The World Doesn't Mooch Off U.S. Health Care R&D

(Bloomberg View) — The economics of health care is a devilishly complicated subject. Between the complexity of the market, the degree of regulation and the unusual nature of the things being sold, the topic is so vast that any single economist is practically incapable of grasping the whole picture.

That’s why I’m skeptical of arguments that rely strongly on economic theory. Unlike the market for oranges or blue jeans, health care defies simple theoretical analysis. Debates between advocates of government-centered and free-market systems tend, out of necessity, to focus on only a few points and leave much of the picture unaddressed.

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To me, a much more compelling argument is simply to look around the world at the various health care systems that have been tried. One system stands out from all the others in the developed world — that of the United States. Most countries have some form of universal health care. The United States, however, up until the advent of Obamacare, allowed most people to buy or not buy insurance as they chose or were able. The results seem clear — Americans pay way too much for their health care. In dollar terms, the United States spends more than anyone except Switzerland and Norway:

But since these countries have higher incomes, as a% of its economy the United States spends a uniquely large amount.

This would be fine if the United States got more bang for its buck. But most health outcomes in the United States are about the same or worse than in those other rich countries. The Commonwealth Fund, a private foundation, has done an excellent job of documenting this disconnect between what the United States spends and what it gets in terms of results. Though the United States does better at combating cancer, it has lower life expectancy overall, and suffers far more from chronic conditions. A stark example is the rate of death from childbirth, which has risen in the United States even as it has fallen steadily in other countries.

Some might believe that the United States needs to spend more to achieve the same outcomes, because Americans are more irresponsible with their health in the first place. But whether Americans are more likely to lead unhealthy lifestyles, there’s plenty of evidence that much of the money the country spends on health care isn’t going to any useful purpose. Analysis of health spending shows that Americans just pay higher prices for most health care goods and services — the same MRI or hospital toothbrush will cost an American much more than it will cost a British, Canadian or Japanese person. For example, in 2012, an appendectomy would cost the average American patient $13,851, but only cost the average Australian $5,467 and the average British person $3,408. That implies that much of the excess money Americans spend on health is just wasted.

This is striking evidence. At some point, endless discussions of economic theory need to yield to blunt fact — government health care systems just seem to do better than the U.S. system.

(Photo: Thinkstock)