OP-ED

U.S. Health Care & U.S. Productivity: A Dissent

One of the great myths about American society is that our lack of a “universal” health plan harms our competitiveness.  The masters of this refrain, of course, are the American automakers.  Years before driving themselves into bankruptcy and the unwelcoming arms of their new owners, the American taxpayers, they used to claim that they spent up to $1,600 per car on health care.  This was more than they spent on steel, and a multiple of what they claimed their foreign competitors spent.  In her well received book, Who Killed Health Care? America’s $2 Trillion Medical Problem – And the Consumer-Driven Cure (New York, NY: McGraw-Hill, 2007), Professor Regina Herzlinger of Harvard Business School claims that these complaints are inflated (pp. 104-105).

Furthermore, we don’t hear Mark Zuckerberg complaining that Facebook’s health care costs are preventing him from competing against foreign social-media businesses.  Indeed, while all Americans complain about health costs, the argument that our health “system” reduces our competitiveness versus other countries with “universal” health care is actually quite weak.  Indeed, the percentage of all firms offering health benefits actually increased from 66 percent in 1999 to 69 percent in 2010, and a greater number of smaller firms have begun to offer health benefits, according to the Kaiser Family Foundation.

One oft-cited metric is that the United States spends far more on health than other countries as a share of Gross Domestic Product (GDP).  But this measurement can mislead.  It is a ratio composed of a numerator and a denominator.  The numerator – the real cost of medical care – has grown slightly slower in the U.S. than Europe.  Advocates of government monopoly health care point out that Canadian and U.S. health spending as a share of GDP was about the same before the Canadian government took over health care, but diverged starting in 1970, soon after the government completed its takeover.  They present this as evidence that the state can control costs better than the private sector.  However, real GDP growth in Canada dramatically outpaced U.S. growth between 1969 and 1987, meaning that the denominator of the health spending per GDP ratio grew much faster in Canada, not that the numerator grew much slower, according to research by Professor Brian Ferguson.

Common sense indicates that richer countries will spend more on health care.  In The Business of Health: The Role of Competition, Markets, and Regulation (Washington, DC: The AEI Press, 2006), Robert L. Ohsfeldt and John R. Schneider estimate that an increase of $1,000 in GDP per person results in a $110 increase in health care spending, if the relationship is linear.  If this is the case, then something is seriously wrong in American health care, because the United States spends far more than that for each dollar increase in GDP. However, it is more likely that nations increase their health spending at a certain rate as GDP goes up, not a certain dollar amount.  The international evidence fits the latter hypothesis much better: a thousand-dollar increase in GDP increases health spending by about 8 percent.  In this case, health spending really ratchets up as national income increases.  For example, if GDP increases from $30,000 per capital to $31,000, health spending increases by $232; but if GDP per capita increases from $40,000 to $41,000, health spending increases by $500.  According to Ohsfeldt and Schneider, this model explains 93 percent of variation in health spending internationally – much greater explanatory power than the linear (dollar for dollar) model (pp. 7-8).  Most importantly, the United States is not at all an outlier.

This finding challenges our intuition, however, because it is hard to grasp how much more the U.S. earns than other countries, and how much buying power this gives us.  According to data extracted from the International Labor Organization, U.S. GDP per capita is far greater than almost any other nations’ and this is largely due to American productivity.  U.S. GDP per person engaged (employed) in 2008 was $65,480, followed by Hong Kong at $58,605 and Ireland at $55,986.  Some of this was due to Americans working longer hours, but mostly it was due to productivity: value produced per hour worked.  Most developed countries produce between 60 percent and 90 percent of the value that the U.S. does, per hour worked.  For the four countries compared in this analysis, France was the second most productive, with a productivity rate 91 percent of the United States.  Germany lagged at 72 percent.

The table below (drawn from a recent analysis) compares the U.S. with four countries whose health care systems are often held up as admirable options: Canada, Germany, France, and Great Britain.  In all these countries, GDP per capita was significantly less than the United States.  The U.S. spent significantly more on health care per person than comparable countries.  Nevertheless, Americans still have much more money left over after paying for health care.  Indeed, we have between $4,500 and $8,400 more income per capita than Germany or France – after paying for health care – a “bonus” of American productivity.

American crusaders for “universal” health care emphasize America’s uniqueness in lacking this characteristic of the modern welfare state.  Given the benefits of America’s productivity, perhaps it is a uniqueness we should not rush to abandon.

Table 1: National Accounts for Five Countries, U.S. dollars, Purchasing Power Parity, 2008
U.S. Canada Germany France Great Britain
GDP $46,901 $38,923 $36,918 $34,641 $37,250
Health Spending $7,538 $4,079 $3,737 $3,696 $3,129
Difference $39,363 $34,844 $33,181 $30,945 $34,121
U.S. “bonus” after health spending as percentage 13% 19% 27% 15%
U.S. “bonus” after health spending in dollars $4,519 $6,182 $8,418 $5,242
Source: Organization for Economic Co-operation and Development, StatExtracts (Paris, France, Organization for Economic Co-operation and Development, data extracted November 2010).

John R. Graham is Director of Health Care Studies at the Pacific Research Institute, San Francisco, CA.

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39 replies »

  1. THEN MOVE
    ” .. precious little wealth created is now only trickling up ..”
    Then why don’t you SOCIALISTS move to Cuba? And let 10,000 illegals fight for your spot?
    When did God give you SOCIALISTS license to GRAB 60% of the EARNINGS of others?

  2. “Eventually, the stagnating wages of most Americans will provide a very similar disincentive to be productive and work harder,”
    Again Margalit your error is your base assumption that people who are productive and work hard have stagnating wages, if you look at movement between quintils you will see plenty of people moving up. The people that are stagnat and moving down are those with no education and working less then full time.

  3. Nate, you have a very strange way of reaching overarching conclusions based on the few and far in between exceptions to every rule and every reality. To you wealthy translates into star athletes and rock stars, and poor translates into drunken bums loitering at a street corner.
    Prof. Mankiew wrote in one of his blogs that higher taxes will be a disincentive for his article writting, not because he won’t get paid, but because he won’t get paid enough to meet his expectations.
    Eventually, the stagnating wages of most Americans will provide a very similar disincentive to be productive and work harder, for the same exact reason.
    Poverty or wealth are relative concepts evaluated at a local level. Nobody in Omaha is comparing themselves to those living in Finland, Angola or Chile.
    Choosing not to see the problem will not make it go away.

  4. I’m very glad people took the time to respond – even on Christmas Day! I regret I can’t wrap an “omnibus” response myself to everyone.
    Let me just respond to our host, Matthew Holt: I’ll never disagree that we waste much of our health spending in the U.S. However I follow Ronald Reagan in asserting lack of government control is not the problem, because government control has increased by any measure (share of spending, pages of regulation) since the 1960s.
    Aaron Carroll’s posts at The Incidental Economist are excellent. He has written about the increase in health spending in the 1980s. I think Megan McCardle at The Atlantic has a credible explanation for that which Tyler Cowen observed in this regard. Ms. McCardle suggests that the Reagan tax reforms eliminated many non-taxable benefits other than health coverage, so the tax bias tilted even more in favor of health benefits. (See her entry “What happened to U.S. health costs?” on 12/1/2010.)

  5. “The fact is that those who get extensively rich do so because other people work hard and are very productive,”
    No matter how discredited you just can’t drop the dogma can you? So your saying the only reason Cliff Lee makes what he does is because his utility infielder works so hard? Taylor Swift, aka perfection, only makes what she does becuase her backup singers are so darn productive? I forget the guys name but he bet big against bank mortgages and made billions, who worked so hard to support his gamble?
    Your desperate and just making yourself and your argument look worse.
    “but are being left behind nevertheless.” LOL you are so detached from reality. Being left behind? Having a 1200 square foot house, 2 cars, cable, home and cell phone, multiple color TVs, etc etc that is being left behind? Our poor live better then the middle class of every but a few countries, who are they being left behind in comparison to, the 1% of Americans who work hardest and risk the most, everyone should get to live that life or no one at all?

  6. Nate, there is no way for any one person to do any kind of work, or work any amount of hours that equates to an income as the top 1% receive. The fact is that those who get extensively rich do so because other people work hard and are very productive, but are not receiving commensurate compensation. This is not a new phenomenon and it is sustainable as long as the uneven distribution is within reason, i.e. as long as the workers improve their lot in direct proportion with the property holders. It is not acceptable, and it is dangerous, when the producer class sees a 9% improvement while a tiny minority of super-wealthy is gobbling up hundreds of percentages. If you draw the wealth pie before and after you will understand what I mean.
    The numbers are factual. The only opinion here is that I don’t believe this arrangement is sustainable (as I said to start out with).
    To Barry’s point, this is not about poor uneducated and lazy fringes engaged in gaming the system. I’m pretty sure you will disagree with my opinions on those unfortunate citizens as well, but this is not the minority group addressed here. I am talking about the vast majority of Americans who are not “struggling” in the sense of having to send the kids out to collect coal along the railway, but are being left behind nevertheless. This is not good for America and it’s not good for the wealthy themselves. If the majority is not comfortable, or even affluent enough to buy what you sell (and everybody sells something), you (the rich guy) will not prosper either in the long run.
    Unfortunately, our true blue magnates believe that the solution is to go sell their junk in China and the hell with the American market. I disagree with this scorched earth philosophy, and this too is a matter of opinion, I guess.

  7. Margalit – While my own preference is to see prosperity widely shared as opposed to concentrated in the hands of the few, I see plenty wrong with the current system that doesn’t involve the wealthy.
    First, there is no doubt that wages have stagnated for many. Before the small software company my wife worked for was sold last year, she was earning roughly the same as a software developer in inflation adjusted dollars as she was when she worked for IBM as a programmer in 1976. Many in the unionized manufacturing sector fared far worse, though that was partly due to their union leadership pricing them out of the market by demanding ever more in wages and benefits than a competitive economy could ultimately support. I also fault many in the middle class for an unrealistic surge in expectations over the last 30-40 years. Back then, houses were smaller, there weren’t as many bathrooms, and people made due with one car. More often than not, one income was sufficient to support the family. When I was growing up in the 1950’s, very few young children went to pre-school. We learned to read when we were six instead of three or four but we learned. There weren’t nearly as many organized activities back then that parents feel they need to sign their kids up for today at considerable financial cost. To support today’s expectations, most people need two incomes and they still aren’t able to save much. By contrast, Europeans live in far smaller houses and drive much smaller cars and own fewer of them. While they have a more extensive safety net including taxpayer funded health insurance, I wonder how many people in the U.S. would trade their current lifestyle for an 800 square foot house, a tiny car, $8.00-$9.00 gas, taxpayer funded health insurance, the chance to fork over 50% of their income in taxes to federal, state and local government combined and probably no opportunity to get rich or even make it into the upper middle class. Probably not as many as you might think.
    Among the poor, we find many who failed to graduate from high school, can barely read and have few marketable schools. Yet, somehow, they are fully aware of every government program they might be eligible for from food stamps, to housing vouchers to social security disability benefits, and Medicaid. Even if they’re not eligible technically, they know how to manipulate their affairs to make themselves eligible including working off the books and keeping a male spouse or significant other off the lease to maximize the value of the housing voucher. It’s as though they acquired a P.H.D. in gaming the system. I’m perfectly willing to pay taxes to help people in genuine need, but the amount of fraud throughout our economic system is enormous. I’m not enthusiastic about paying taxes to support that.

  8. Great example of liberal thinking on another hot button issue;
    ” Prognosticators who wrote the U.N.’s Intergovernmental Panel on Climate Change, or IPCC, global warming report in 2007 predicted an inevitable, century-long rise in global temperatures of two degrees or more. Only higher temperatures were foreseen. Moderate or even lower temperatures, as we’re experiencing now, weren’t even listed as a possibility.
    Since at least 1998, however, no significant warming trend has been noticeable. Unfortunately, none of the 24 models used by the IPCC views that as possible. They are at odds with reality.”
    who needs reality when you have progressive science to take its place. Reminds me of the great philospher Adam Savage, “I reject your reality and subsitute my own”, if only it was that easy.

  9. Margalit that is the difference between facts and opinions, I don’t care what Mr. Greenspan opinion is as he hasn’t shown himself to be particulary good at these matters. Now lets look at the facts;
    You said “precious little wealth created”
    Factually untrue
    “The poor and middle class are indeed left with exactly what they had before”
    You just admitted this is also factually untrue
    “Most often it accrues to those who are already wealthy and have the financial means to extract wealth from the system.”
    Also factually untrue.
    So you make an argument that is lacking any fact and when called out on your lack of factual basis defend it with an opinion. Again, this is why you can’t have inteligent arguments on policy with liberals you don’t know the fundemental difference between facts and opinions. You want to rewrite the nation based on opinions then claim shock when it never works out like you intended.
    Your welfare state is dependent on society thinking our poor are, well poor or struggling, this is not true for 90% of them. If you were ever held accountable and forced to argue facts your progressive agenda would fall apart and we would reinstitue a more sustainable assistance program.
    For argument sake, someone that works fewer hours and is less educated should earn what compared to someone 40 years ago? Apparently you believe todays poor should be paid twice what someone in 1970 was who worked 1000 hours more and was better educated. I’ll guess you weren;t even aware of these facts and were just of the opinion all things were equal?

  10. Nate, not sure what the link you posted means, but I think you really meant to post this one
    http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States
    Did you read it? Perhaps in addition to what you selectively quoted from it, you may also want to quote Mr. Greenspan on US income inequalities:
    “As I’ve often said, this is not the type of thing which a democratic society – a capitalist democratic society – can really accept without addressing.”
    109% of $40,000 is $43,600, and 276% (yes 276%) of millions and billions is almost triple as many millions and billions. Who are we kidding here?

  11. Just to follow up, the dividend income accruing to the founders of Google and Berkshire Hathaway from their huge ownership interest in those companies is precisely ZERO as is the associated income tax liability because these companies don’t pay any dividends. They reinvest all of their profits back into the business to build long term value for all shareholders and, by the way, increase their workforce to support the growth of the business. Bill Gates pursued the same strategy at Microsoft for much of its early history though MSFT does pay a meaningful dividend now.
    Many of the countries wealthiest people avoid much of the estate tax when they die by giving most of their wealth to charity either directly or through a foundation. Both Bill Gates and Warren Buffett are doing this. Funding charitable endeavors is a good thing, not a loophole.

  12. Today, the expenditures per person of the lowest-income one-fifth (or quintile) of households equal those of the median American household in the early 1970s, after adjusting for inflation.[6]
    The way the left frames these arguments could not be more dishonest. At least I hope it is framing and they aren’t really this clueless. If not for the efforts of our evil rich how is our bottom class living like the middle class just 40 years ago? Considering education is declining and so many are state dependent someone is obviously generating termendous amounts of wealth to drag them up with little to no help.

  13. The trend toward increased concentration of wealth over the last 30 years has very little to do with federal income tax policy. While marginal income tax rates were far higher in the 1950’s and early 1960’s, very few people actually paid them. Tax shelter opportunities abounded that allowed wealthy people to borrow money on a non-recourse basis for investment in oil and gas, real estate, cattle and other ventures. Even if the investment was a bust, they could often write off up to 5 or 6 times the amount they actually had at risk and save far more in taxes than they invested in the deal. At the same time, the top capital gains tax rate was 25% during that period as compared to 28% following the 1986 Tax Reform Act and 15% today. The rules governing tax shelters were changed in the late 1970’s so investors could only write off what they actually had at risk (obligated to repay) but no more.
    Moreover, over the last 30-40 years, the state and local tax burden also increased materially in most states. In NJ, for example, prior to 1966, we had neither a state sales tax nor an income tax. Now we have both with the sales tax rate at 7% and the top state income tax rate at 8.97%. The local property tax on my modest tract house when it was built in the early 1960’s was $450 per year. Now it’s about $8,000 while the Consumer Price Index increased “only” between 5 and 6 times during that period.
    The rich got richer during this period mainly because of the sharp increase in the level of the stock market. It wasn’t until 1954 before the Dow Jones Industrial Average exceeded its 1929 high. It didn’t pass the 1,000 level until January, 1973. Today, it’s over 11,000. Moreover, land and commercial real estate values, oil and gas, media assets, etc. also rose sharply relative to inflation. More recently, people who successfully built businesses, especially in high tech, reaped huge financial rewards.
    You can’t get really rich in America by working for a salary. Aside from inheritance, you have to be an owner of or partner in a successful business. Even for corporate executives, most of their wealth building opportunity comes through stock options and restricted stock awards, not cash salary. With respect to stock options, when they are exercised, the difference between the exercise price and the market price at the time of exercise is taxed as ordinary income, not the much more favorable capital gains rate.
    People who were most adversely affected by economic change since the early 1970’s were those previously in the heavily unionized portion of the manufacturing sector that lacked a college degree. The combination of automation, other technological improvements and foreign competition eliminated many of these jobs and drove down wage levels for those still employed – think auto and steelworkers, among many others.
    In the 1970’s during the early part of the Carter Administration, the capital gains tax rate was very high by historical standards and the venture capital industry was virtually non-existent because the return to investors, especially during a high inflation environment, was not sufficient to compensate for risk. Those who favor higher taxes on the wealthy would likely be very disappointed in the amount raised realative to what so-called experts estimate would be raised.

  14. “precious little wealth created”
    By who’s measure? The facts would seem to show your either full of it or the worst propogandist ever.
    http://en.wikipedia.org/wiki/File:Graphic.png
    Huge amounts of wealth have been created.
    “The poor and middle class are indeed left with exactly what they had before”
    “The real, after-tax income of the top 1% earners has grown by 176% percent during that time, compared to a 69% rise for the top 20%, and an increase of 9% for the lowest 20%[1].”
    169% is nothing? 109% is nothing? And that is just reported income, non reported income and non income assistance adds even more to their not exactly where they were.
    “Most often it accrues to those who are already wealthy and have the financial means to extract wealth from the system.”
    More lies and or ignorance;
    “Moving between quintiles is more frequent in the middle quintiles (2-4) than in the lowest and highest quintiles. Of those in one of the quintiles 2-4 in 1996, approximately 35% stayed in the same quintile; and approximately 22% went up one quintile or down one quintile (moves of more than one quintile are rarer). However, 42% of children born in the bottom quintile are most likely to stay there, and another 42% move up to the second and middle quintile[3].”
    Do you ever get the feeling everything you “know” is a lie?
    42% of those born in the bottom move up, pretty much the exact opposite of what you said…..odd
    ” Since wealthy individuals are rather selfish and shortsighted”
    Compared to the welfare class who expect handouts as a protected right. They have a name for your bias margalit.

  15. Nate, the precious little wealth created is now only trickling up. The poor and middle class are indeed left with exactly what they had before, only now their wealth represents a smaller percentage of the total, so percentage wise there is an upwards redistribution.
    New wealth does not accrue necessarily to those who work hard and take risk. Most often it accrues to those who are already wealthy and have the financial means to extract wealth from the system.
    However, the stability and sustainability of any national arrangement depends on the existence of a comfortable and largely content middle class which vastly outnumbers both the poor and the wealthy. Since wealthy individuals are rather selfish and shortsighted (with some exceptions), it is the representative government’s responsibility to protect and nurture this middle class majority.

  16. “The increasingly upward redistribution of wealth to a small minority is not sustainable and the health care problem is just one manifestation.”
    Margalit the term redistribution means to take wealth that already exist and move it around, that is not what has been happening in the US at all. We have been creating new wealth and most of the new wealth is going to those taking risk and working. Our poor are better off then any other time in US history, no one has taken their wealth.
    ” I don’t think Facebook has exactly the number of retirees GM has, and therefore less incentive to dump them onto a state system paid for by the taxpayer.”
    Matt talking incentives what was GM’s to give retirees free drug coverage with no co-pay or Rx plans with $2 co-pays and no differential to use generic when everyone knew they were cheaper. UAW retiree plans were the richest benefit plans in the world, common sence they would lead to utilization and cost problems, it had nothing to do with number of retirees or being a private system and everything to a terrible benefit plan that anyone with highschool math could tell was not sustainable.
    “But where does it say that we have to spend the money we do spend on health care as badly as we do?”
    It doesn’t, we are free to spend wiser if we want to, we shoose not to, where does it say we want some politician to come around and tell us how to spend the money we make? We don’t need liberals telling us how to eat, raise our kids, what car to drive, and how to live our life thank you.
    “Who cares about that when premiums have been growing at rate far exceeding GDP growth and wage growth.”
    If you knew how premiums were calcualted you would Vikram. Premium is cost plus overhead. You seem to be missing that while our cost has grown slower what we cover has skyrocketed. We use to pay 50% of our cost of out pocket, that is now down to 13%. That 37% difference in source is on top of the cost inflation leading to higher premium increase then cost increase.
    “Well than Japan should have much higher cost because they have had no growth for decade and now its society of octagenarians.”
    Non existant 100 year olds consume very little healthcare. Their 100+ population is vastly overstated due to pension fraud.
    “what made Canadian GDP grow faster than US?”
    Simply they don’t have american liberals. Lumber and oil are 2 of the top three industries which they embrace. Here in the US liberals have gone out of their way to destroy those industries. We have plenty of lumber and oil domestically that wouldn’t require us to import any from canada but we choose not to harvest it.
    ” 50 million people without health insurance,”
    As far as I can find we are the only country that counts illegal aliens in our uninsured numbers….wonder why that is
    ” We spend twice as much per capita as other developed nations, but we have nowhere near twice the GDP per capita. How plausible is it that the slope of the curve for accelerated spending on health care is so high that it “explains away” 93% of the difference?”
    Very jonathan, actually. After you pay for your house and car where does the money go? Look at percentage of income spent on housing for the different income brackets and a steep curve would be expected.
    “Margalit’s point about non-sustainability is one of the strongest bipartisan arguments in favor of the recent health insurance reforms.”
    A non sustainable system is an argument for reform that increases cost and reduces cost control? Don’t see how that actually works out.
    ” The thieving twins of insurance and Health Care providers.”
    Gary why do you give a free pass to the triplet who is the biggest theif of the three, generational wealth theft is far worse then what incurance companies and providers take out. Today’s seniors are taking a multiple of contribution that is bankrupting the system.

  17. MEDICARE LIARS
    ” .. All you need to know in three words: “Pacific Research Institute.” The parochial Fox News of think tanks. Unfettered for-profit markets uber alles.”
    Oh, yeah. STEALING is so much easier to ignore, if you are INCOMPETENT. If you are Eric “New Black Panthers” Holder.
    http://online.wsj.com/article/SB10001424052748704457604576011382824069032.html?mod=WSJ_hps_sections_health
    ” .. There’s something else about Dr. Wayne that doesn’t resemble a normal family-practice doctor: his earnings from Medicare, the government insurance program for the elderly and disabled. Dr. Wayne took in more than $1.2 million from Medicare in 2008, according to a person familiar with the matter, a large portion of it from physical therapy. That’s more than 24 times the Medicare income of the average family doctor, according to a Wall Street Journal analysis of Medicare-claims data ..”
    STEALING by Medicare — thanks to Eric “New Black Panthers” Holder. Incompetence by OWEbama/Pelosi/Reid.

  18. ” .. Frank: Ever think of attempting to something cogent, rather than writing the usual idiotic, and gratuituously offensive, bullet points?”
    You first, Chuckles.

  19. Having not read items in this weblog for a while, astonishing to read that nonsense such as Mr. Graham’s continues to be asserted despite the pathetic skewing of data used, etc.
    Never heard of the Pacific Research Institute before, but I guess that it is one more extreme rightist propaganda mill, based on this posting.
    Perhaps types such as Mr. Graham are now out in force given that the USA Congress will shortly be populated by even more extreme rightist know-nothings than the previous Congress. So presumably the hope is that those know-nothings will attempt to do whatever is the worst in every policy arena, including notably healthcare policy, for the vast bulk of the USA population.
    The relevant facts, as others note in the comments, are all contrary to Mr. Graham’s assertions.
    Truly unbelievable that this and so much other nonsense continues to be peddled by types such as he.
    Yikes, Frank – the current non-Maoist moniker for whomever is the commenter – is back in force. Frank: Ever think of attempting to something cogent, rather than writing the usual idiotic, and gratuituously offensive, bullet points?

  20. All you need to know in three words: “Pacific Research Institute.” The parochial Fox News of think tanks. Unfettered for-profit markets uber alles.

  21. HO Ho Ho Who cares about the truth and Facts,when Health Care Santa is nothing more than the evil Grinch es? The thieving twins of insurance and Health Care providers. The premises is to deceive and reach into the back pockets of the patients and drain them of their life savings.
    The US and Canadian Health Care system are completely different Concepts. Our Health Care and insurance industry chooses to provide fewer services at Higher rates and exceedingly higher out of pocket costs. However the evil twins go further than that with exceptions,exclusions and itemized billing.
    Canadian Health Care Treats the whole person and not just the symptoms. Canadians have only 25 Percent of their pay check taking and although they pay co pays. They don’t have to loose their life savings.
    We pay more per ca pita simply because everyone including their brother in law has freely exploited patients with markups that exceed 1,000%plus for products and services. Plenty of room for a ton of unscrupulous Greedy Vendors.
    Private industry can brag on sucking patients dry and making exceptional profits at their expense.However, what they don’t want you to know is Health Care has sacrificed your safety and welfare to increase those profits.. Well, someone has to die to feed these money Harvesting agents. Showing a willful disregard for human life.Right?
    Nothing like Human Sacrifices to build your industry on!
    The truth is people are getting a little extra from their Hospitals such as Staph Infections and Medical Errors that are PREVENTABLE,but patient Safety is Being Ignored by a large majority of Hospitals and Health Insurance is ignoring it as well. Either you protect yourself or suffer the consequences!

  22. EUROPE, PAY UP
    ” .. When the average American can’t afford the average cost of health care, the below average income American who has an above average cost is screwed ..”
    Well, then Europe and Asia should PAY MORE of the burden of medical research.
    Of course, that will happen when the OWEbama crowd stop claiming “not our fault.”
    As for this — “Unfortunately, for 50 million people without health insurance, the point is moot ..”
    50 million? 45 million? 35? 15? How many illegals? That number has been ginned-up more than Al Gore’s thoughts on “global warming.” And every time it is ginned-up, fewer and fewer people believe it.
    And, of course, all those “without” insurance have stopped smoking, dope and booze, and have BMIs of 25. Which is as believable as a rookie Harvard Law bumper-sticker fan as president.
    All the taxes and money in the world won’t fix all the problems in the mini-minds of Mike Moore, Pelosi, OWEbama, et. al. If you think your country is lousy — it will be.

  23. The author, Margalit, and Vikram all make good points, although showing different sides. The same data can be seen in contrasting perspectives. Margalit’s point about non-sustainability is one of the strongest bipartisan arguments in favor of the recent health insurance reforms.

  24. Terrible analysis, for many of the reasons cited above. For those who haven’t read the Incidental Economist analysis (which is just an application of OECD data), go here. Even on the face of it, the claim that income/GDP effects alone explain 93% of the difference between the US and other nations is suspect. We spend twice as much per capita as other developed nations, but we have nowhere near twice the GDP per capita. How plausible is it that the slope of the curve for accelerated spending on health care is so high that it “explains away” 93% of the difference?
    The GDP per capita number is a mean not median, so it reflects large income growth for the very rich and no or even reduced improvement for the majority in recent years. Here’s a nice analysis. (definitely use the sliding bar to see the change over time). Since we have more income inequality than comparison nations, as others noted, you certainly cannot conclude that the average American has more left over after taking out health care costs.
    And as Matthew noted, the example of car companies complaining while Facebook does not is breathtakingly lame. I’m sure hedge funds don’t complain about their health care costs, either, because their revenue per employee/contractor is so much higher than the car companies that paying twice as much for health care is still a drop in the bucket. Maybe the reason manufacturing and service companies complain more than than IT and financial services companies is the obvious reason: labor is a higher fraction of their costs and so health care expenses per employee matter more.
    And we don’t insure everyone, and we know we waste hundreds of billions (why would you want to downplay that?), etc., etc.

  25. Matthew: “My comment was that we spend the money we do spend on health care very very badly”
    Yes, and it is getting worse, spending $ billions on meaningfully unusable and patient endangering CPOE devices that steal time and intellectuial energy from the patient. This is a national crisis for the multi system diseased patient.
    The FDA and criminal authorities should be made aware of this fraud.

  26. Check out Tom Geoghegan’s recent book (Wrong Continent) for patient debunking of many of the claims in this post. Very rich people in the US are better off than very rich people in Germany–it’s reversed for the rest.

  27. My comment was that we spend the money we do spend on health care very very badly
    Jeff Goldsmith reminds the thread of the other problem. When the average American can’t afford the average cost of health care, the below average income American who has an above average cost is screwed.

  28. In nominal terms, the US per-capita income is 9th in the world. When adjusted for purchasing power parity it is 4-6th depending on how the adjustment is made.
    Yet, none of the countries that are ahead of the US in income have higher health care costs. The notion that after some level of income, countries will tend to throw money away in health care is not based on real data. The countries that could serve as a counter-examples were conveniently left out of the analysis.

  29. Graham’s central point is actually correct: the US did a slightly better job than the OECD country average in “containing” per capita health cost growth both from 1960-1998, and from 1994-2004. Additionally, cost growth is slowing, both here and overseas, and at an accelerating rate. Costs are not “growing out of control”; in fact, the US industry is in what passes for a recession, the most significant one since I’ve been watching it (35 years).
    Unfortunately, for 50 million people without health insurance, the point is moot, as it is for the perhaps 50 million more who have health insurance but cannot afford the cost shares. The absolute level of costs and their affordability is the real problem, something health reform didn’t touch.
    This topic is so politicized that the facts don’t seem to matter much.

  30. “Misleading facts ..”
    Like jumbo shrimp? Army intelligence? Like the BS pushed by the alleged “Politifacts” that government does NOT control healthcare?
    What a load! All those D.C. lobbyists — just a coincidence? What’s next — OweBama has executive experience? Get a clue — please.
    As for Euro-Socialism being superior to the USA —
    Yeah — that’s easy, when you are REFUSING TO PAY your fair share of global medical research. As absurd as OWEbama/Pelosi claiming to be financially-thrifty.
    ” .. Well than Japan should have much higher cost because they have had no growth for decade and now its society of octagenarians.”
    Oh, yeah. All the USA has to do, is become Japan. As in, MONO-RACIAL. No African-Japanese, no Latino-Japanese, no Euro-Japanese.
    ” .. Also ask yourself this question, what made Canadian GDP grow faster than US?”
    See previous, “nuclear umbrella.”
    ” .. When the wish of Chinese Yuan valuation increase comes true, all the spare purchasing power will be vanished.”
    Uh .. 75% of China is rural and DIRT-POOR. That’s REALITY.
    ” .. Making one healthier may not make him/her rich, but making someone sick will definitely make him/her poorer.”
    Of course — it our fault that Mike Moore is fat, OweBama and Boehner smoke, and bums in SFO crap in alleys. How could we be so insensitive? The USA is such a lousy country, illegals should voluntarily go back to Mexico, et. al. OweBama could lead them there!
    /deep sarcasm, borne of INCOMPETENT government and tax policy/

  31. Misleading facts:
    1. the real cost of medical care – has grown slightly slower in the U.S. than Europe.
    Who cares about that when premiums have been growing at rate far exceeding GDP growth and wage growth.
    How can per capita expenditure be missed? All countries are experiencing cost growth. And that is reflective of new agea lifestyle and diseases. Nothing to do with payment mechanism.
    2. Canadian per capita cost was lower due to better GDP growth.
    Well than Japan should have much higher cost because they have had no growth for decade and now its society of octagenarians. They spend 8.2% and US 16% of GDP.
    Also ask yourself this question, what made Canadian GDP grow faster than US? Was it productivity? Is there any link between health and productivity?
    3. ‘Our economy & purchasing power is far better than rest hence our healthcare is best and spending more than other is natural and right choice’
    When the wish of Chinese Yuan valuation increase comes true, all the spare purchasing power will be vanished. That will not make healthcare any worse.
    Making one healthier may not make him/her rich, but making someone sick will definitely make him/her poorer.

  32. CANADA, UK & EUROPE
    “A socialist country with rapid GDP growth?”
    Who didn’t have to pay for the nuclear umbrella that kept OweBama’s pals in the USSR from attacking them.
    Who REFUSE to pay their fair share of global medical research — and the spineless losers in D.C. who don’t DEMAND they pay their fair share.
    Tax the rich? Oh, yeah — tearing down others will fix all the problems of dopers, boozers, smokers, and fatties. Right after pigs fly over 1600 Penn Ave. NW, D.C.
    Wasting Medicare/Medicaid money? Heck — the “Wall Street Journal” op-ed page SHOUTED for TEN (10) years about the mess of Fannie, Freddie and Bwarney Frwank. Nothing happened — now look at the mess. Even Bwarney has admitted he goofed.
    And Eric “New Black Panthers” Holder has to have “60 Minutes” show him how to find Medicare fraud. Helen Keller could have found that mess!
    Good ol’ Mike Moore? Ha! Wikileaks proved that his BS about “quality” Cuban medicine was a laughingstock — in CUBA!
    Plenty of problems in D.C. And SOCIALISM won’t fix them.

  33. Although the per-capita expenditure on health care is a good measure, the per-capita GDP is neglecting the Gini, which in this country is more like third world countries than the countries in the table above.
    Productivity may be great, but the benefits are accruing to the few who can easily afford the per-capita health care costs. The problem is that most others cannot.
    The increasingly upward redistribution of wealth to a small minority is not sustainable and the health care problem is just one manifestation.

  34. Pacific Research Institute can’t be serious about this. The data is unmistakable – the US spends far more per capita, and has worse access and outcomes in almost every measure. See Aaron Carroll’s posts on theincidentaleconomist.com

  35. 1) We calculate GDp differently than European countries.
    ” However, real GDP growth in Canada dramatically outpaced U.S. growth between 1969 and 1987,”
    A socialist country with rapid GDP growth?
    Steve

  36. John, I don’t think Facebook has exactly the number of retirees GM has, and therefore less incentive to dump them onto a state system paid for by the taxpayer. So it’s a little bit of a Christmas Eve comparison.
    But lets concede your point. We’re so damn rich that even though we’re paying what looks like a lot for health care (and for that matter I’d hazard a guess education, prisons, military and more) compared to other countries, we still have “excess” money left over.
    But where does it say that we have to spend the money we do spend on health care as badly as we do?

  37. Written as only someone who has never had to buy health insurance can. The article forgets to mention that for as much as the U.S. spends it doesn’t insure 100% of the population like *all of those other nations do*.

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