A Health Care Race the U.S. Shouldn’t Win

A new study by the Kaiser Family Foundation comparing U.S. healthcare costs with the rest of the world is providing ammunition to both sides in the health reform debate.

The headline from The Hill’s report highlights how the study is being reported in the press:

Report: U.S. healthcare costs growing faster than elsewhere

The initial reaction by many is likely to be that the blame lies with the insurance companies and their outrageous profits. Wrong. The major rate of growth in costs is in those in the Medicare system over the age of 75 with an increase 8 to 12 times greater than those aged 50-64 as found in earlier studies by the National Bureau of Economic Research.

It’s true that private health insurance premiums have risen at essentially the same rate as the growth in total national health care expenditures.  The problem though is not exclusively in private or employer sponsored insurance but is attributable to all elements of the U.S. healthcare system, and particularly to Medicare. This point is emphasized by the fact that public spending on healthcare in the U.S. rose faster as a percent of GDP than in any other developed country according to OECD data.

One of the key talking points for the left on Obamacare is that is preserves Medicare, supposedly unlike the Ryan plan.  These data points though are really bad news, as preserving “Medicare as we know it” is unsustainable.

To make matters worse for the single payer gang, the percent rate of growth in healthcare costs in Spain, Belgium, Sweden, The Netherlands, and Great Britain were all greater than in the U.S. Of course, we start from a dramatically higher baseline, mostly attributable to much higher prices in the U.S. Nonetheless, simply adopting a government-run health care system didn’t solve the problem in those five nations.

Certainly, the published assessment of the data is always open to further analysis. The Hill’s headline that the growth of costs in the U.S. is greater than any other country is totally predictable given our much higher baseline costs. This is the power of compound interest: If you have a higher baseline, equal per cent increases compared to other nations will lead to ever higher absolute dollar cost increases. Moreover, these data require complex adjustments for currency exchange issues as well as the underlying growth rate of the entire economy in each nation.

However, regardless of how one approaches health care reform the study makes one thing clear: cost control has to be addressed.

Reference:
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