Some More Thoughts on Health Care

Last week, Mark discussed the risks and pitfalls of health care as relating to the US system. A few things went through my mind as I read it; today I’d like to go through them in no particular narrative order.

- It’s very true that health care doesn’t lend itself easily to free market solutions, something that has been described by the late economist Kenneth Arrow in 1963. Not only can’t you decline to participate (well, you can, but it’s not really a good idea), the buyer/patient isn’t even in the position to make the purchase decisions herself except in the most simple cases of “standard” maladies like a flu. The doctor, who can and does make those decisions, has an ethical obligation to put the patient need before market, i.e. price considerations. Add to that health insurance, which adds it’s own layer of costs, inefficiencies, and moral hazard, and it’s easy to see why most countries don’t opt for the US model of a “free” health market.

- The cost vs. outcome discussion needs bit of unpacking into several bullet points. True, the American lifestyle is unhealthy, but  that’s not particularly special among developed nations, and it arguably “works as designed”. Consider this chart: The “obesity epidemic” in the US started right after the aptly named and largely scientific-evidence-free SAD (Standard American Diet) with high sugar and starches, and low fat, was adopted as public health policy guideline. Americans have been following the guidelines, including moving more. Unfortunately, you can’t outrun a bad diet.[1]

- While the obesity rate with all its problems [2] is indicative of the state of health of a nation, despite the popular misconception it’s an outcome, not an input variable. I.e. it’s a consequence of the health care system and of public health policy, not a cause. Sure, it’s individual choices that lead to obesity, but these choices are the sum of the information that is available – see above.

- Life expectancy is not the only outcome that is sub-par in the US despite much higher spending – so are all other relevant ones:

Granted, this chart is a few years old, but I don’t believe the relative order either for costs or outcomes has significantly changed – the US still spends vastly more, with worse outcomes.

- 25% of spending on healthcare is wasteful. Assuming you don’t have a subscription to JAMA (I don’t), this video summarizes the findings.[3]

- Getting back to the topic of life expectancy, infant mortality in the US is also fairly high. You can’t blame that on the infants moving too little or eating too much, and only very indirectly on the parents’ lifestyle.

- I’d also argue with the contention that the US subsidizes other health care systems, at least in the developed world. Even in countries where drug prices are much lower (the linked Scientific American article names the UK as comparison), drug makers still make a profit, albeit not as much as in the US, so the lower prices are not a subsidy in any usual sense of the word. Additionally, many drugs that contribute to high cost (and high profits) are arguably largely unnecessary. My favorite example of this is the current pharma cash cow, statins. The science behind cholesterol lowering is highly dubious anyway. Statins do reduce mortality from heart disease, but they consistently fail to reduce all-cause mortality in all but people with an established history of heart disease. (And all-cause mortality is all anybody should really care about – why lower the risk of dying by falling from a ladder when at the same time you will just die more of everything else?). Add to that the fact that trial data about their efficacy and actual side effects are held under wraps und can’t be verified by independent researchers, and we get a classic case of “trust us, we only want your best - a.k.a. your money”. (Honi soit qui mal y pense.) To complete the link to Risklantern – the risk/benefit relationship of the drug is opaque to the patient, even if she were equipped to and wanted to understand it. They are even opaque to the doctor being pressured to prescribe it. And the “subsidy” – the point where I started – is not from the US to elsewhere, but from the US taxpayer (for Medicare) and the health insurance policyholder (employer/employee) to pharma shareholders.[4]

- The innovation argument is also largely a straw man, see statins. Where it’s really important, drug/treatment development is and will continue to be publicly subsidized, see the BioNTech COVID-19 vaccine. Pretty sure Pfizer will not hurt for partnering with them, either (not sure how much they actually contributed to the research, maybe somebody can comment.) Much more can be said about innovation, patents and regulation, but I’ll leave that for another post.

- Oh, and yes, Mark did largely describe the German health care system. Which arguably is not the best either, although much more affordable and nobody goes bankrupt because she has the misfortune of contracting a severe or rare disease, and not the same job lock risk either. Personally, I think single payer systems work best for something like healthcare where choice is much less important than outcomes and where externalities and other market failures negate the benefits of competition – see first bullet point. Some rationing is unfortunately inevitable, whether you do it based on wealth/income or other criteria (e.g. age, severity, necessity) is a choice society has to make. If I were to design the perfect health care system from a risk perspective I would probably ration based on individual risk choices. Food for thought for another post.

Notes:

[1] One of the authors of the linked article is Tim Noakes, sports physician and one of the world’s leading authorities on long-distance running, who literally tried to outrun a bad diet.

[2] Obesity is simply defined as having a BMI above 30, regardless of body composition.  Dwayne “The Rock” Johnson is obese!

[3] The Indicental Economist, the blog I got the video from, it a great resource on anything health care and health insurance related.

[4] One day I’ll write a post about the invisible hand, free markets, and what Adam Smith actually meant when he wrote all that. If I can find a risk angle. Suffice to say that if we were to attach a generator to his grave, we could create a lot of energy given the speed he must be spinning…