Wednesday, August 24, 2005

It's the prices, stupid

In answer to Henry's question, I point you to an article of the same name in Health Affairs(institutional subscription required).
The data show that the United States spends more on health care than any other country. However, on most measures of health services use, the United States is below the OECD median. These facts suggest that the difference in spending is caused mostly by higher prices for health care goods and services in the United States.
In answer to specific questions. Prescription drugs?
Spending per capita on pharmaceuticals—a subject of interest to policymakers throughout the OECD countries—varied from $93 in Mexico to $556 in the United States in 2000 (Exhibit 3). In spite of having the highest per capita spending, the United States is closer to other countries on pharmaceutical spending than spending for other health services and goods.
The review article on health care spending in 2005 looks at other possible causes. Do Americans consume more health care?
Surprisingly, Americans have access to fewer health care resources than people in most other OECD countries, measured in three major categories: hospital beds per capita, physicians and nurses per capita, and magnetic resonance imaging (MRI) and computed tomography (CT) scanners per capita.

The number of hospital beds per capita in the United States was in the bottom quartile of OECD countries in 2002 . Also, the number of U.S. physicians per capita (2.4) was below the OECD median of 3.1 in 2002. However, the growth rate in the number of U.S. physicians per capita between 1992 and 2002 exceeded the growth rate of the OECD median. Despite this growth, the United States still had fewer physicians per capita than the OECD median in 2002.
Does America have more technology?
High-technology medical equipment is frequently cited as the main driver of escalating health spending. Although the United States tends to be an early adopter of medical technologies, it does not acquire medical technology at high levels once the technology has diffused widely.

Although the United States has a relatively low supply of these health care resources, they may be used more efficiently than in other countries. For example, lengths of hospital stay are generally shorter and more intensive, and CT and MRI scanners may be used more frequently than in other countries. The greater intensity of care could explain why the United States has fewer health care resources and pays higher prices for their use.
Do rationing and wait times (as in Canada) account for any difference in health care spending?
Waiting lists could explain part of the difference in health spending between the United States and other OECD countries. However, there are several reasons to believe that they explain little of the difference. First, not every OECD country experiences waiting lists, although every country spends much less than the United States on health care. The OECD Waiting Times project identified twelve OECD countries that considered waiting times for elective surgery to be a high priority but also identified seven countries besides the United States that did not perceive that they had a problem with waiting times.15 Health spending in the twelve countries with waiting lists averaged $2,366 per capita, while in the seven countries without waiting lists, it averaged $2,696—both much less than U.S. spending of $5,267 per capita.

A second reason is that the procedures for which waiting lists exist in some countries represent a small part of total health spending. Using U.S. survey data, we calculated the amount of U.S. health spending accounted for by the fifteen procedures that account for most of the waiting lists in Australia, Canada, and the United Kingdom.16 Total spending for these procedures in 2001 was $21.9 billion, or only 3 percent of U.S. health spending in that year.
Malpractice: are more malpractice claims filed? Yes:
The United States had 50 percent more malpractice claims filed per 1,000 population filed than the United Kingdom and Australia, and 350 percent more than Canada. Two-thirds of the U.S. claims were dropped, dismissed, or found in favor of the defendant; in one-third, plaintiffs received compensation after a settlement or judgment. The same distribution of claim results occurred in Canada.20 In the United Kingdom, fewer claims are dropped and dismissed and more are settled; during 1995–2002, 36 percent of claims were dropped, 60 percent were settled, 1 percent were found for the defendant, and 2 percent were found for the plaintiff.21 No data on the distribution of claim results were available for Australia.
(Comparison countries chosen because they all share Anglo-Saxon legal institutions). But is more paid out in malpractice claims? No:
Surprisingly, U.S. malpractice payments (including both cases that resulted in a judgment for the plaintiff and cases resulting in a settlement) were lower, on average, than those in Canada and the United Kingdom. In 2001 the average payment in the United States was $265,103, which was higher than in Australia but 14 percent below Canada and 36 percent below the United Kingdom.22 While U.S. media and public attention have focused on multimillion-dollar awards at the upper end of the range, the average was actually smaller than in Canada and the United Kingdom in 2001.

Possibly the most important and best summary measure of the magnitude of malpractice awards is total payments divided by total population. On this measure, the United States is only slightly higher than the other three countries: $16 per capita in 2001, compared with $12 in the United Kingdom, $10 in Australia, and $4 in Canada. In all four countries, however, malpractice payments represent less than 0.5 percent of health spending.
So it is largely a question of price levels for medical services and goods. You better believe that (most) people in France and Canada are getting better care for half the price. In national health care systems you have monopsony (a buyer has power) which keeps prices lower; whereas in the United States this is not the case, so you have no entity which can exert downward pressure on prices and wages. In the absence of a national health care regime you have no one entity responsible for the global costs, thus no one entity which wants to control costs.


Anonymous Blue Cross of California said...

Great blog I hope we can work to build a better health care system. Health insurance is a major aspect to many.

1:04 AM  

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