Why Can’t WE…..Be More Like THEM?
The Business Roundtable has released a study by Mercer that is so gloomy I hesitate to even report on it. [Warning: If small children or very impressionable and sensitive people are present, now would be a good time for them to leave the room.] Here goes:
- The US receives 23% less value from our health care system than Canada, Japan, Germany, the United Kingdom and France.
- We receive 46% less value than Brazil, India and China.
These findings are accompanied by the opinions of several BRT members (heads of the largest corporations in the country), all of whom are persuaded by this study — if they were not already persuaded anyway — that we desperately, urgently, without further hesitation or delay need to reform our system by…… by…… by…… hmmmmmmm…… I guess the execution has been delegated to others.
OK. I won’t keep you in suspense any longer. I know exactly what three questions you are just dying to ask: Brazil? India? China?
httpv://www.youtube.com/watch?v=Doz5w2W-jAY
“Why Can’t THEY be just like US?”
These three countries “spend just 15% of what we spend on health care, yet the health of the US workforce trails” them “by 5%.” Also, although the report doesn’t say this, it is implicit in the overall methodology that these three countries don’t just beat out the US. They beat out all those other developed countries as well.
And what is it about health outcomes in Brazil, India and China that makes their health care systems better than ours? Thank you for asking. It turns out that virtually the entire difference is due to the fact that we have more than twice as many obese people as they do as a fraction of the population. (No. That’s not a misprint. It’s all in Table 3.)
[Note to LDCs: There’s an upside to having half your population starving. You’ll score really high on Mercer’s health index.]
So what lessons can be gleaned from all this to guide health reform? As we previously reported here and Health Affairs reported here (but which is not even mentioned in the BRT study!!!): Although India has some of the best hospitals in the world and maybe the most competitive hospital market in the world, INDIA HAS VIRTUALLY NO HEALTH INSURANCE. Almost everybody pays out of pocket for almost everything. In terms of the US health care debate, almost everybody in India is UNINSURED.
[Note to the Obama health team: I would institute this reform gradually.]
Postscript No. 1: The BRT and Mercer believe that health insurance fringe benefits add to production costs. This is one of the most studied questions in all of labor economics and the answer is affirmed over and over again: health insurance substitutes for cash wages and other benefits. IT DOES NOT ADD TO OVERALL PRODUCTION COSTS.
Postscript No. 2: The BRT and Mercer believe that health reform requires government action, despite our refutation of that idea in Patient Power 15 years ago and more recently here: No US law is keeping large corporations from adopting the Canadian system….. RIGHT NOW….. HERE IN THE US….. WITHOUT ANY GOVERNMENT HELP. There is nothing Canada is doing that GM and the UAW cannot do on their own for GM workers. In fact, they would probably do it better than Canada does it.
[…] Among developed countries, Hong Kong is so far out in front there isn't even a close second. Or at least it would be if (a) it were still an independent country and (b) I used the measuring rods commonly used by critics of the US system, including the Commonwealth Fund, the World Health Organization, SiCKO and the Mercer/BRT study described below. […]
Very funny.
Funny, Bret? Try sad. The BRT consists of our nation’s largest employers.
Has anyone noticed that the push for health care reform seems to coincide with a renewed attempt to convince everyone that every other health care system in the world is better than ours.
Less value in part because we are subsidizing pharmaceutical research, and probably other medical research as well. Of course, every time someone brings this up, some genius points out that “European drug companies are developing new drugs too.” Right–because they expect to be able to recoup development cost by selling in the U.S.
How do you know we are getting less value? Because we have more obese people? Last time I looked, doctors don’t control how much people eat.
John,
One thing I love about your blog is that it brings out your wonderfully nuanced sense of humor. Very nice post.
One other thing though. You write, “No US law is keeping large corporations from adopting the Canadian system.” Is that true? My understanding is that the legal doctrine of “medical necessity” requires that once a treatment for, say, cancer, becomes standard, any insurance company that offers coverage for cancer must pay for it, even if it costs $100K to extend life by one month. So people who want good insurance that’s not cutting edge can’t legally get it. One way they save money in Canada, besides using rationing by waiting, is to avoid the cutting edge stuff. Am I wrong about the U.S. law?
Best,
David
And I say to those who want to institure those “progressive, universal (read free for me) systems” in the US, I hope you are prepared for rationing and government bureaucrats deciding your health care future. Need a knee replacement at 75? Sorry, not cost effective. Ever wonder why the hospitals in Florida are full in the winter? Canadians who winter in Flordia and can’t get the care in Canada. Ever wonder why Manila has 17 HMO’s?
Hong Kong is part of China, and some advantages you mention partly apply to the mainland too — little insurance, patient-centered, less capital-driven. The big flaws are that medical centers on the mainland are few and far between versus HK, the use of EHRs/IT is still tiny, and government provides even less subsidized medical care than in HK. Last week the legislature dealt with some of this going forward, but it will take years to build out.
We are trying to encourage them to build an IT infrastructure to go along with their 20,000 new community clinics and hundreds of new hospitals budgeted last week, and integrate the levels of care. There is also strong growth in use of savings accounts and what they call “bancassurance,” but probably it will be mostly a large government risk pool paying clinics and doctors on salary. Even the insurers say they can hardly handle a billion new customers, and wraparound products will be required for both individuals and employers similar to HK.
Unlike most other countries, the Chinese want to learn from Americans and Europeans and want to avoid the mistakes we all made. It won’t be easy, but they have the advantage of starting from scratch.
Dan Koon, if rationing does take place, that would serve as a great impetus for people to travel to those great health systems like Brazil, China or India where the costs are much lower, patients would not have to wait and still receive great care.
Let’s see. China’s life expectancy is 73 (in a good year) and India at 65 (maybe). And all along we’ve been told that is one of the gold standards for judging a health system.
Response to David Henderson:
Thanks for the kudos. I’m afraid you are in the minority, however. Health policy is the most humorless field there is. It’s so bad that we have started posting “Satire Alerts” so that people who are jocularly challenged will know not to take the printed word seriously.
On coverage, insurers can, and do, limit what they will pay. But I am proposing that GM could go a step further and ration access to MRI scans, etc., just like Canada does. You would have to have legal agreements to get around possible tort law complications, but with the UAW negotiating for the employees, I would think these agreements would hold up in court.
Hi John,
How did they arrive at these conclusions? What can we do to be able to refute this? I trust we can refute this data.
Thanks for the heads up.
Hmmm: interesting they’re calling a BMI greater than 25 obese, instead of overweight…what happened to the generally accepted definition of BMI >_30 = obesity?
Also, if we are looking at weight why aren’t we looking at smoking…er, I mean “tobacco addiction”?
In reply to Prof. Henderson (above): The employers to which Dr. Goodman refers, e.g. G.M. or the Business Roundtable members are ERISA-harbored, self-insured employers. I’m 90% confident that they are not “health insurance” according to the letter of the law, so their obligation to pay for “medically necessary” care is limited (even though they do, as I noted in my recent paper on state-mandated benefits, http://tinyurl.com/cob5r7). I understand that there is a body of ERISA jurisprudence defining this “ring-fence”. My (non-lawyer’s) interpretation of this is that if an ERISA plan actually decided to impose Canadian-style waiting lists, there is very little incentive for lawyers to sue it for denying payment for care, as they would a state-regulated insurer.
David and John: I also have a sense of humor. That means there are at least three of us.
John:
I am sure you have made this argument before, but a nice and simple point that can help non-economists understand the misleading nature of such “studies” is to point out that the law of diminishing returns is sufficient to guarantee such results. Of course the bang for the buck falls as we spend more or try to do more to live forever.
Suppose we found an island nation that has never been exposed to the outside world. Suppose all we did was sell them Bactrum. Bactrum is an old anti-biotic that sells even in the U.S. for about $2 a bottle today. It is a wide spectrum antibiotic that solves lots of health care issues very cheaply.
That island nation would have the highest value from their health care system in the world by far. They would spend almost nothing on an anti-biotic that addresses a wide range of diseases. But they would still have unset broken bones, die of heart attacks, etc., etc., etc.
In short, they would be healthier at the margin at very low cost but they would not be “healthy” overall by any stretch of the imagination. To be “healthy,” they’ll have to spend more money. The richer they are the truer it is they will be able to afford lower bang-for-the-buck treatments that nevertheless move them a little closer to immortality.