One thing that I learned during a month at Harvard Medical School is that health care spending is inversely correlated with income. The poorer people are, in other words, the more they cost for an insurance company (or the “plan sponsor”, such as an employer, behind the insurance company).
In some cases, of course the causation may go in the other direction, i.e., a person who has a chronic health problem can’t work as hard or as effectively and therefore earns less. But the consensus within the public health and insurance industry seems to be “lower income, therefore higher cost.”
Singapore is notable for low health care spending as a percentage of GDP (only 4.5 percent; compare to 18 percent for the U.S.) while simultaneously enjoying better outcomes, e.g., longer life expectancy. How much of that, though, could be attributed to Singapore simply having a higher-income population? The CIA shows that per-capita GDP, adjusted for purchasing power, in Singapore is $93,900 per person, 58 percent higher than the $59,500 for the U.S. (Singapore and the U.S. are close to each other in rankings of countries by income equality/inequality, so the median incomes should be similarly related).
Plainly this cannot explain most of our off-the-charts spending on health care. Canada and the big European countries spend much less, as a percentage of GDP, despite having lower per-capita income. But if we assume constant waste due to our more-or-less constant system design (fee-for-service, half government, patient doesn’t pay directly), the stagnant U.S. median income (FRED data) could perhaps explain some of why it is so tough for us to achieve incremental improvements.
The “U.S. population” is a moving target, especially due to immigration. Immigrants have a lower income than native-born Americans (see data below), but they also change the median age of the population, which is a big determinant of health care costs (older people are more expensive): “Without immigration since 1965, the U.S. today would have a median age of 41, not 38.” (Pew). Our incompetence at delivering health care may be masked to some extent by immigration, which has reduced median age. Also complicating matters is that immigrants may be less likely than average to have some chronic medical issues. A morbidly obese person, for example, might have trouble making it over the border.
Related:
- “Comparing Income, Education and Job Data for Immigrants vs. Those Born in U.S.” (St. Louis Fed, 2017): “the median personal incomes of the two groups are starkly different, with a much higher median level of income per person for natives ($28,000), compared with the foreign-born ($20,400). This contrast, however, is consistent with the difference in education levels between natives and the foreign-born.”
Strangely opposite to Calif*, where immigrants way out earn natives & are far more educated. Eventually, immigrants become natives, have kids who learn basic science instead of engineering & gain debt levels they never had access to, before. Chinese design engineers poured in 30 years ago, had kids who studied biochemistry, started taking vacations, & got replaced by Indians. Now the Indians are getting lazy, borrowing 50x their income, taking weekends off like natives.
Every time I hear of \the Asian cheap labor in CS, I kinda chuckle. When would, say, Dr Satish Rao of UC Berkeley become available so that I can hire him on the cheap. The are Indians–and then there are unwashed Indian masses that our immigration law doesn’t distinguish. I do believe that this lunacy reached all the way up to President Obama. Let me explain why.
When the theoretical physics Nobelist (Frank) Yang Chen-Ning,
https://en.wikipedia.org/wiki/Yang_Chen-Ning ,
lost his wife of decades and re-married a young Chinese immigrant, and then she got homesick (while pregnant) and wanted some authentic Chinese noodles, they returned to China where Frank accepted the top post in the Tsing Hua University.
If I were Obama, I would have spent whatever would make Frank happy, no expenses barred. I would have built a mock Beijing city near Stony Brook, complete with the Northern Chinese pulled-noodle shops just to keep Frank a happy director of the Yang(!) Institute of Theoretical Physics.
Obama failed to do that, and so we lost Frank, a real national treasure. And then later Yao left Princeton for–you guessed it–Tsing Hua. Even it were a billion dollars, it would have been a billion wisely spent. Why does nobody talk about it?
I know my post was off topic, but I feel it was a really important off-topic subject. Sorry Phil!
@M
I think you’re overstating the significance of letting a Nobel laureate go.
Here is something more significant:
https://en.wikipedia.org/wiki/Qian_Xuesen
I’m pretty sure Nobel Price Winners statistically don’t do a hell of a lot other than sit on committees after their win. Not many counterexamples here. Yang is a great example of this, and keeping him here as some kind of prized pig is needlessly cruel. Long Island isn’t exactly paradise -I am pretty sure I’d rather live in China.
OT: lots of reasons I can think of the US is so messed up.
1) The billing system is criminally insane; I interviewed for a hospital price optimization firm -they informed me there is a 3 tier pricing system. Medicare/medicaid, which is set by statue more or less, uninsured, which is “price it so they go bankrupt and we can take all their stuff” and some bizarro “negotiated” insurance company price which is lower than the bankrupt the uninsured price, but is much higher than the government price.
2) People in America have absurd chronic health conditions; the poor more than the wealthy. There are websites documenting the visible outcomes of this at Walmart. Nobody looks like that in Singapore. You’d die walking from one air conditioned shopping mall to the next if you were “people of walmart” tier fat.
3) The medical system administers various bad incentives to medicalize everything; live a terrible lifestyle -here have a pill for that. From statins (which arguably don’t do what they’re supposed to, but fit a metric) to paxil (what is it … 20% of the population take this garbage?) to everything else. I’m pretty sure half the country is on some kind of pill. Goldman analysts pointed this out; curing people is bad business.
4) More available treatments and expensive tests than in other countries. Spiraling tests is a common experience with older people. Sometimes it catches things, I guess!
5) The medical profession in the US has the most effective labor union which ever existed.
Poor health causes high medical expenses and low income, this is just common sense. As people recover they start making more money and do not have to spend on medicine anymore as much. In turn poor health may be cause by pre-exposure to unhealthy environment, genetics, accidents and personal choice.
So natives have one birthday every year, but immigrants stay young forever, never becoming old enough for diabetes or Social Security? Or is it more of a Ponzi scheme where we we have to have significant, continuous flows of people in order to fight against the realities of the human life cycle?
What about the (subsidized) senior housing in Ann Arbor that seemed full of Chinese and Russians who would have given their their working years to the USA’s Communist arch enemies, therefore having made trivially small lifetime tax payments or other contributions to the US economy, yet benefiting from programs intended to benefit older Americans?
And finally, is there really a significant actuarial difference between 38 and 41?
I’m pretty sure that actuaries can attach a dollar amount to the difference between 38 and 39.
When your data set is over 10’s of millions of people it should pop right out.
“Or is it more of a Ponzi scheme where we we have to have significant, continuous flows of people ” ? – Life is a ponzy scheme? Parents used to have many children to support them when parents grow old. We should continue doing this, or at least make children productive, exactly opposite of what of much of public education doing.
” yet benefiting from programs intended to benefit older Americans?” – apparently programs were not intended just for older Americans. Otherwise they would not accept recent immigrants. Do not blame legal immigrants, they had nothing to do with creating these programs. They kept US defense engineers employed by contributing to their past societies.
“And finally, is there really a significant actuarial difference between 38 and 41?” Assuming average income of $20,400, it is $61,200
> Or is it more of a Ponzi scheme where we we have to have significant, continuous flows of people in order to fight against the realities of the human life cycle?
Only madmen and economists (and politicians) believe in infinite exponential growth in a finite world.
anon, growth is hard while decline is easy – just do nothing. Usually population dynamics is using fibonacci approximation, not exponential, for uninhibited real life growth. But what growth – Americans are failing to replace while letting average pupil’s education slide. The hope is that sufficiently significant higher percentile will have skills sufficient for development, and that others will acquire while working. And see post on Yeng Chen-Ning, best and brightest have been leaving. As we know, there are lots’s of immigrants making 6 – 7 figures and some of them own Google. What does lifetime average income of $20,000 / year say about bulk of new immigration? I assuming that statistics mentioned in the post is correct.
I wonder if anyone has done a study showing whether access to basic health care would have substantial benefits across the board.
My experience living in the UK for two years, with two children aged 4 years and 9 months respectively, was that when we had cause to visit the emergency room it was empty. Why? Because you didn’t need to go to the emergency room to get basic health care. You went to your local “surgery” (the British word for local health care practitioner) instead, saw someone quickly, and if you needed it got free medicine for children under 16, and at a cost of 10 pounds for adults.
The second thing I’d do is set about making pricing completely transparent, and asking the hard question of why a surgery (in the US sense of the word) is $1000 at one hospital and $10000 at another, and then doing something about it (like possibly implementing price controls).
Have had n=2 experiences in ER:
One was at the local hospital in a town of about 40k. Not particularly busy. Got taken care of straight away.
Other was in the next town over maybe 80k and one step down economically. That was a busy place. Also got taken care of straight away. Most of the customers were dealing with substance abuse issues. I don’t expect many of those issues would be headed off at the local surgery. I could be wrong and with early intervention and practical follow up there would be fewer trips to the ER caused by substance abuse.
Hispanics hare on average much poorer than white Americans and have, again on average, much longer life expectancies:
https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_life_expectancy
As the chart shows, people in Puerto Rico can expect to live longer than people in almost all the US states. Hispanics in Massachusetts outlive whites in the same state by almost seven years!
I could be the “immigrant effect” suggested by Phil (which does not explain Puerto Rico’s longevity…). It could be, I don’t know, that the poorer you are the more expensive is the cost of your medical care. Certainly poorer people, Hispanics, have longer lives than whites who are on average wealthier.
This discussion opens up a lot more questions than it answers for me. I think you really have to look at the underlying health conditions that drive the costs for lower income people to get a handle on it. Do poorer people live unhealthier lives? Experience more accidents? More often have substance abuse problems that result (one way or another) in large health care costs? Do they rely more often on ambulance trips (see below)? It would not surprise me at all if they do, and I have a friend I can ask about that, and I will.
It would be very interesting to find out if there’s really good data. I mean, it’s obvious (at least to me) that older people would be more expensive, but are poorer older people another level of expense beyond that? If so, why?
And why in America? What is it about Singapore that they can get away with spending a fraction of what we do? Do they just not treat the poor people, or treat them with the least expensive options they have available? Or does everyone in Singapore live healthier lives regardless of their income level? Do people practice Prevention better? Is this a cultural phenomenon rather than a purely economic question?
Here’s another important thing to consider: calling an ambulance (or having one show up and transport you if you’re unconscious), regardless of the patient’s income, can be heart-attack-inducing expensive. I was astonished by some of the stories in the article below. Thousands and thousands of dollars, not for treatment, just for the ride, sometimes over very short distances! The ambulance companies often bill (I’d use another word, but it’s coital and profane) people with private insurance more, to make up for trips that don’t get reimbursed. The article states that something like 1/3rd of ambulance trips are false alarms or otherwise don’t result in anyone going to the hospital and therefore never reimbursed. And in a lot of cases:
“The core of the problem is that ambulance companies and private insurers often can’t agree on a fair price, so the ambulance service doesn’t join the insurer’s network. That leaves patients stuck with out-of-network charges that are not negotiated, Imholz said.”
So what do you do if you’re unconscious? How can you ask the ambulance operator if their service is in-network?
“For a glimpse into the unpredictable system, consider the case of Roman Barshay. The 46-year-old software engineer, who lives in Brooklyn, was visiting friends in the Boston suburb of Chestnut Hill last November when he took a nasty fall….
…
After Barshay returned to Brooklyn, he got a bill for $3,660, or $915 for each mile of the ambulance ride. His insurance had covered nearly half, leaving him to pay the remaining $1,890.50.
“I thought it was a mistake,” Barshay said.
But Fallon Ambulance Service, the private company that brought him to the hospital, was out-of-network for his UnitedHealthcare insurance plan.”
The article at the Washington Post is from 2017.
https://www.washingtonpost.com/national/health-science/ambulance-trips-can-leave-you-with-surprising–and-very-expensive–bills/2017/11/17/6be9280e-c313-11e7-84bc-5e285c7f4512_story.html?noredirect=on&utm_term=.f5e07e606460
This one blew me away:
“A woman who rolled over in her Jeep in Texas was charged a $26,400 “trauma activation fee” — a fee triggered when the ambulance service called ahead to the emergency department to assemble a trauma team. The woman, who did not require trauma care, fought the hospital to get the fee waived.”
That fee is what I call “trauma activation.”