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A checkup on US healthcare expenditures.
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If you live in the US, chances are you have health insurance even if you are healthy. Without it, visits to the hospital, procedures, or doctor visits are very expensive. Even with insurance, it’s likely that they or someone in their family has had to shell out lumps of money for medical expenses. Unfortunately for the average American, healthcare costs have been rising faster than the average rate of inflation. What’s the deal with that? Perhaps we pay higher costs because the US is the wealthiest country with the best healthcare?
According to the Legatum Prosperity Index (LPI), the US ranks 69 out of 167 countries ranked in the healthcare category. This ranks behind countries like Iran, Cuba, Turkmenistan, Sri Lanka, Qatar, and many more. You could argue that the index has some biases and nuances, but generally speaking, it is clear the economic powerhouse has not translated into healthcare efficacy.
With a quick search, you will find that the US ranks quite poorly on many important health statistics such as life expectancy, infant mortality, and cancer rate. Further, health expenditures are vastly higher than in any other country in the world, even those that rank much better on these key metrics.
As of 2017, the US stands 43rd in the world with a life expectancy of 80.00 years[64] In 2007, the CIA World Factbook ranked the US 180th worst (out of 221)—meaning 42nd best—in the world for infant mortality rate (5.01/1,000 live births).[176] Americans also undergo cancer screenings at significantly higher rates than people in other developed countries, and access MRI and CT scans at the highest rate of any OECD nation.[177]
History
Social programs in the public eye started to garnish attention in the Great Depression. While FDR is known for the New Deal and social programs as a Democrat, Hoover’s Republican campaign used the same strategies and policies that were taken a step further under Roosevelt. Agricultural loans, public works projects, protectionist economic policies like tariffs, bank bailouts, social security, unemployment insurance, and public support for unionization were bi-partisan interventionist policies that sprung into prominence at the time.
The next big wave of social policies came 1960s with the Great Society programs under Lyndon B Johnson. The impact of these reverberates in more ways than just education as I discussed last week in Future Prospects. Medicare and Medicaid programs were signed into law in 1965. Then under Nixon in 1971, price controls were enacted on medical expenses as costs were increasing which would only begin a decade known for its consumer price inflation. If you aren’t convinced that price controls have contradictory consequences, check out Under Control.
In the 1980s, Reagan’s policies were built upon deregulation which extended to healthcare. Despite any attempts to cut costs, spending on healthcare continued to increase (just like the country’s deficits). Looking at the chart, you can’t even tell that was an initiative.
I urge you to check out the WTF1971 site, which suggests that something in that year may have been the cause for healthcare expenditures to start increasing. I too agree that Nixon abandoning the last monetary ties to gold sparked an irreversible deterioration that is likely an underlying cause of many societal issues.
This subconscious and psychological change from money happens because it changes incentives. Reports in the 1980s suggest that hospitals began acting more like businesses and less like caretakers. This monetization is one reason for the deterioration of healthcare, education, science, and more which is a few steps removed for most people to consider or realize.
With the federal and state spending baked into policy with the Great Society programs and the unlimited budget to do so, there was a trend change within the US. The US was similar to the rest of the world in terms of healthcare spending in and before the 70s. Since then, the US has blown other countries away spending more nominally, as a percent of GDP, and per capita.
Finally, the latest big change in US healthcare policy was the Affordable Care Act (ACA) under Obama. The charts above show pretty clearly that the ACA like the programs before it, has done little to reduce healthcare costs. National healthcare expenditures went up not down. While there are political arguments about how the costs have been borne by consumers, the fact is the price of healthcare cost has continued rising.
Who pays for it is a different story, as the healthcare expenditure is picked up by taxpayers and deficit spending if not the consumer. The consumer is likely to choose the least costly and adequate quality option. Left to their own devices, insurance companies, corporations, and the government will devise ways to create their products outside of what is best for the consumer. With more money coming from government subsidies than from the consumer himself, the industry is left with negligible motivation to make better healthcare products tailored to the consumer.
At the end of the day, when it comes to education and now healthcare the US spends more and performs worse. What gives?
We can argue all day long about surface-level causes like poor diet, aging demographics, government programs, corporation incentives, etc. However, what we do know as fact is that the massive spending occurring is not working to improve outcomes. I have made my case that the underlying incentives of no ties to hard money and government subsidies are much further up the ‘food chain’ in terms of root causes. Until next week,
-Grayson
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This is what happens when free markets are allowed to operate in an industry that has little free market applicability in it (we don't choose when to get sick or which ambulance takes us to which hospital, for instance).
Medicare for All is my favored option. We get rid of complicated and costly programs like private health insurance, Obamacare, Workman's Comp and Auto insurance medical portions, Medicaid, and thousands of smaller programs at the federal, state, and county levels to subsidize healthcare. Equally important, the government is only the bill payer, not the employer. The public saves money from government pricing power and much reduced paperwork.