“It’s the Prices, Stupid!” Take 2

Writing in the September/October Health Affairs –which I finally found a moment to read–, Gerard Anderson (public health professor at Hopkins), Bianca Frogner (doctoral candidate at Hopkins), and Uwe Reinhardt (Princeton professor) examine the level of spending on health care in the US and elsewhere. (See Health Spending In OECD Countries In 2004: An Update.) As is often the case in health care when you take a look at the data, the conventional wisdom doesn’t hold up. Here are some interesting findings from the 2004 OECD data.

  • US per capita spending is 2.5x the OECD median. (Ok, that one’s not a surprise.)
  • US patients go to the doctor less often than the median: 3.9 MD consultations per capita in the US compared to the median of 6.1
  • There are fewer doctors, nurses, and hospital beds per capita in the US than the median
  • Inpatient bed days per capita are lower (0.7 US v. 1.0 median) due partly to a lower average length of stay (6.5 days US v. 8.2 days median)
  • Number of advanced imaging units (MRI and CT) is similar to the median (though the authors don’t supply the data)

What’s causing this? The authors’ answer is the same as it was last time they looked at the data. “It’s the Prices, Stupid!” they say. In particular, they point the finger at “higher spending on physician services” though they don’t supply the data. They also indicate that the higher spending may be due to a high proportion of obesity in the US, though their case for this assertion isn’t particularly compelling.

There are a few things that would be interesting to know, beyond what the authors included:

  • What is the impact of drug and medical device costs, both cost per unit and number of units?
  • Does the authors’ culprit of “higher spending on physician services” hold up as a robust explanation or is it masking other factors?
    • Do physicians have dramatically higher net incomes in the US or is some of the excess lost to administrative costs incurred by physicians looking to get paid? (Primary care physicians in the UK’s NHS seem to be well-compensated, for example.)
    • What would be the impact of accounting for differences in financing medical education? If we added the cost of state-subsidized or fully paid medical school to some of the other countries’ tallies, how would that affect spending? Also, does self-financing of medical education in the US encourage physicians to seek out higher-paid specialties than they otherwise would in order to escape debt faster?
  • Where do “rationing” and “waiting lists” fit in? Overall utilization is higher overseas, but that doesn’t tell us about specific services
October 10, 2007

2 thoughts on ““It’s the Prices, Stupid!” Take 2”

  1. Laws of supply and demand should mean that fewer doctors per capita in the US leads to healthcare spending being higher, all other things being equal. Of course that is not the only cause; demand seems higher as well. But just plain training more doctors and nurses would not be a bad use of money. And it would make a lot of moms happy!

  2. A much greater percentage of R&D takes place in the US and these costs are borne primarily by the US consumer in health care costs.

Leave a Reply

Your email address will not be published. Required fields are marked *