Thursday, August 25, 2005

Not convinced

Isaac answers my question, but I'm not yet convinced.

The facts are clear.
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.
And that would imply that higher prices are being paid in the United States. Isaac argues that this is due to the market power of socialized health care systems. I agree that monopsony may play a large role, but it also seems possible that our health care system is more productive, which would also lead to higher prices.

For example, consider these observations:
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.
These facts fit the productivity story. We need fewer beds since patients recover more quickly in the United States, each individual physician and nurse can help more people so there are fewer of them, etc. Since these factors are more productive they cost more.

As the article mentions, per capita spending on prescription drugs is one of the statistics where the US is closest to Europe. The differences that do exist seem attributable to income. My guess is that socialized systems also do a better job at limiting access to newer and costlier medicines than do US insurance companies. But that's not necessarily good.

So is it not possible that productivity differences account for price differences? But why do Europeans have better longevity? Well, as Isaac mentions in another post that can be explained by looking at non-health-care factors. But monopsony surely is an element.


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