try to prove that there is nothing that needs to be reformed. Everything is perfect. Those of us with insurance are happy campers and delighted with the service we get, and those of us without can always get care even if we don’t have insurance. What planet is this man living on? Who pays his speaking fees? A teenager spending a few minutes on the Internet could dispel most of Prager’s myths.

He argues, for example, that it is totally untrue that the U.S. spends more on health care (oops, insurance) than other countries. All he needs to do – and what an enterprising youngster would do to get the facts – is to go here to the OECD analysis which is updated annually to see that indeed the U.S. as a percentage of GDP spends enormously more than other OECD nations and not by slim margins. The U.S. spends a staggering 16 percent of GDP on health – most of the OECD countries spend less than 10 percent of GDP.

According to Dennis, life expectancy is better in the U.S. Wrong again. At the age of 65, for instance, most people – males and females – in EU countries have longer life expectancies than their counterparts in the States.

A bemused Dennis also can’t understand how on earth you can mix public and private options. He asks: “Do you really believe that private insurance could survive a ‘public option’? Or is this really a cover for the ideal of single-payer medical care? How could a private insurance company survive a ‘public option’ given that private companies have to show a profit and government agencies do not have to – and given that a private enterprise must raise its own money to be solvent and a government option has access to others’ 
money — i.e., taxes?”

Oh dear, Dennis, you need to get a passport and travel a bit, old boy. PPP and BUPA have survived fine in the UK running alongside Britain’s National Health Service. Several other European countries have thriving private health insurance companies that work with or compete with the public systems, e.g. in Belgium, France and Italy. Oh, and by the way, most educated and travelled people, and a lot of health experts, would argue that the best health system in the OECD countries is in Belgium with high quality and prompt service. Germany comes next. After experiences in hospitals in several OECD countries, including the U.S., put me in a Belgian or German hospital before sending me to a U.S. one.

Not content with coming out with nonsense when it comes to statistics, Dennis than comes up with an absurd objection to President Obama’s goal of stopping health insurance companies from denying coverage for pre-existing conditions. “If any individual can buy health insurance at any time, why would anyone buy health insurance while healthy? Why would I not simply wait until I got sick or injured to buy the insurance?”

That is easily navigated. Make it compulsory for everyone to have health insurance but make sure there are affordable cost options and premiums. Let’s do a quick comparison. I have an individual health insurance policy in the U.S. — it costs me more than $450 a month. I have also private medical insurance from a UK company that covers me anywhere in Europe: it costs me about $140 a month and it is far more extensive than the U.S. one.

Separately from Prager, Clive Crook has an excellent piece in today’s Financial Times, making the point that the President is making a hash of reform and is starting to back-track. He needs to argue specifics, Crook says, and he is right. Trust the congressional Democrats to make a mess of things even when they have big majorities.

Green Shoots of Recovery — Wishful Thinking

The stock market is up. Goldman Sachs has announced a profit.  All of a sudden the chatter on the evening cable shows is of the green shoots of recovery, with declarations being made that we have turned the corner on what only a few months ago was being described as the worst recession since the Second World War…no, the worst slump since the Depression. 

 

On the Lou Dobbs show on CNN tonight, Cato Senior Fellow Alan Reynolds talked of us coming out of the recession by the third quarter. I know Alan, and like him, but I think he is way off the mark and so too with the other upbeat commentators. The huge response by governments and central banks across the globe – a response Alan criticized – has no doubt slowed the pace of the slump but there remains plenty to worry about.

 The latest economic report from the OECD makes for grim reading. “Economic activity is expected to plummet by an average 4.3 percent in the OECD area in 2009 while by the end of 2010 unemployment rates in many countries will reach double figures for the first time since the early 1990s,” says the OECD’s Economic Outlook Interim Report.

It continues: “Amid the deepest and most widespread recession for more than 50 years, international trade is forecast to fall by more than 13 percent in 2009 and world economic activity to shrink by 2.7 percent. The big emerging economies will also suffer abrupt slowdowns in growth.”

 Several underlying problems remain. Banks are still not lending and investors remain skeptical about investing in banks for good reason: the policies introduced in Britain and the US aimed at cleaning up banks’ toxic debts are too limited.

And the threat of contagion is still there, with the Austrian, Swiss, Swedish and Germans banks highly vulnerable weighed down as they are by loans they made to the credit and investment-thirsty countries of Central Europe.

A second problem rests with what kind of recovery we can expect. The scale of the global recession will have undermined the productive potential of the US and other Western economies with investments not having been made in future efficient production and with the skills base weakened by job losses. All of that means that when the recovery does come – the OECD thinks next year at the earliest – we can only expect it to be very insipid.

Higher taxes needed to pay down the massive debt the governments of the US, Britain and some other Western states are taking on, such as Ireland, will further undermine recovery.

Lastly, nothing is being done about the huge trade and borrowing imbalances that brought us to where we are: in the States, the administration is focusing on stimulating demand (by borrowing, again) and in China the leadership is investing in productive infrastructure to produce the goods Americans will buy with the money they will borrow from China.