May 15, 2018
Austin Frakt had an interesting NYT Upshot piece noting that the US leads the world in health care spending per capita, but badly trails most other wealthy countries in life expectancy. He notes this divergence began in 1980.
While that is true in terms of life expectancy, the divergence in spending actually began in the 1970s. According to the OECD, the United States was near, but not at the top, in terms of health care spending as a share of GDP. Both Canada and Denmark devoted a larger share of their GDP to health care. While the difference with Canada was small, the difference with Denmark was more than 1.2 percentage points of GDP for 1971, the first year that data are available.
By 1980, the gap with Denmark had fallen to less than 0.2 percentage points of GDP, while US spending as a share of GDP exceeded Canada’s by 0.6 percentage points. Insofar as there is a mystery about US health care spending, as the headline asserts, it seems to have begun in the 1970s rather than the 1980s.
One other point is worth noting in reference to this piece. At the end, as one potential solution to high costs in the US, the piece suggests more competition. That would be great (starting with an end to government-granted patent monopolies in prescription drugs and medical equipment), but another even more simple route is increased medical travel.
If people facing expensive medical procedures could travel to other countries and share in the savings it would directly lower costs. Furthermore, by reducing demand in the United States it should put downward pressure on prices. However, the most important effect is that it would make more people aware of the fact that people in other countries get high-quality care for prices that are often less than half of what we pay in the United States.
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