Healthcare Spending--Playing Devil's Advocate

2/09/2013 12:28:00 PM
Everyone seems to have jumped on the we-need-to-control-healthcare-spending bandwagon. It is considered self evident that the growth in healthcare spending is a problem needing to be solved, that we need to find some incantation to banish the healthcare growth demon from all of our budgets. On the one hand, I get that people are not looking forward to spending increasing shares of their income on healthcare, which isn't an activity that makes many people very happy. But let me suggest that what has really happened is that we've let our minds be poisoned by the mostly false notion that we can spend less on healthcare and live to tell the tail.

It might shock you to learn that healthcare spending in the US is growing at the same pace as in most developed countries. It's true that we spend a much higher amount, but the growth is the same. This suggests that the difference is simply do to structural issues that make it more costly to provide health services in the US as compared to, say, most of Europe.

My point is this: there are lots of reasons why healthcare spending would be higher, even a lot higher in the US than other developed countries. A few reasons off the top of my head:
  1. Americans are particularly unhealthy people. This has to do with individual behaviors, not institutional failures. Policy can affect these behaviors slightly, but not much when compared to the magnitude of the problem.
  2. America is spread out. The distance between US cities, combined with the sprawling nature of those cities, inherently disfavor competition, and also dramatically increases the infrastructure costs of providing the same per capita level of care as denser countries.
  3. Americans are wealthy. We spend a larger share of our income on healthcare because we can afford it.
  4. Americans are farmers. A much larger share of the US is covered with farm land than Europe, a larger share of the population inhabits regions where there is a lot of farming, and farms are subject to less environmental regulation. That means that we have far more health costs due to the exposure to organophosphates and other pesticides, as well as all the other chemicals used in intensive agriculture. Studies show that living in the US country side makes people significantly less healthy than living in the inner city, and farm chemicals are the most likely culprit.
  5. The US has less environmental regulations. Dirty air and dirty water make for a higher health bill.
  6. American cities are inside-out. Wealthier Americans live in the suburbs and commute to the cities, whereas in Europe the poor are the commuters. Long commutes decrease general health in a variety of ways (such as less exercise, more stress, greater likelihood of trauma, exposure to car fumes, eating more fast food etc.), and the wealthy are far more likely to seek treatment in general (yes, even in countries with universal care). Moreover, this means that to some extent it is the wealthy who can afford treatment who are being exposed to harmful farm chemicals.
Not all of these causes are likely to be reversible by policy. We may have to make peace with the idea that it costs more to maintain health capital in the US than in other advanced economies. But, to the extent that we think realistically about this, that shouldn't stop us from advancing proposals that will reduce costs while improving care. Here are some ideas:
  1. Deregulate. Ok, I believe that strong regulations are needed to keep patients safe, but does the guy who tells me what pair of glasses I need really have to spend four years and $150,000 on to get a doctorate? Do I really need a prescription to put a couple fragments of plastic in front of my face?
  2. Deregulate some more. In particular, we should increase the roles of physicians assistants and other types of practitioners who don't have MD's. A full medical doctorate is a pretty expensive credential to require for many of the mundane things that doctors do. We should give these chores to cheaper labor, and charge less for them.
  3. Increase state/federal funding for medical residency programs. Whether or not there is an actual doctor shortage depends on how efficiently you think doctors should be able to see patients. But, regardless we ought to be able to agree that increasing the supply of doctors will cut costs. The single biggest constraint on the supply of doctors is the fact that Congress won't increase funding for medical residencies, which are required before a med student can go into practice. These residencies are costly, and are traditionally only paid for by the federal government. Congress, in its infinite anti-spending wisdom, refuses to increase that funding, and as a result we all pay through the nose whenever we need to see a doctor.
  4. Reform the way doctors offices work. Much of the health reform in the past few decades has focused on shifting to a managed care paradigm in which each person has a primary physician who treats the patient for basic things, and refers him to all other specialists and procedures. This design is fundamentally fallacious--most americans, if asked, could not name a primary physician, because they don't need one. What they need is a guy to go see when they wake up sick to their stomach, yet they couldn't go see their primary care physician if they wanted, because that requires an appointment. You call and they say they can see you next tuesday. Great--as far you know, you could be dead by then. The result is that all sick patients end up in emergency rooms--designed to treat trauma, not the flu--and don't bother with primary care physicians. Those patients should be triaged into an urgent care unit, which for the most part would only need nurse practitioners and tongue depressors, not stretchers and resuscitators. So we should consider reforming the system to center around urgent care rather than managed care.
  5. Create a national medical database. Yeah, let the George Orwell and big brother and whatever other libertarian phantasms come. Fact: a national medical database will allow us to cure diseases and stop epidemics in their tracks. Millions of lives and billions of dollars will be saved.