U.S. per capita health spending after taxes lower than Europe’s

Advocates of universal health insurance and of a single-payer scheme keep arguing that the U.S. spends too much for too little in terms of outcomes, but this report offers another perspective.

OECD data is here. The data is not adjusted for the higher income tax rates in most countries compared with the U.S. Single payer and universal health schemes drive up effective tax rates.

In its June 13, 2007 edition, Business Week compared U.S. health care

 

spending with spending in France and the UK. France came off pretty well only because its higher tax rates weren’t reported as they are noted in the previous link. And the UK is an example of how you get what you pay for. Business Week concludes:

Despite this, rising costs and an aging population make it a struggle for France to finance its system. On May 29, the government warned that health-care inflation this year is running ahead of projections, threatening to deepen an already worrisome $5.2 billion deficit. In Britain, the National Health Service presents a much grimmer picture. It has provided universal coverage for nearly 60 years and boasts benefits such as drug prescriptions that cost no more than $13 for a month’s supply.

FEWER DRUGS COVERED
Yet despite the government pouring $81 billion into the NHS over the last six years, access to treatment is spotty, and long waiting lists are the norm. In 2005, 41% of British patients waited four months or longer for elective surgery, compared with less than 10% in the U.S., according to London-based think tank Civitas. Limited resources also mean medical care varies widely depending on where you live. Access to life-extending new cancer drugs is especially constrained. As a result, Britain has one of the lowest five-year survival rates for cancer overall: 43% for men and 53% for women, vs. 53% and 71%, respectively, in France.

Many critics of the British system blame the National Institute for Health and Clinical Excellence (NICE), whose mission is to analyze the cost-benefit of treatments to determine which should be covered by the NHS. Some of the new cancer therapies NICE has nixed include Imclone’s (IMCL) Erbitux, for colon cancer, Genentech’s (DNA) Tarceva, for non-small-cell lung and pancreatic cancer, and Avastin, another Genentech drug used to treat bowel cancer.

The picture is no brighter concerning access to advanced, gene-based medicine. It was only after two women sued for access to the treatment that health authorities approved the use of Genentech’s Herpacin for early-stage breast cancer in people whose genetic makeup strongly indicates that they will be helped by the drug. Herpacin costs $44,000 for a year’s treatment.

STILL ABOUT MONEY
A further downside for residents of Britain: The cash-strapped NHS places less emphasis than the U.S. or France on preventive care. Annual physicals aren’t insured. And screening programs are less generous than in the U.S. So despite the fact that pap smears can help detect cervical cancer, the second leading cause of death for women, they are only offered once every three years, as opposed to the recommended annual test in the U.S.

What neither the French nor the British system can overcome is the stark math of cost-benefit analysis. A cancer drug like Avastin, which can extend a patient’s life by a few months, costs $48,000 annually per patient. It’s far too expensive, by NICE’s reckoning, to provide to all colon cancer patients, so it’s available to none. In France, the state pays a portion and the wealthy are free to make up the difference. Money, in other words, buys good health‚Äîon both sides of the Atlantic.

This NY Times article (Oct. 18, 2006) adds a lesson from Europe. Note this comment about administrative costs in Europe and in the U.S. for seniors:

The administrative costs of our patchwork bureaucracy eat up about 25 percent of health spending, which is why would-be reformers have long focused on these costs. But they aren’t the main story. Even in Europe’s single-payer systems, administrative costs account for about 15 percent of health spending, once everything is included, according to the Lewin Group, a consulting firm.

One good way to understand the problem is to look at the share of health spending that the elderly account for in different countries. In the United States, people 65 and older have Medicare, which has administrative costs roughly as low as those of other countries’ universal plans. Younger Americans, by contrast, have private insurance, with all its inefficiencies. Yet elderly Americans’ share of national health spending is similar to that of the elderly in other countries, as Arnold Kling, an economist, has noted.

So something beside administrative costs is at work here, and it involves a basic cultural difference. Americans seem to be less willing to take no for an answer and more willing to try almost anything, no matter how expensive or how slim the odds, to prolong life. (The United States is also a fatter, more diverse country with wider income disparity, which gives our medical system a harder task.)

There are enormous benefits to the American refusal to go gently into that good night. It has made us obsessed with medical advances and turned this country into the world’s research laboratory. If you followed this year’s Nobel Prize announcements, you may have noticed that every scientific prize went to an American. Even hernia surgery, which has been around for 5,000 years, is now based in significant part on American methods, notes Raymond C. Read, a retired surgeon who has studied its history. Some of our spending, in short, goes to support medical care in other countries.

The problem with comparing U.S. health care expenditures, costs, outcomes and health status with those in other countries is that almost any such comparisons are misleading. It is impossible to compare our demographics, political system, income taxes, productivity, prosperity, per capita income, regulations, government programs and private insurance markets with those of other countries and come up with meaningful information for policy makers.

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