Health Care Intelligence Failure?

This title was taken from Arnold Kling who is challenging the suggestion from AB and Kash that we do not get that much from all the money we spend on health care as compared to other nations. Arnold writes:

That is, I believe that it is likely that, for the most part, Americans receive significantly better health care than their counterparts in other advanced countries…Still, it would be premature to state that as a firm conclusion. The point of this essay is not to demonstrate the superiority of our health care system. Instead, what I want to suggest is that the indicators available on comparative health care quality send only weak and contradictory signals. Much better research is required…believe that it is beyond reasonable doubt that, over the past 25 years, the share of GDP devoted to health care has risen faster in the United States than in other advanced countries. In 1980, the U.S. share (using OECD measures) was 8.7 percent, which was higher than most OECD countries, but close to or even lower than the shares of Germany, Sweden, and Denmark. By the year 2000, the U.S. share was 13.1 percent, and only one other country (Germany) had a share over 10 percent. I believe that it is beyond reasonable doubt that at least some of the difference in spending reflects higher utilization rates for health care services. That is, not all of the increase in the U.S. share of health care spending is due to inflation.

He goes onto to show that real health care spending has increased in per capita terms, but note that AB, Kash, and others make the same point. The difference of opinion seems to be whether this increase represents more and/or better services or simply an increase in their relative prices. After all, OPEC during the 1970’s figured out how to make us pay more for oil by reducing quantity supplied along an inelastic demand schedule. Arnold, on the other hand, is arguing that the increase in real health care spending represents an outward shift the demand curve.

Health care services differ from barrels of oil as the former are not easy to quantify. Arnold was kind enough in a comment to ask us to read NAO’s International Health Comparisons. After its Part 2, which compares health care expenditures across the G7 nations (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) as well as Australia, New Zealand, and Sweden, Part 3 discusses what is received in the form of services “in terms of healthcare personnel, medical technology, drugs, the number of medical procedures carried out and preventative medical programmes”. Part 4 compares health outcomes across nations. Since this UK organization took used the OECD Health Data 2002, its international comparisons are very similar to those provided by AB and Kash.

In a comment to AB, Arnold had suggested that AB and Kash had left off the comparisons where the U.S. fared better than other nations. While we do tend to have more practicing nurses per acute bed that most of the other nations examined, the only other place where I see the U.S. faring better than most nations in terms of services provided is the number of Magnetic Resonance Imaging, which NAO claims is a proxy for investments in new technology. It may be an odd proxy, however, as Japan’s availability of MRIs is almost three times that of the U.S. Maybe I’m missing something but I’m not sure if the NAO data at all undermines what AB and Kash were suggesting.

Update: how could I forget to mention this classic: Milton Friedman and Simon Kuznets, Income from Independent Professional Practice (NBER, 1945). Dr. Friedman has often argued that we should abolish the AMA as “state licensing procedures limited entry into the medical profession, thereby allowing doctors to charge higher fees than if competition were more open”. More recently, Dr. Friedman has been continuing to argue that we pay too much for health care, but then his solution is less government involvement. So at least one conservative economist concedes there are health care inefficiencies even if he does not necessarily agree with the proposed remedies from those of us on the left.