Health Care Reform

As far as I can tell the government’s proposed “health care reform” can be summarized as “put more money into the existing U.S. system”. I’m wondering why we as a society would want to do this.

Let’s look at how our current system is doing, starting with this table of life expectancy for different countries worldwide. Mexico seems like the best comparison. Mexicans share our continent, our love for soda and corn syrup, and our tendency towards chubbiness (source). We spend approximately $8500 per year per American on health care and live to the age of 78. A Mexican can expect to live to age 76. How much do Mexicans spend on health care? Their per-person GDP is only about $13,000 per year, and they supposedly spend about 6 percent of GDP on health care (source) so $800 per person is a good estimate.

Another way to look at these numbers is that an American will spend $600,000 in order to add two years to the end of his life. Those two years may very well be spent in an intensive care unit or a nursing home and certainly are not likely to be spent on the tennis court or visiting the Venice Biennale.

For $600,000, an American could have the following:

  • a house, free and clear of all mortgages (median price for a single family house sold nationwide in May 2009 was $170,000)
  • a lifetime supply of automobiles, assuming $20,000 per car, a 10-year life per car, and 50 years of driving ($100,000)
  • 50 vacations for a family of four (average cost $1600; total of $80,000)
  • a college education ($25,000 of tuition for four years at a public university, roughly the average cost)
  • two children, reared to the age of 17 ($125,000 per kid, average cost for a basic family (source); note that a pair of Americans could have four children, all of whose costs would be completely paid for out of this $600,000)
  • $75,000 in walking-around money

If we had unlimited money it certainly would be nice to have the kind of health care that we have. But the Collapse of 2008 highlighted the fact that we don’t have unlimited money and resources. Wouldn’t most Americans rather have their house, car, vacations, college, and children paid for than get extra MRIs, helicopter medevacs, and death-after-weeks-in-the-ICU that the insurance companies and government (Medicare/Medicaid) are buying on our behalf?

16 thoughts on “Health Care Reform

  1. If you compare the USA to its other North American neighbour, Canada, you will find that the USA still spends more on health care, but has lower life expectancy. So you don’t necessarily have to spend more money on health care to improve your health outcomes. But that may require looking at the dreaded single payer option.

  2. Philip’s analysis is not far-fetched. Even some insurance policies sold in California, such as Blue Shield of California’s Access Baja plan, REQUIRE participants to go to Mexico for treatment. At $100 per month, the Access Baja plan costs an order of magnitude less than what I pay for US-based care. And my deductible and copay are considerably higher.

    Clearly it is possible to provide decent health care at far lower cost than what currently prevails in the US. I agree with Philip — policy wonks in Washington DC are trying to solve the wrong problem.

  3. Your first paragraph baffles me. How can you reduce the proposed reforms to nothing more than “putting more money into the system?” The bill is intended to reduce costs and provide coverage to those who need it.

    Your suggestions for what could be done with $600k make for a nice thought experiment but provide nothing in the way of a solution and certainly don’t represent a real, potential tradeoff. Obviously, the system is wasteful, costs are inflated, and incentives are in all the wrong places.

    But do you propose maintaining the status quo? If you don’t like the proposed plan, what suggestions do you have on how health reform can be achieved? If we do nothing, then costs will continue rise, and those who need coverage, people lacking health insurance or denied it because of pre-existing conditions, will continue to suffer.

  4. Nick: The proposed “reforms” leave in place the insurance companies, the hospitals, the doctors, the practice of paying per-procedure, the practice of charging different customers vastly different amounts for the same service, the tort system, etc. In sifting through the various statements from politicians I can’t find anything significant that is being changed except that more people will be insured and more money will be spent (note that this is different from “more people will be provided with health care”; hospitals are already required to care for everyone who shows up with a potentially serious problem).

    I have spent about 75 percent of my life with health insurance and 25 percent without. Personally I would like to see the complexity of the system reduced so that a human being could understand it. If I don’t have insurance, I would like to be able to buy health care services at the same prices that Medicare pays (often 1/10th or less of what a hospital might try to bill a private patient). If I do have insurance, I would like there to be a reduction in fine print and paperwork so that I can figure out in advance whether something is likely to be covered and so that I don’t have to argue with anyone over payment. (A friend had a bike accident and knocked out a couple of teeth and his insurance policy said that it paid for “damage to healthy teeth” but he still had to sue them before they would pay the dentist’s bill. They had some theory under which they did not have to pay (evidently it was too complex for a judge to understand).)

  5. Your point about the AMA limiting licenses no matter what amount of money is spent was good. The media can’t report that because of conflict of interest.

  6. Phil,

    Your anecdote about the dentist’s bill opens up a very ugly, and mostly unaddressed, side of the healthcare debate: The borderline-criminal language and rationale that the health insurance industry uses to deny care to paying customers.

    I am at the point, from seeing so many stories such as that one, that I am ready to accept a government-sponsored health plan, if not outright single-payer. Medicare-for-all would be better, overall, for the nation than the current insurance system.

  7. I think the government intended to have a single payer system to force the private system to confirm to similar cost savings. I don’t think they want to pour money in to reduce costs directly.

    But it looks like the single payer system is not acceptable and they will have to find other ways to reduce costs. Cost reduction is their real goal. If they can reduce health costs, have more people get attention when they are in the early stages of illness they will reduce expensive ‘late-stage’ medicine.

  8. I would argue that even if we gain nothing at all in terms of life expectancy still 8.5k/year/person might be money well spent. It still probably isn’t but we shouldn’t look just at how much it extends our life. Also you can’t compare the experience of doing some medical procedure in Mexico by just paying dollars because it’s cheaper (but still at least 4 figures if not more) with the average experience for a Mexican. In many places you have to bribe somebody to get any attention, you need to buy your own medical supplies, parents are forced to bring money if they want their children to be looked at at all, emergency services are so undersized that they might not exist at all as you have to take the taxi for any emergency anyway.
    Now I don’t know how the money can be better spent and what amount would be reasonable. Maybe you can do more with even only 1k/year and most likely you “aren’t getting your money worth” out of those 8.5k/year. But for sure you’re getting more than 2 years (on the average) at the end of your days; the benefits are all throughout your life.

  9. Val: I’ve only been to Mexico a few times, but I don’t remember seeing people looking dramatically unhealthy compared to Americans. Whatever it is they are doing results statistically in a life that is two years shorter. Of that we can be reasonably sure. As to whether Mexicans are less happy or healthy I don’t think that we should be so confident that the (Norte) American way of life is superior.

  10. I’m surprised Obama doesn’t tackle this problem first by prevention. I don’t know what the cost/benefit ratio of these would be, but how about:

    * Free yearly health checkups for everyone, complete with advice on how to improve your health. Health care gets much more expensive if not treated early.
    * A tax on fast food to pay for this. I’ve always been a fan of taxing unwanted products/services. If we want people to eat more healthy, slap a 50% tax on every burger sold. Maybe not exactly like this, but you get the idea.
    * End farm subsidies. Products based on corn & wheat are cheaper than vegetables in part because of massive subsidies. That doesn’t make any sense.
    * Educate people on nutrition, eating healthy, exercise, all that stuff.
    * Studies have found that a key problem for poor people is eating healthy is more expensive, and more time-consuming. How about sponsoring a series of books, leaflets, handouts, etc. that feature “healthy meals you can cook in 30 minutes or less”. Clara’s Great Depression Cooking comes to mind (, but I doubt it has to be as austere as that!
    * A hefty gas tax (this could be gradual). We would be a lot healthier if we drove less and walked more. Burning fossil fuel contributes to global warming as well. Another tax-unwanted-behavior idea.

    Of course these are just some of the many options available. I just threw some out off the top of my head, and I am not sure these are the best ones. But I am sure they are better than the proposed let’s-do-the-same-thing-as-before-except-now-sponsored-and-administered-by-the-government approach.


  12. Unlike in the USA, access to healthcare is accepted as a basic right for citizens in most 1st world countries. This is achieved in different ways in various countries, with varying degrees of success – but the basic right is not challenged. Let’s start the debate from there.

  13. Murray: The Atlantic article referenced by Ronald (above) has a subhead reminding us that “health insurance isn’t health care”. Critical health care is already provided as a “basic right” in the U.S. A hospital cannot turn away an ill patient despite his or her inability to pay and lack of insurance (only one hospital in Florida ever managed to get around this, it seems, and that was after years, millions of dollars spent, and a jet chartered to get the illegal immigrant back to his home country). Making sure that poor people in the U.S. can get health care should not require that everyone else suffer the consequences of disconnecting consumers and providers via the insurance system.

Comments are closed.