Tyler Cowen is always good at providing contrarian takes on popular issues, for example regarding why healthcare in the US is so expensive, and or why Americans spend so much on healthcare:
Once we focus on consumption, America’s high health-care expenditures no longer appear so unusual. In fact, if you graph health-care expenditures, per capita, against individual consumption, the fit is very close across developed nations. In other words, the spending bug tracks into health care, too.
To put it most simply, we Americans spend a lot on health care because we spend a lot period.
I have never seen the healthcare cost issue framed in this way before. It’s relevant to think of healthcare costs not as absolutes, but relative to US standards of living and consumption, which compared to the rest of the world, is quite high, so logically we would expect healthcare costs to be high too.
I think his analysis omits the obvious, which is that healthcare is not fungible, which means one must take into account quality. As Tyler notes, healthcare is not like consumer goods. It’s not like spending twice as much on a surgical procedure is the same as buying a laptop that is twice as powerful or a TV that is twice as big.
Thus if Americans spend more on healthcare compared to anywhere else in the world, are they getting more healthcare or better healthcare for their money. This is harder to determine. Tyler’s analysis does not explain the so-called $50 cotton ball problem: why bills are so high for seemingly routine procedures, even if these costs get negotiated lower by insurers and patients. This suggests some degree of overpaying. It’s like Americans are paying $4,000 for a laptop when that same laptop costs $1,000 overseas, and then blaming that $3,000 difference on Americans’ propensity to consume.
To be continued…