Culture and Health Care Costs
By Arnold Kling
David Leonhardt discusses the common complaint, why is it that the U.S. spends so much on health care and has no greater longevity than other countries? He writes,
So something beside administrative costs is at work here, and it involves a basic cultural difference. Americans seem to be less willing to take no for an answer and more willing to try almost anything, no matter how expensive or how slim the odds, to prolong life.
That is the conclusion that I reach in Crisis of Abundance, but I do not think it is just late-stage care that is excessive. People at all stages of life demand thorough diagnosis and the most expensive treatment (as long as someone else pays for it). Doctors want to satisfy their customers.
One quibble with Leonhardt’s article is that he cites administrative costs in health care of 25 percent in a context that makes it sound as if this is the administrative cost of health insurance, for which that figure is way too high. The 25 percent number must include all administrative costs, including scheduling patients, record-keeping, and so forth.
The finding that “population X spends more on health care but has no better outcomes than population Y” holds within the United States as well as across countries. Given that we know that some medical procedures are beneficial, what accounts for these findings (which I sometimes refer to as “users-are-losers” results)? Robin Hanson (be sure to read his comments on that post) says that good procedures are canceled out by harmful procedures, so that on average medicine has zero benefit. I say that good procedures are averaged in with a lot of wasteful procedures, so that the average benefit appears to be zero.
Leonhardt goes on to write “The United States is also a fatter, more diverse country with wider income disparity, which gives our medical system a harder task.” This is another possible explanation for the “users-are-losers” results. The population that spends more on health care may have some unmeasured characteristic that makes it need more health care, and this characteristic tends to boost spending while worsening outcomes.