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.

Comments

[Anonymous]

I'm sure that in the last sentence of the fourth paragraph you meant to write $100 billion and $900 billion.

Also, here's a link to the McKinsey report:

http://www.mckinsey.com/mgi/publications/US_healthcare/

[Anonymous]

Right on! I am a voluntarily uninsured adult American. If Obama wanted to help me maintain my health, he might consider putting in some racquetball courts around here. As it is, I can't afford to participate in either Medicare or Obamacare, which promise to tax me but not to cover me when I am sojourning for six months every year overseas.

[Anonymous]

Dear Judge Posner,
May I gently suggest that, in this and other of your recent writings, there is a danger of your concentrating so much on explaining the comparative economics that you seem to ignore the often more important personal liberty aspects. And I say this as an economist and lawyer who has great admiration and appreciation for your contributions to law and economics.
In your discussions of health care policy as well as other issues such as the environment and government spending, please keep much in the forefront the importance of personal choice and the many benefits to freedom of personal over governmental allocations and spending.

[Anonymous]

Medicare works. I have never heard anyone say that Medicare is like getting healthcare from the DWV. Lower the eligibility so more people can use Medicare. Taking something that works, making it better, and expanding it to serve more people is simple and easy to grasp.

[Anonymous]

I would be interested in hearing what the previous commenter means when s/he writes that "medicare works." It seems to me that it reimburses doctors poorly while at the same time engendering massive amounts of fraud and waste. As an example: An ailing member of my family just got a hospital bed and wheelchair delivered to our home at Medicare's expense -- both of which were brand new and very good quality. She used them for approximately two weeks, then entered home hospice care. Due to redundancies in the system (and a lack of oversight by Medicare) the hospice program ordered an entirely different bed and wheelchair for her, again on Medicare's tab, and paid for a pickup man to drive upwards of 100 miles each way to pick up the nearly brand-new equipment (I'm not sure if it'll be used again or dumped). This kind of idiocy makes me very nervous to consider expanding Medicare without evaluating its waste -- not from doctors, who weren't personally responsible for demanding that she get another bed, but from the government bureaucracy that requires and then reimburses such stupid expenditures.

[Anonymous]

President Obama is addressing the nation this evening on this topic. Our healthcare system should be revamped only after very careful analysis of implementation, consequences, and procedures. Many in Canada have vigorously encouraged the US to NOT adopt their healthcare programs. Let us act prudently and wisely. Amen.

[Anonymous]

An erlier commentator remarked: "there is a danger of your concentrating so much on explaining the comparative economics that you seem to ignore the often more important personal liberty aspects." Yet personal liberty presupposes income: If you can't pay, you can't choose. The issue of economic inequality is an issue of unequal liberty. Making health care affordable for the poor in one way or another enhances economic liberty. There is no point in arguing for free choice for people who cannot afford to choose.

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[Anonymous]

I take issue with the comment stating that many Canadians feel the US should not adopt the Canadian single payer health insurance scheme. It seems to me that if the Canadian health system is so bad, the Canadian electorate would scrap it. Is any Canadian political party suggesting this? The answer, of course, is negative. It would be electoral suicide. The same goes for any British, Dutch, German, Swiss, French,or Japanese political party. The whole world is familiar with our health system due to America's cultural reach, and the whole world knows that our health system stinks. The only people who don't know it are Joe the Plumber and other members of the Republican base.

[Anonymous]

http://www.youtube.com/watch?v=3EPd2i4Jshs

[Anonymous]

"If you can't pay, you can't choose. The issue of economic inequality is an issue of unequal liberty. Making health care affordable for the poor in one way or another enhances economic liberty. There is no point in arguing for free choice for people who cannot afford to choose."

Many people choose not to pay for health insurance and choose to buy something else instead. Then, when something goes wrong, they choose to visit the hospital emergency room which has a mandate to treat anyone who shows up, without regard to ability to pay. That's one of the things that increases the cost of insurance/Medicare for everyone.

My understanding of the currently proposed plans is that they will force people to purchase insurance who are now choosing not to, so we will end up with less rather than more liberty.

David Drake

[Anonymous]

"The whole world is familiar with our health system due to America's cultural reach, and the whole world knows that our health system stinks."

So why do many people from other countries who can afford it come here for treatment?

[Anonymous]

There is nothing inconsistent with "many Canadians feel the U.S. should not adopt the Canadian system" and no Canadian political party's proposing to scrap the Canadian system.
Would very many people in the U.S. propose that any other country adopt our public school system? Would any political party urge abandoning it?

"The whole world is familiar with our health system due to America's cultural reach, and the whole world knows that our health system stinks."

So why do many people from other countries who can afford it come here for treatment? You confuse the quality of services provided--which are world class--with the system of paying for them, which, for historic reasons, is not.

David Drake

[Anonymous]

I agree with Judge Posner.

We can't afford for everyone to get all the healthcare they want. For the few who can, that's great. We also are not going to cut even more people out of the healthcare system. It's wrong and long-term disastrous. I love our country and capitalism and personal freedom, but platitudes about personal choice or isolated clever analyses of individual items are not going to save our country. Rising health care costs are squeezing our standard of living and will bankrupt our country.

[Anonymous]

if there is anything which needs the supply side thinking, its healthcare.

invest more into building facilities and training doctors from taxpayer money.

then everyone can have all the heathcare they want.

[Anonymous]

Callahan from the Hastings institute for ethics states logically that the only way to set up a national health care system is to admit and accept the necessity to ration care on the front end and of course our politicians are to slimy to do that. So we will get a higher cost lower access poorer quality system. I talk to many physicians of every specialty every day and it is they who will provide care or not provide care depending on the system finally passed. The AMA does not represent physicians so what ever they say doesn't reflect what physicians are thinking.

[Anonymous]

Becker encourages skepticism toward the policy-maker's agenda. Posner responds by encouraging skepticism of Becker's conclusion -- that is, by encouraging skepticism of skepticism.

No study will definitively explain why the US spends more than other countries on health care, but Preston and Hu offer the plausible hypothesis that lifestyle choices matter. And no study will resolve how much of our extra expenditures are worthwhile, but Becker marshals an argument that much of it might be.

If similar hypotheses are even partly right, then the proposals now before Congress may not help and might hurt. Legislative humility may be too much to hope for, but legislative caution isn't.

[Anonymous]

Both of these posts mix together some very complicated issues. As I am sure that both Mr. Posner and Mr. Becker are aware "outcomes research" which was largely developed by John Wennberg of Dartmouth University shows some very serious problems with American healthcare. We underfinance public health which is both very inexpensive and the only part of the healthcare system which can be definitely shown to increase life expectancy. We underfund prenatal care,and have millions of citizens who have diabetes and heart disease without being aware of it. The reason for this is simple: public health is a public good which makes it difficult for private business to profit from it.

At the same time American physicians are often pressured to do unnecessary operations on their patients in order to keep their jobs. Dr. Wennberg's first major study was on the number of hysterectomies performed in various parts of the U.S..At that time 70% of American women were undergoing the procedure. In Boston the figure was over 90% in Nebraska only 20%. It turns out that sometimes less is more. Doing fewer hysterectomies in a population can improve life expectancy and save women much unnecessary pain. This problem of physicians performing too many operations has since been shown to be the case with many other procedures.

As an attorney investigating health care cases in the Detroit area I was appalled by the number of times patients' families were lied to by hospital staff in order to convince them to agree to operations on family members. This is essentially a problem of asymmetric information. Physicians, having lost their independent professional status, need to meet monthly billing quotas in order to keep their jobs. Patients have no way of knowing what procedures are really necessary. Consequently profitable procedures like hysterectomies and electro-shock therapy are overperformed.

President Obama may not have the answers for our healthcare system but it is clear that reform is needed.

[Anonymous]

Both of these posts mix together some very complicated issues. As I am sure that both Mr. Posner and Mr. Becker are aware "outcomes research" which was largely developed by John Wennberg of Dartmouth University shows some very serious problems with American healthcare. We underfinance public health which is both very inexpensive and the only part of the healthcare system which can be definitely shown to increase life expectancy. We underfund prenatal care,and have millions of citizens who have diabetes and heart disease without being aware of it. The reason for this is simple: public health is a public good which makes it difficult for private business to profit from it.

At the same time American physicians are often pressured to do unnecessary operations on their patients in order to keep their jobs. Dr. Wennberg's first major study was on the number of hysterectomies performed in various parts of the U.S..At that time 70% of American women were undergoing the procedure. In Boston the figure was over 90% in Nebraska only 20%. It turns out that sometimes less is more. Doing fewer hysterectomies in a population can improve life expectancy and save women much unnecessary pain. This problem of physicians performing too many operations has since been shown to be the case with many other procedures.

As an attorney investigating health care cases in the Detroit area I was appalled by the number of times patients' families were lied to by hospital staff in order to convince them to agree to operations on family members. This is essentially a problem of asymmetric information. Physicians, having lost their independent professional status, need to meet monthly billing quotas in order to keep their jobs. Patients have no way of knowing what procedures are really necessary. Consequently profitable procedures like hysterectomies and electro-shock therapy are overperformed.

President Obama may not have the answers for our healthcare system but it is clear that reform is needed.

[Anonymous]

Both of these posts mix together some very complicated issues. As I am sure that both Mr. Posner and Mr. Becker are aware "outcomes research" which was largely developed by John Wennberg of Dartmouth University shows some very serious problems with American healthcare. We underfinance public health which is both very inexpensive and the only part of the healthcare system which can be definitely shown to increase life expectancy. We underfund prenatal care,and have millions of citizens who have diabetes and heart disease without being aware of it. The reason for this is simple: public health is a public good which makes it difficult for private business to profit from it.

At the same time American physicians are often pressured to do unnecessary operations on their patients in order to keep their jobs. Dr. Wennberg's first major study was on the number of hysterectomies performed in various parts of the U.S..At that time 70% of American women were undergoing the procedure. In Boston the figure was over 90% in Nebraska only 20%. It turns out that sometimes less is more. Doing fewer hysterectomies in a population can improve life expectancy and save women much unnecessary pain. This problem of physicians performing too many operations has since been shown to be the case with many other procedures.

As an attorney investigating health care cases in the Detroit area I was appalled by the number of times patients' families were lied to by hospital staff in order to convince them to agree to operations on family members. This is essentially a problem of asymmetric information. Physicians, having lost their independent professional status, need to meet monthly billing quotas in order to keep their jobs. Patients have no way of knowing what procedures are really necessary. Consequently profitable procedures like hysterectomies and electro-shock therapy are overperformed.

President Obama may not have the answers for our healthcare system but it is clear that reform is needed.

[Anonymous]

"My understanding of the currently proposed plans is that they will force people to purchase insurance who are now choosing not to, so we will end up with less rather than more liberty."

Not quite so, if the system becomes cheaper that way (as has been argued by proponents). Then more resources will be available for other purposes, enlarging the scope of liberty, so to speak. So in the end all boils down to an efficiency argument.

The liberty of those who don't insure and are treated with the taxpayer's money reduce the scope of liberty of those who subsidize them. It is a forced subsidy, and it strikes me as strange to defend that for the sake of liberty.

The tenor of the commentator seems to prohibit subsidies for treating the uninsured. This is a valid alternative to mandatory insurance, perhaps the only one, although I doubt that many would favor it.

The status quo is not defensible, even with an appeal to liberty.

[Anonymous]

One question? "What good is Free Choice and Liberty when one is sick or injured and can't get Medical Care"? Should we return to the the "good ol days" where the medical wisdom of the day was, save one bullet for yourself?

As for Canadian Med. Care, perhaps the following anecdote will put the whole medical thing in a new light:

I was talking to friend of mine who is Canadian and lives in Canada about our health care debate currently going on. His Comment, "Thank God I'm Canadian and live in Canada. At least I know if I get sick or injured I can get Medical Care when and where I need it; whether I'm employed or not. Unlike you confused and "wacked out" Americans."

[Anonymous]

"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!"

It seems like this is the problemn with the current health care system, and a reason we should move off of the lush benefit program popularly associated with government and union employees and towards high-deductible insurance plans where the consumer bears most of the costs.

[Anonymous]

First off, please keep comments to fewer words than the actual post. God.

Secondly, when the government forces healthcare or mandates insurance for everyone (as they do here in Massachusetts), then it also becomes in the government's interest to monitor the health of Americans. If my tax dollars will foot the bill when you go to the hospital, then I would want the government to ensure that you live a healthy life to lower costs. Is that the world we really want? Close McDonalds because it is unhealthy. Monitor people's sexual partners to ensure they are not participating in high risk behavior.

If we can devise a system that provides SOME necessary/essential healthcare to indigent Americans and ensure emergency care and anything beyond that is up to the consumer, which could probably be achieved without spending a dime more than we already do by cutting spending in other areas of healthcare. It just makes no sense to mandate that everyone have or have access to health insurance. I don't want the government telling me what I can smoke, eat or drink or who I can sleep with or what dangerous activities I can participate in - I dont' think Obamacare goes that far, but how close to socialized healthcare do we need to inch before it becomes the state's interest to determine how people behave? More so than they do already that is.