Health Care, Destroyer of Worlds

Ezra Klein uses this chart from the CBO to illustrate the point that "Medicare and Medicaid aren't in any unique distress -- that their cost problems are a function of health inflation across the whole economy, not just in government programs, and that to get their growth under control will require wholesale reform." To play devil's advocate for a bit, though, one can imagine a scenario in which the economy grows fast enough between 2007 and 2082 for the non-health care sector of the economy to grow notwithstanding the vast growth in the share of the economy going to health care. Indeed, if we keep up a two percent annual growth rate (which would be on the slow side), the size of our economy will double in just 35 years. So there's plenty of room for health spending to escalate enormously as a share over the next 75 years without that actually reducing people to penury.

When it comes to public sector programs, by contrast, there's an argument that if the share of GDP that's going to taxes goes that high, it'll destroy the economy. Incentives, deadweight loss, etc. I don't know that I really think that's the case, but that's the argument you would hear for why runaway Medicare and Medicaid growth is a special kind of horribleness.

Now for my view, there's little evidence that health care spending really helps people, so it really would be a shame -- albeit a survivable one -- for health spending to grow on this trajectory. On top of that, there's good reason to believe that the most effective method of radically restraining health care spending is through full-bore socialized medicine as in the UK's National Health Services. UK health care is slightly worse than what you can get elsewhere, but it's way cheaper and UK health outcomes aren't wildly worse than outcomes anywhere else. Save money by providing universal mediocre health care, à la NHS, leave some of the savings in people's pockets and spend the rest on subsidizing mass transit and bike paths. Or to look at it another way, if Hillary Clinton's entire agenda were enacted, her climate change proposals would wind up doing more to improve public health than would her health care proposals.

Comments

Matt, if you think the NHS is socialist in any meaningful way, I'd suggest you examine the facts on the ground. This is one of the most asinine posts you have ever come up with, and reveals a typically American ignorance of other countries. As for the level of care, there's no reason to think that it is mediocre - and most users are more than satisfied. Please, grow up, and actually investigate before posting this sort of complacent, ugly American nonsense.

Posted by irritatedbrit | February 7, 2008 8:48 AM

Well, this is honest. Deadly honest. Needless to say, it isn't likely to be politically compelling, and it does undermine any future justice-based arguments you might offer in favor of Obama-style health financing reform.

Posted by Thomas | February 7, 2008 9:01 AM

it does undermine any future justice-based arguments you might offer in favor of Obama-style health financing reform.

Why's that? Obama's proposals seem pretty unrelated to the issue I'm discussing here.

Posted by Matthew Yglesias | February 7, 2008 9:05 AM

Matt, if you think the NHS is socialist in any meaningful way, I'd suggest you examine the facts on the ground.

Please explain how the NHS is not in any meaningful way socialist. It is provided free, to all, and paid for by taxation.

And look up mediocre in a dictionary. Most people should be more than satisfied with mediocre health care. Most people don't need exceptional health care.

Posted by Njorl | February 7, 2008 9:12 AM

"Medicare and Medicaid aren't in any unique distress -- that their cost problems are a function of health inflation across the whole economy, not just in government programs..."

Yes, that's true, but beside the point--which is that their cost problems make them unique from the perspective of their being part of the federal budget. In other words, their costs will soon begin to eat up substantial portions of the budget, leaving precious little for anything else.

Posted by Claudius | February 7, 2008 9:19 AM

"spend the rest on subsidizing mass transit and bike paths"

I like, but find it ironic coming from the guy that once bemoaned biking.

Posted by freddiemac | February 7, 2008 9:25 AM

I don't understand irritatedbrit's objection to the term socialist. There are some circles in the U.S. that toss this around inaccurately as a term of abuse, but that's not what Matt was doing. NHS was created by a Labour government that was proud to be part of the social democratic movement. It is tax funded and provides care largely at NHS hospitals by NHS employees. There are contracts with private practices as well, but "socialised medicine" is a perfectly fair description.

As to mediocrity, there is plenty to like and plenty to criticize about NHS. True, most people are satisfied, but on the other hand private medical insurance, and through it, access to private care, is one of the most coveted employment benefits in the UK. I have discussed this with dozens of British friends, most of whom are supportive of NHS but want to supplement it with something better if they can afford it. A well known 2003 Annals of Oncology study of relative survival times, which placed the UK in the middle of European countries and lower than its Western European peers, supports the judgment of mediocrity.

Matt is not spouting complacent, ugly American nonsense. His very point is criticism of the U.S. system. There are many critics of U.S. health finance and healthcare who would prefer a single-payer system but regard the NHS as mediocre.

Posted by Paul Turner | February 7, 2008 9:39 AM

The chart indicates that whether healthcare is provided by public or private means, the rate of growth in spending is the same.

Given that, assuming that the growth and amount of spending is the same, how does it make any difference to the economy if it is spent by private or public?

Posted by Chuck | February 7, 2008 9:53 AM

I wonder if it's a mistake to make a straight line projection of medical costs in the US. It's like taking the first year of growth of an infant, and saying he's going to be 20 feet tall by the age of 18.

My point is that there may be some natural upper limit on spending that isn't apparent yet.

Posted by stm177 | February 7, 2008 9:54 AM

taxes are not the only costs which have interesting and perhaps alarming incentive effects. If we stick to employer provided health insurance, the increase in health care costs imply huge gains from replacing workers with machines and huge gains from importing all that can be imported from low health cost countries.

Of course I am assuming that firms and workers are stupid. Before driving US business to india or robotland, health care costs would be dodged by US business.

The private sector isn't stupid. If costs get that high, it will dump them on the public sector (the uninsured get care in emergency rooms). Medicare and medicaid will have to pay for the care of everyone and there will be a disaster.

There is nothing particularly distortionary about taxes. changing employer provided insurance to public insurance paid by a payroll tax will reduce employment in some firms (walmart) and increase it in others (General Motors). Since we are now subsidizing bad jobs at bad wages, this should cause increased efficiency.

Posted by Robert Waldmann | February 7, 2008 9:58 AM

1. Get a real job.
2. This chart is estimated, not historical, so take it with a grain of salt.
3. Medicaid and Medicare grow 300%, from 4b to 16b. Private spending grows 200%, from 11b to 33b. This suggests that the problem is not really related to the health-care market, a problem which could be solved by single-payer. Medicaid-Medicare growth is not a problem with the efficiency of the government either but an issue of an aging population. Yes Britain's population is aging too and NHS is different from Medicaid-Medicare for many reasons but whatever, and NHS spending too has grown, although its costs are masked compared to Medicare and Medicaid because it is not so concentrated on the growing elderly or sick.
4. Single-payer would still probably have a better effect on lowering costs than Obama and Clinton plans, but do not be so quick to extrapolate from the British system. Frankly I think these compromises are kind of silly.
5. Health-care improves physical quality of life, whether that is mediocre health-care that is acceptable for people with minor health problems, but in an optimal system for people with serious health problems. Health-care programs, whether NHS or the Clinton-Obama plans do not exist to redirect the GDP, but to fill gaps in the private sector to help people avoid the pain of medical problems.

Posted by Moral Panicker | February 7, 2008 10:13 AM

There's little evidence that health care spending benefits anyone?
Are you crazy? One of the first things people ask about when they consider a new job is whether it pays benefits. They think health care helps them. Don't you? I've stopped reading Andrew Sullivan because he's irrational when he discusses Hillary Clinton, and that's all he discusses. Should I add you to the list?

Posted by Stan | February 7, 2008 10:36 AM

If the Brits want more than mediocre care all they have to do is spend a little more money on it. As Matt noted, they're cheaping out now compared to almost all other industrialized countries. You could have a UK-style system that provides quite good care and still spend significantly less than the US spends now. For that matter you could do the same with a much more private-insurance-oriented system like Germany's. Which just goes to show how uniquely awful the US "system" is.

Posted by Steve LaBonne | February 7, 2008 10:49 AM

What I would like to see is a projection comparing growth of health care cost to growth of income broken down by age group. Average cost for 18 to 25 year olds compared to average income for that group, etc....

Posted by cw | February 7, 2008 10:55 AM

As far as I'm concerned Matt is right. I have health insurance. My kids do not go to the doctor unless they are deathly ill and I haven't seen a doctor for any reason for fifteen years. Why? Because of deductibles. Health Insurance companies collect premiums on millions of people who never get ANY BENEFIT at all because we cannot afford the deductible ($1000/person; $4000/family. Insurance for most Americans is simply catostrophic insurance. If you are lucky enough to have a relatively healthy family (like mine), you never receive any benefit.

My premiuim costs me about $150/month, my employer pays $500/month for nothing. I would take in increase in taxes any day in order to go to a doctor.

When my son had $6000 in tests for ADHD, the insurance denied the claim, don't cover "bwhavioral problems". The doctor never told me this would happen. So, I had to pay for all of these basically useless tests even though I had insurance. Insurance companies are a scam.

Posted by apishapa | February 7, 2008 11:01 AM

wow, this reached Kausian levels of contrarian-ism. congrats.

Posted by josh bivens | February 7, 2008 11:05 AM

What's Ezra Klein's solution to rising health-care costs? "Squeeze the providers"!

Posted by Klug | February 7, 2008 11:12 AM

The objection to the term "socialism" may simply be rooted in the fact that economists often define socialism as the means of production being owned by the state. From this prospective providing a service paid for through taxation isn't socialist as it depends on market-driven tax revinue. Pure socialism doesn't involve high taxation, in fact it will involve no (or very little) taxes because the state will be collecting "revinue" (such as it is) directly from its ownerhip of the means of produciton.

This technical definition of soicalism is almost completely out use in common American political decourse, and te NHS certainly fits the common usage definition of socialism.

Posted by JK | February 7, 2008 11:15 AM

Stan,

There's little evidence that health care spending benefits anyone? Are you crazy?

No, he's not. Read the article he linked to. The evidence is pretty overwhelming that, in general, "health care" just doesn't have much effect on health.

If you want to improve the health of the American population, focus on cutting the rate of smoking and getting people to eat better and exercise more. That would do far more to improve health than "universal health care."

Posted by Mixner | February 7, 2008 12:07 PM

So, Mixner, you've sworn off going to doctors? You think diet alone will do it? Or is it avoiding second-hand smoke? How do you find out if you have high blood pressure, a brain tumor, pre-cancerous colon polyps, a leaky heart valve, if you don't have medical exams? And how many medically uninsured people making 30k a year go to a doctor regularly? Your argument, and Matt's, is the most ludicrous thing I've read in years.

Posted by Stan | February 7, 2008 12:57 PM

Stan,

You're not listening. We're not saying that health care never does any good for anyone. We're saying that, in general, it has little effect on health. Diet, exercise and other lifestyle factors are much more important. As are basic public health measures like clean water, proper sanitation and air pollution standards. I'm sorry if you think this is "ludicrous," but the evidence for it is pretty overwhelming.

Posted by Mixner | February 7, 2008 1:06 PM

I agree with Mixner. The only way to make America healthier is through diet, exercise and clean living.

I demand government programs to force all people and employers to perform morning calisthenics, followed by a 3-mile brisk walk to the local public health clinic where we will all eat bran muffins. Who's with me?

Posted by Klug | February 7, 2008 1:55 PM

A small quibble it is not health inflation, people are buying more and newer stuff not the same amount of the same stuff. If it was the same amount of the same stuff and the price was rising you could call it inflation.

Posted by Floccina | February 7, 2008 2:42 PM

Stan
The effect of medical care beyond the cheap stuff like vaccinations and antibiotics is small. And as to why people highly value health insurance benefits when considering a job, think about the fact that people went to Doctors even when Doctors would just do blood letting and we are sure that blood letting always made matters worse .

Hear are some links:
http://www.econtalk.org/archives/2007/05/hanson_on_healt.html
http://www.econtalk.org/archives/2006/07/cogan_on_improv.html
http://www.cato-unbound.org/2007/09/10/robin-hanson/cut-medicine-in-half/
http://www.overtreated.com

There are many more studies that say the same.

Posted by Floccina | February 7, 2008 3:02 PM

If health spending doesn't generally help, it isn't an injustice for people not to have funds spent on their health. The egalitarian argument for health financing reform is premised on the idea that health spending is a good.

Posted by Thomas | February 7, 2008 3:05 PM

Thomas I agree and further if the goal was charity it do much more good to buy vaccinations antibiotics and, shudder the thought, DDT for the worlds bottom billion than to spend more on healthcare for Americans.

Matt sees a different goal for socialized medical and that is to dramatically reduce spending. Now one could approach spending reductions another way and start with banning certain procedures like back surgery or raise a big tax on health insurance.

Posted by Floccina | February 7, 2008 3:39 PM

Mixner, I am listening. Life style is obviously very important in your health. But if you have the wrong heredity or simply bad luck, you have to pay for medical care. The idea that you can preserve your health by a good diet and clean living is absurd, and it's unworthy of Matt to peddle this nonsense.

Posted by Stan | February 7, 2008 5:32 PM

Stan,

No, you're really not listening. Ultimately, no one can "preserve their health." We all die eventually. The point, as we keep telling you, is that "health care" generally makes little difference to health and longevity in comparison to lifestyle and other factors. That's why people in Costa Rica, a poor country with a health care system that by American standards is very primitive, live as long on average as Americans. Again, look at the evidence.

Posted by Mixner | February 7, 2008 5:54 PM

The Cato article Matt linked to is total B-S. The basic swindle is to compare the costs of providing care, which is real stuff provided to real people, to the costs of statistical outcomes, which are not real stuff or real people.

For example, if you buy a toothbrush and brush your teeth, you will probably have fewer mouth problems, and most of eventually do adopt this habit because it works for us. However, if you are among the subset who bought a toothbrush and brushed their teeth, you will probably not have X.X per cent fewer cavities, and if you do have X.X per cent fewer cavities, it is simply a statistical accident, not the result of cause-and-effect.

Also, the Cato writer never even acknowledges that drugs in America are grotesquely overpriced and over-prescribed. The only spending check he prescribes for the drug industry is to stop providing workers and poor people with health insurance. I'm guessing that drug company donations have helped make Cato the propaganda mill it is today.

(And he wonders why people take his class and remain unconvinced about his conclusions! That has gotta be the class from hell-agree with the rightwing extremist, or take a hit on your GPA- are we having fun yet?)

Yes, society would save money and spend less for healthcare if more was spent on bike paths and transit. But it's a swindle, because the real proposition you're supposed to buy is to spend less on healthcare and nothing on bike paths and transit. Get it in writing and read the fine print before you sign on.

Posted by serial catowner | February 7, 2008 6:00 PM

The objection to the term "socialism" may simply be rooted in the fact that economists often define socialism as the means of production being owned by the state.

Uh - isn't health care in the UK not just single-payer, but all government-paid for health care actually provided by the government? As I recall, the UK is the one system where the government is actually the provider, not just the payer. So even by the most restrictive definitions, the NHS is socialist in every meaningful sense - and it is perhaps the only first-world health care system to be so.

Posted by Glaivester | February 7, 2008 7:19 PM

The Cato article Matt linked to is total B-S. The basic swindle is to compare the costs of providing care, which is real stuff provided to real people, to the costs of statistical outcomes, which are not real stuff or real people.

Terrific. Then we don't have to worry about the 15% of Americans who don't have health insurance. It's just a statistic, not real stuff or real people.

Smarter liberals, please!

Posted by Mixner | February 7, 2008 7:31 PM

Any prognostication which purports to predict the future 80 years out is sheer bullshit. Might as well call Mme Cleo on the psychic hotline.

Posted by JonF | February 7, 2008 7:38 PM

Mixner, if medical care doesn't do any good, why bother seeing a doctor? The argument you're making is bizarre. But I think you're honest in your feelings, and in this respect you're doing a lot better than Matt.

Posted by Stan | February 7, 2008 7:46 PM

One of the dumber charts in existence.

Anybody who thinks health care is going to be delivered in fucking 2082 the way it is in 2007 is a complete moron.

Mixner: "Ultimately, no one can "preserve their health." We all die eventually."

Speak for yourself, primate. I'll take as many more years as can be achieved before the universe goes into entropic collapse. Long before then, so-called "death by aging" (which doesn't in fact exist - you die from systemic failures and damage, not just "aging") will cease to exist.

The reality is that with increasing technology, the odds of people Matt's age living to be well over a hundred - and healthy - by the year 2050 is just about a hundred percent. It could happen by the year 2020, if Aubrey de Grey is correct.

Hang in There: The 25-Year Wait for Immortality
http://www.livescience.com/health/050411_aubrey_interview.html

Nanotech alone by 2050 - 2075 at the outside - should be able to repair virtually any physical damage done to the human body - absent information loss in the brain (and backups for that should be feasible by then as well, if not necessarily economical for most people) - let alone the relatively minor damage caused by diseases and the like.

By that, I mean take a shotgun blast to the heart at point-blank range - and go into some sort of tank and come out in X hours or days fully functional - in fact, better than you went in, because the system fixes your heart plaque as well...

Cancer? Trivial by comparison. Rewrite some cells.

The impact of nanotech on medicine won't simply be radical - it will be almost eliminationist.

Posted by Richard Steven Hack | February 8, 2008 1:19 AM

Stan, Mixner, I think you are talking about two different things.

Stan, you are arguing that healthcare improves individual health (and longevity?). Mixner, you are pointing out that higher levels of expenditure on healthcare are not correlated with better health outcomes.

This is a difference between individual effects and population averages. Both these points can be true if there is confounding going on. Societies with the highest levels of health spending tend to be those with the "worst" health habits. Perhaps because they can "afford" to be blasé about their health (we can always fix it by buying more healthcare later), perhaps because they can truly afford to buy unhealthy products like pre-prepared food, cigarettes and cars (think about the health impact of the step-increase in the sendentary nature of your life that a car brings). (This is not an dollar-for-dollar link, but an indicative trend.)

This lower level of "healthy" living leads individuals and communities to demand more healthcare, particularly medical care (it's a bit late for prevention by this point). And when I say demand, I mean that economically - they buy it, either directly or via pressure for more public expenditure (c.f. the UK in the past decade). In such a situation, the rise in health spending may be a result of poorer health, and yet also, at an individual level lead to improvements in health outcomes if interventions are effective. The net wash is that health doesn't rise much as incomes/expenditures do.

Of course, there is also the argument that many medical interventions do not actually significantly raise the quality-adjusted life expectancy of individuals, but I don't have the time to go into that right now. And there are holes and caveats all over this description, but hopefully I have made a couple of general points.

I guess that all this leads me back to Matt's original point: non-health policies often play a very big role in determining health outcomes - welcome to Public Health 101.

Posted by some Guy | February 12, 2008 11:14 AM

MESSAGE

Posted by ISHMAel back | February 29, 2008 6:39 AM