Do Americans just love expensive health care?
I’m not sure that this is, in fact, “the most important chart in health policy” — I’d probably go with this one — but it’s definitely an interesting chart. The point is that if you yoke the growth of our health-care spending to the growth of our economy, you see a relationship that appears essentially impervious to change. We’ve seen the introduction of Medicare and Medicaid, Nixon’s wage and price controls, various efforts at Medicare reform, the widespread adoption of managed care by private insurers, and much more, but the line continues on in its unbothered way.
The authors of the paper suggest that this is basically because the amount we spend on health care is determined by how rich we are. The main problem with that, I think, is that it doesn’t account for the very different relationship we see between health-care spending and national wealth in Europe, Canada and Japan. Those countries and continents are quite rich, but spend vastly less than we do.
So you have to ask yourself: Is it more likely that Americans, who don’t tend to be vastly more or less interested in luxury goods than residents of other rich countries, just want to spend way more on health care than everyone else does? Or is it more likely that the American system, which is unlike anything else in the world, is simply much worse at controlling health-care costs? I’d say the latter.
The basic model I have of the health-care system is that health care is a product that individuals are uniquely incapable of refusing. If the doctor says your child needs something, then you’ll do whatever it takes — mortgage the house, sell the dog, rob the bank — to get it. In other countries, the government is empowered to “say no” in the form of driving extremely hard bargains with doctors, hospitals, drug manufacturers and others. That right there is the basic difference between us and everyone else. And if you take it seriously, it explains a lot of what’s going on.
In Canada, you either sell your drug for what the Canadian government is willing to pay, or you don’t sell your drug. That’s true in pretty much every country. And it turns out that providers are willing to offer health-care services for far less than what they charge Americans. Peruse these graphs if you want some proof. But because there’s no government saying no to their prices in America, they can basically charge us whatever they want, as we have enormous trouble saying no on our own.