The main things I think America gets for its extra money are shorter wait times, more lavishly appointed hospitals, richer health-care workers, greater variety of treatments, more "quality of life" treatments, and much greater innovation. Indeed, not only do they get innovation, but the rest of the world does too, which is why few people have noticed that their systems stifle innovation. I've never quite understood why people in other countries urge their systems on Americans, when the end result seems almost certain to be lower future quality of their own healthcare.All of this strikes me as clearly correct, though it's worth noting that Canada could benefit from increased retention of health care workers if the US moves toward socialized medicine. More insightful analysis like this (and this) and less silliness, please.
Wednesday, April 18, 2007
Free Exchange On Health Care
The Economist's Free Exchange blog is on a roll. Among the wonkish economics arguments, they write:
Subscribe to:
Post Comments (Atom)
2 comments:
Are you for a privatized or two-tier health care system in Canada?
I didn't mean to give that impression. I'm not sold on two-tier health care, but I'm not morally opposed to it.
That said, in terms of health care quality, the US has two advantages over the Canadian system. First, they spend much more on health care. Per capita GDP spending is higher both as a percentage of GDP and in real terms. In fact, you have to be careful with the former figures because they understate the latter figures. American GDP per capita is higher. So, even if they spent the same percentage of GDP per capita on health care as us, they'd be spending more in real terms.
Second, it seems obvious to me that single-payer systems like ours destroy incentives that exist in multi-payer systems. If you're a pharma company and you can choose between a market with one buyer and a market with many buyers, you're going to choose the latter. The Canadian government has a great deal of power over pharma prices because, since they're the gatekeeprs to a large market, they can dictate them. So long as these prices are profitable pharma companies agree to them. If some hospital refuses to pay the pharma company's price in a multi-payer system, the drug company moves on to the next one. They price drugs according to (more natural) demand.
But Canadians benefit from this situation. Drugs have to pay for the cost of their own production and they have to pay for the cost of getting through national regulations. In order for a drug to be profitable in Canada, the company must generate enough revenue to cover these. But drugs also have to pay for their own R&D and they have to subsidize R&D on failed drugs. Americans pay more for prescription drugs. Without the Americans paying more, and thereby subsidizing these costs, it's not clear that they'd be paid, in which case the drug companies wouldn't undertake them. Eliminate the American subsidy and you eliminate a huge incentive to create new drugs. The Canadian government can't dictate prices on drugs that don't exist. Parallel reasoning applies equally well to other development in health care.
Relatedly, Canada loses over 10% of its health care professionals to the US. in this way, Canada subsidizes the US system. Workers can command higher prices (wages) for their labor in the US, where there are many buyers (employers), so they look for work there instead of here. I would expect wages to fall if the US switched to single-payer, and I would expect Canada to retain more of its workers too.
Post a Comment