American Health Care--Posner's Comment

Last December, the McKinsey consulting firm published a report which states that despite the much higher per capita spending on health care in the U.S. compared with peer countries, the longevity of Americans (even if only that of white Americans is considered) is lower than the average of the comparison countries. This is true, according to McKinsey, even though the prevalence of disease is less in the United States than in those countries (with the principal exception of diabetes, a consequence of Americans' obesity). Because Americans smoke less than the people in those countries, smoking-related diseases are actually lower in the United States. The report attributes to the higher cost of health care in the United States to higher physician incomes, physicans' control over the number of medical procedures and their ownership of testing and other facilities, which drives up utilization, much higher prices for procedures, higher drug prices, and other factors. To which should be added the exemption of employer-provided health benefits from employees' income tax and the very high overhead costs of health insurers. Against this, the Preston-Ho article that Becker summarizes points out that the more extensive screening and aggressive treatment of selected cancers, notably breast cancer and prostate cancer, in the United States result in lower mortality from those cancers than in the peer countries. That is an important point, but it does not establish the superiority of our health-care system. To establish (or refute) that superiority would require conducting a cost-benefit analysis. I have my doubts that such an analysis would vindicate the U.S. system. We spend some $2.5 trillion a year on health care. Our peer countries spend about 60 percent as much per capita on health care and this implies that if we spent at the same level as they, our annual health-care expenditures would be $1.5 trillion. The question, therefore, is what benefits are we obtaining for the additional $1 trillion that we are spending? Suppose the additional screening for and treatment of cancer that we do compared to what the peer countries do is $100 million a year (I have not been able to find an estimate of that cost); that would leave $900 million in "excess" health-care expenditures to explain. A related point is that the causes of the lesser emphasis in the peer countries on cancer screening and treatment have not been explained. Is it simply a lack of money? Or is it a medical judgment? There is some skepticism in medical circles concerning the overall efficacy both of mammography and of screening for and treatments of prostate cancer. Treatments for prostate cancer are expensive in dollar terms but more so in side effects, which often are permanent. Different people, and perhaps different populations, make different tradeoffs among the various factors that affect a decision on screening and treatment. I also question the Preston-Ho suggestion that the shorter average life span in the United States compared to that in the peer countries should be treated as a completely exogenous factor. Treating it as such results from an artificial distinction between medical care and public health. Obesity is not a disease, but it is a serious public health problem. A rational allocation of health-care resources might require a shift in resources from end-of-life medical treatments to preventing obesity. Such a shift might increase longevity much more cheaply and effectively than more screening for cancer. So might greater efforts to reduce the murder rate, improve prenatal and infant medical care, reduce speed limits, reduce unsafe sex, increase liquor and cigarette taxes, improve education, reduce poverty, and prohibit motorcycles. It might be argued that the additional costs of health care that are created by obesity have an offsetting benefit: they reduce the cost of being obese and so increase the net benefits of heavy eating. But the higher health costs of the obese are externalized, in part anyway, to the taxpayer (also to the other members of their insurancce risk pool, if health insurance companies aren't allowed to discriminate). I doubt, moreover, that the obese gain more in enjoyment of food than they lose in the health and other costs of being obese. Much obesity is a result of ignorance (both of calories and of the health effects of obesity), bad habits picked up from parents and peers, negligent parenting, and poor impulse control (i.e., very high discount rates). And speaking of obesity, its prevalence in the United States undermines studies that find that people attach great value to small improvements in quality and quantity of life. The fact that so many Americans eat badly, don't exercise, drink (or "text") when they drive, and otherwise endanger their life and health, implies, since one can eat well, drive sober, and exercise, etc., at relatively low cost, that people don't value small improvements in quality and quantity of life very much--unless the improvements are paid for by someone else! Even if we are receiving $1 trillion in benefits from the "extra" $1 trillion that we paying for medical care, it doesn't follow that the $1 trillion in extra costs isn't too much. The reason is that we face, in my opinion, a fiscal crisis; something will have to give and maybe it should be some medical care. The national debt this year will almost equal the Gross Domestic Product (true, the "public" debt--debt owed to entities outside the federal government--is lower than the overall national debt, but the debt owed the social security trust fund, for example, is a real measure of likely future fiscal obligations), and it will continue to soar at least until the economy, and with it federal tax revenues, recover. But it probably it will soar beyond that because the Bush Administration established a precedent of $500 billion annual federal budget deficits that the Obama Administration will follow and probably raise. The health-care reform wending its way through Congress will expand benefits without, it now appears, controlling costs. It is a misfortune that Congress didn't begin with trying to control costs, and then consider whether the nation can afford to expand benefits.

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So I just do not understand how is it possible that after all the additional costs spent on obesity treatments, breast and prostate cancer, etc. our life expectancy is much less than that of the Europeans.
The prevalence of disease is more in Europe than in the United States with a few exceptions. And yet Europeans spend less per capita on health care and live longer than we do.
Even though our health care system is private it appears to me that it's extremely inefficient. Insurance companies act as a middleman and are being paid a pretty good amount of money do to so.
Basically we pay them to make the system more efficient but that does not lower the cost. If they manage to lower the cost of health care, the additional funds are distributed as profits and high salaries to the CEO’s but that does not lower OUR costs.
Health care providers are faced with an inelastic demand for their services so that they can charge their patients as much as they can afford or as much as the insurance company would pay. There is a huge information asymmetry between physicians and patients. Patients do not care or know how many treatments they need to receive (the more the better) and how much it will cost as long as the insurance company would pay for it. Therefore physicians often charge for a lot of unnecessary procedures.
Finally, Medicare provides the services to our senior citizens that no private insurance company would ever want to provide. What would be the alternative if there is no Medicare? Old people would just die, that’s the alternative. The same way as, currently, uninsured people die because they cannot afford health insurance.
I am 100% sure that the health care system can improve and we all can benefit from it. It’s ignorant to think that we are not paying for the uninsured even right now. Hospitals pass indirectly their unpaid bills to the insurance companies or us. Wouldn’t it be better if we pay for the uninsured in a more systematic way? We can structure the health care system so that everyone can participate and pay for it.

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Last December, the McKinsey consulting firm published a report which states that despite the much higher per capita spending on health care in the U.S. compared with peer countries, the longevity of Americans (even if only that of white Americans is considered) is lower than the average of the comparison countries. This is true, according to McKinsey, even though the prevalence of disease is less in the United States than in those countries (with the principal exception of diabetes, a consequence of Americans' obesity). Because Americans smoke less than the people in those countries, smoking-related diseases are actually lower in...

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Last December, the McKinsey consulting firm published a report which states that despite the much higher per capita spending on health care in the U.S. compared with peer countries, the longevity of Americans (even if only that of white Americans is considered) is lower than the average of the comparison countries. This is true, according to McKinsey, even though the prevalence of disease is less in the United States than in those countries (with the principal exception of diabetes, a consequence of Americans' obesity). Because Americans smoke less than the people in those countries, smoking-related diseases are actually lower in...