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.”
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