With every healthcare debate, people point out that Americans pay 2.5 times more per capita for healthcare compared to Europe and receive much poorer results. I’m skeptical of this in large part because I perceive everything in Europe being more expensive than the USA. Wages, gasoline, housing, food, taxes. You name it. If this is true, then how could healthcare be so inexpensive? Am I wrong? Are there many things that are less expensive in Europe compared to the USA?
Healthcare in Europe is cheaper because socialized medicine can enforce economies of scale, can negotiate drug prices (something US public health programs are prohibited from doing, with the exception I think of the Veterans Administration), resources can be concentrated on preventative medicine and areas of concern, there’s less incentive for doctors to run away from primary care and into lucrative careers like face-lifting…the reasons go on and on. Of course this is all supported by taxes, so in that way the individual pays “more,” but they reap the benefits of a system that overall provides excellent care at a lower cost.
I’ve never been to a hospital or a doctor in Europe, but I have been to pharmacies in Britain, Spain, France, and Italy. IME over the counter medicines are cheaper.
Here in Taiwan and in Japan where I previously lived, they have single payer systems and set the fees which doctors and hospitals can charge for procedures.
Even in Germany (the oldest universal healthcare system - 1871), where it is multi-payer (non-profit insurance companies), prices for healthcare are negotiated. Insurance premiums are then paid by you & your employer or the government.
In the 1912 election, Teddy Roosevelt pushed for a plan like this but was shouted down with cries of “Socialist!”.
Certainly traditional Scottish apparel is cheaper in Europe than in the United States … it’s a 500 mile drive to San Francisco just to find ONE shop with kilt accessories … and if you want your clan’s tartan … that’s some serious money …
So part of the answer to the OP are these very regional and specialized goods …
Major public works projects are also much cheaper in Europe for the same reason. Mile for mile and like for like, the US is somewhere between 2X more than Britain and 10X more than Spain.
Yup. When I lived in the Netherlands for a couple of years, I was startled to find that many things including groceries cost less than I was accustomed to paying for them in the US, because like you I had absorbed the usual American propaganda about Europe being this inefficient high-priced economic disaster zone. But as this cost of living comparison indicates, the reality is much more complex.
For the non-wealthy, taxes aren’t that much higher in European countries than in the US: average earners in the US pay slightly under a quarter of earnings for all income and social security taxes, while in most Western European countries it’s slightly over a third. IME having earned non-wealthy-level income in both countries, the higher taxes are more than offset by the lower prices on many important goods and services, including most healthcare.
What does the OP mean by wages being more expensive? Does that mean wages that are higher or lower than what he’s used to in America?
People who complain about our healthcare being more expensive conveniently ignore the facts that (A) we have more medical technology than even Western Europe, and (B) American companies produce a disproportionate share of new drugs.
Per-capita number of MRI machines:
The US accounts for roughly 43% of all new drugs.
And yet the US accounts for only 25% of the world’s GDP.
And yet people in other countries have MRIs and take medicine too.
MRI machines are useful diagnostic tools but they have no therapeutic benefit, and once you have enough MRI machines for the diagnostic investigations that are medically required, there’s very limited medical benefit in having more. The US has more MRI machines per capita than European countries, but without some reason to think that it has the optimal ratio of machines to population, this could be evidence not of superior US medical care but of less efficient allocation of US health resources.
In other word, this might point to at least a partial explanation of why the US spends so much more than European countries on health, while not getting better outcomes.
I can’t look for cites right now, so for now my IIRC responses:
That’s not necessarily a good thing. I recall reading articles that said a high proportion of scans are wholly unnecessary.
The obvious counter-argument is that if we do many “unnecessary” scans, sometimes we find something serious we had not expected to see.
But it would clearly depend on whether this happens a significant fraction of the time.
The US is a world leader for R&D in general, and other industries do not have the inefficiencies of the medical market.
Or put it this way: if we stripped out the money that goes to insurance companies, but retained the money that goes to pharma, would that impact on new drug development? Why?
This touches on issues that have been so frequently discussed in GD and elsewhere that it might even be the #1 topic of discussion over recent years, so I’m just going to answer in terms of broad generalities here.
The cost of living has very little to do with it. At the risk of greatly oversimplifying, much lower health care costs are achieved – not just in Europe, but in Australia, Canada, and all other advanced nations – because of two basic factors:
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Private insurance is inherently an incredibly inefficient way to cover the unique requirements of health care. It’s fundamental to insurance as a private business to assess the risk of each client, set premiums accordingly, and adjudicate each and every claim as the primary method of managing costs. This turns out to be a very poor model for human health care because ultimately everyone will always need medical attention, and a civilized society will always try to provide it in some way. The conventional insurance model, like auto insurance, involves a tremendous amount of administrative paperwork and complexity each and every time the system is used. In contrast, the model of all other countries, in its simplified essence, is simply to cover everyone at a fixed cost pro-rated over the entire population and simply pay for all covered procedures automatically.
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The above model is functionally single-payer even of it might physically involve many different payers, because there is a single point of administrative regulation and it’s therefore possible to have both (a) a community-rated premium system where everyone pays the same, and (b) a common negotiated fee structure across the whole jurisdiction that controls and limits provider costs. Providers generally accept those restrictions because in view of the first point above, their cost of doing business is far lower than having to deal with multitudes of insurance adjusters seeking to minimize payouts, and they simply get paid in full by submitting electronic invoices and nothing more.
The above is greatly simplified as there are many different systems in different countries with varying degrees of private insurance involvement, but the gist of it is true everywhere, and where US-style private insurance is part of the system, it is both highly regulated and/or very limited in the degree of public participation.
None of those are really relevant. Having a greater quantity of medical technology is a side effect of the inherently high profitability (read: “high cost”) of the medical provider system. The cost of having many diagnostic imaging machines like MRI and CT scanners idle and unused is enormous: not only do the machines cost millions, but you have to add on the salaries of the technicians and support staff to operate them. The US insurance-based pricing system can accommodate wasteful practices because in essence they can charge whatever they want. That’s a good illustration of the cost difference right there. Elsewhere, hospital in-patients and urgent cases needing MRI imaging or whatever it may be get immediate attention, but routine elective outpatient imaging requests may have to wait. When it comes to managing very expensive resources, you really can’t argue with the economics of queuing theory.
Drug costs aren’t especially relevant as they aren’t normally a very large part of the health care cost equation, and it’s a very complicated issue in which drug companies are both important contributors to health care advances and also, sometimes, ruthless profiteers. Many countries simply require drug companies to justify drug costs to prevent excessive profiteering. Drug costs are basically orthogonal to the whole health care cost discussion.
The point about things like MRI scanners is important. Over servicing is one of the key ways that costs are driven up. Luckily having an MRI scan isn’t injurious, but CT scans are.
The other important aspect of US healthcare is medical litigation. That drives over servicing as well as generally driving up costs. Doctors and hospitals must carry significant indemnity insurance, and that cost is simply passed on to the patient. A portion of the additional cost of US healthcare is essentially paying for lawyers working on a no-win no pay basis. But also, the only useful defence against many litigation cases is to show that every possible diagnostic aid had been used. There may be no sensible medical reason to call for a massive set of MRI scans, but covering against possible litigation by calling from them can make sense. Since it isn’t the doctor paying for the scans, why would he care? MRI scanners are massive money making machines. It is hardly surprising that the US has more per capita. (You may also take note that the MRI and CT scanners were invented in the UK. Sadly Sir Peter Mansfield died last week.)
The only useful way to compare health systems is to compare outcomes. Rooms filled with expensive machines that go ping do not guarantee good outcomes.
If you are sick with X, where would you prefer to be treated if you want the best chance of a good outcome? You can also look at the efficiency of the health system - how good is it for the money spent.
The US rates 37 out of 191 in the world for efficiency.
Here is one quick summary of the US system relative to the world. http://www.oecd.org/unitedstates/Health-at-a-Glance-2015-Key-Findings-UNITED-STATES.pdf
We had a thread a little while back about car insurance - I was surprised to see how expensive it was in the USA. e.g. I pay £250 a year for a two 40+ drivers, clean record, full coverage with breakdown and legal cover on a car worth about £20,000
Food - we’ve holidayed in the USA many times and we always get apartments and so end up shopping for much the same things as in the UK and are always struck by the fact that, overall, it costs about 20% more for our range of products.
Mobile phone contracts. - I bought an unlocked Moto G for £130 and have a 4G contract that gives me unlimited texts, 200 minutes of calls and 2GB of data for £10 a month.
Wages are generally lower in Europe, but so is the cost of housing for comparable sizes and housing densities (which isn’t always possible without a lot of squinting); a lot of “daily living” products are also cheaper in absolute terms. One of the problems of comparing wages between countries is that the direct “dollars to dollars” comparison doesn’t work unless you take cost of living into account.
This in in fact one of the arguments against the American system. Having more MRI machines doesn’t mean that you get a better care but that ressources aren’t rationally used. Instead of having a network of public hospitals where costly equipment is acquired according to needs (say, only one major hospital in a given town will be so equipped, enough to serve the needs of the local public), you will have several private hospitals, all of them fully equipped even though the “offer” will largely outpace the “demand”.
And despite those equipments being underused, they’ll still be used more than necessary, in part because hospitals will want to amortize the cost, and in part in cover your ass mode, as a result of the notoriously high risk of litigation. This obviously driving healthcare costs even further up.
If the USA swapped to a UHC model tomorrow, what do you think would happen to worldwide pharma research?
I know someone who lives in an nice neighborhood in Berlin whose apartment is probably half the cost of a similar place in DC.
Also, I’ve found that cheap wine (not rotgut, but your basic “I don’t want to spend a lot of money on this for a casual dinner”) is way cheaper in Europe than the US. On the other hand, I’m pretty sure nobody in Europe can afford liquor.
In the Netherlands, wages may be lower, but cost of living is less. Most importantly, and a lot of commodities are communal and of better quality then in the US. For instance, our large communal swimming pool is really nice and serves the whole part of town well. Only the uberwealthy have their own private pool.
The same holds for city parks, city libraries, education on all levels, medical care, social security net, safety ( people in the USA have to buy their own car and house alarms, guns, private security, etc) etc etc.