A favorable citation of my arguments at Tech Central Station. Normally, I’d be pretty concerned about this, but it’s from Tim Worstall, the sole exception, AFAIK, to the otherwise uniform hackishness of that site[1].
Tim quotes my discussion of the Baumol effect to argue that the fact that the US spends so much more on health care than other countries is not necessarily a bad thing. At the aggregate level he’s right. We should expect the share of income spent on services like health and education to rise as income increases, driven by productivity growth in the goods-producing sector. In the case of medicine, the regular discovery of new and costly treatments adds to the problem (there’s an argument that this technological innovation is an endogenous result of the way health care is financed but I’ll leave that for another day).
Worstall is also right to imply that systems of public provision have, at least in some cases, led to pressure to hold expenditure below the socially optimal level. This was most obviously true of the National Health Service in Britain, though expenditure and service provision have increased greatly since the election of the Blair government, and are set to rise further. The same pressures are evident here in Australia.
That said, when you look at the US system in detail, it’s clearly not a matter of paying more to get more. While the health care available to the top 20 per cent of Americans (those with unrestricted Blue Cross style insurance) is probably the best in the world, the average American (insured by an HMO or a fee-for-service insurer with restrictions) doesn’t get any better care than in other developed countries and the uninsured are much worse off.
The real problems are the financing system (Worstall gets off a neat crack at the expense of JK Galbraith here, but the real problems go back to the 1930s, as discussed by Robert Moss in When All Else Fails) and the very high salaries of US doctors compared to those in other countries, reflecting both higher inequality in the US and the huge cost of becoming a doctor through the US higher education system.
One result is that, despite relying primarily on private, employer-provided insurance, the US government actually spends more, relative to GDP, on health than most others.
Finally, there’s the balance between medical care and public health, broadly defined. It’s well known that the US has a lower life expectancy than other countries that spend much less on medical care. This isn’t however, primarily due to inadequate access to lifesaving treatments (the poor miss out on lots of routine health and dental care, but they can usually get emergency treatment). Rather, it’s the result of unhealthy living conditions broadly defined to include guns, car crashes, the consequences of obesity and so on. These things aren’t easily fixed, but there’s more resistance to doing anything about them in the US than in most other places.
fn1. Why he keeps writing for them, I don’t know. Tim would do much better as the opposition writer in residence at a left or liberal site, a slot that is very hard to fill in my experience. He makes good points, is willing to admit that he’s wrong on occasion, and is gracious when he catches someone else in error, as he has done with me. Still, that’s his business.
