Does More Government in Health Lower Health Care Spending?

This is John Lott, writing for FOX

For the average OECD country in 2007, government expenditures made up about 72 percent of all health care expenditures. At 45 percent, the U.S. is tied for the lowest share. Government spending made up more than 80 percent of health care spending in about a third of the countries. But making the US more like other countries and giving the government an even greater role doesn’t seem to be the key to reducing costs. Indeed, the reverse is true…. Using all the data available from 1960 to 2007…. each one percent increase in a government’s share of health care expenditures increases health care expenditures by about 0.4 percent.

Comments (5)

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  1. Joe S. says:

    Interesting result.

  2. Bart Ingles says:

    The only caveat might be whether the same double-counting exists concerning other countries. Presumably Lott would have considered this, but then the question is if the methodology is so different between U.S. and other countries’ figures, can we trust the comparisons at all?

    Lott: “If Americans spent as much for drugs as other countries, we could reduce our health care expenditures by another percentage point.”

    Would this not also raise other countries’ expenditures? In other words, would the U.S. and France be on par at 12 percent?

    On price controls stifling innovation, I’m always mystified that TV interviewees get away with the counterargument, “But Europe controls drug prices, and European drug companies are just as innovative as U.S. companies!”

    Well, yeah, because they know they’ll be able to recover development costs in the U.S. market.

  3. Stephen C. says:

    This is the kind of finding that deserves a lot of attention.

  4. Linda Gorman says:

    The OECD has an ongoing project to harmonize health accounts across countries, so whether the countries are comparable depends on which ones he used. A fair number should be comparable in 2007. Very few are comparable before 2002.

    The main differences that remain will be in accounting for disability costs and for money spent on health by citizens of Country A in Country B. Obviously that biases US spending upwards, for example, and Canadian spending downwards.

    The elephant in the waiting room that no one ever deals with is waiting lists. The US doesn’t have much in the way of waiting lists, the other countries do. They obviously represent a cost, a big one that is never accounted for.

    As for drug cost and access, Patricia Danzon and Michael F. Furukawa have shown that the US spends more on drugs, prescribes new drugs more quickly, and uses relatively more new drugs and high-strength formulations. Generics are less expensive in the US. Comparing the cost of a US market-basket of drugs in other countries, assuming it is available, suggests that US consumers pay 10-30 percent more.

  5. Sara Mackey says:

    It is as it is with college, real estate, or anything else the government gets involved in: the cost goes up, and stays up because of the interference and because the private providers are not able to make a profit. Indeed, and I’m afraid the route this country will take if Obamacare is not repealed!