Does the U.S. Really Spend Excessively on Health Care?

If you look at this chart, U.S. consumers apparently spend too much on everything. In short,

Actual Individual Consumption (AIC) per capita is more than 50% higher in the US than in the European Union as a whole!

This is among a number of arguments made by Mike Bird someone else. Pointer from Tyler Cowen.

This entry was posted in Economics of Health Care, Tyler Cowen is my Favorite Blogger. Bookmark the permalink.

10 Responses to Does the U.S. Really Spend Excessively on Health Care?

  1. Roger says:

    Wouldn’t a substantially more accurate interpretation be that “Americans consume more of everything?”

  2. Handle says:

    1. It’s strange to say health care is a “superior good”, as if it were something in an ordinary consumer market, when most of the extra spending is done by governments or third parties, and consumers don’t experience prices.

    2. Think of the implications of how “superior good expenditure patterns” combines with “cost benefit rationale for medical decisions”. Not that well.

    3. There is a big difference between spending more on more stuff or better stuff, on the one hand, and spending lots more on exactly the same stuff, eg. compare prices for drugs or simple procedures in the US vs Japan, Singapore, or even Switzerland, which is an infamously pricier place in most every other way.

    When we are measuring “consumption” is nominal terms we can’t tell whether Americans are buying more health care, or just paying a lot more for a substantially similar quantity and quality of ‘real’ health care per capita.

    Bottom line is that health care is probably not like steak.

  3. RCAFDM says:

    Arnold,

    Thanks for the link to my blog (random critical analysis). It would seem you accidentally hyperlinked Mike Bird to my blog. I point this out because (1) we’re not the same person (2) I’m curious what Mike Bird might have written on this topic.

    Incidentally I think this plot I produced the other day, wherein I show health expenditures as a percentage of consumption (AIC) by AIC per capita, helps illustrate the strength of the long term over the long term (ala superior good) and how the US compares over time.

    -R

  4. Andrew' says:

    I always ask why when we make 50% more than Germans why we wouldn’t spend 100% more on healthcare?

    What would you rather spend a lot more on?

    • asdf says:

      You might as well ask why you wouldn’t spend 100% more on voodoo? Like medical care, your burning a lot of money and can’t really seem to locate any additional benefit.

      Is this what Americans got in exchange for not adopting German socialism? A more dynamic economy which produces additional economic surplus that can be plowed right back into useless and/or overpriced healthcare? What was the point then? We were supposed to get a better quality of life, not higher GDP numbers.

  5. Lord says:

    And it spends both in cost and quantity, the former about a standard deviation higher, the latter because poorer rural areas in the US are better covered than a poorer country in the EU. If you compare with OECD-8 instead, only cost is higher, quantity is lower. Markets never lead to lower costs in healthcare because they aren’t really markets.

  6. collin says:

    If you look at this chart, U.S. consumers apparently spend too much on everything.

    Leave it to a libertarian economist to complain that we can grow the economy by the average person consume less of everything.

    • Andrew' says:

      Leave it to a liberal to think that is a criticism. Of course we believe in investment. Keynesians who do not are silly. They probably aren’t even Keynesians. Consumption support is a special case of propagated lowered expectations that should not be lowered but price signals fool the market into the false belief that less is demanded when it would not be without the false signal.

  7. RCAFDM says:

    Since it appears my first comment is stuck in moderation due to the inclusion of a link.

    I’m going to re-post it without the link

    Thanks for the link to my blog (random critical analysis). It would seem you accidentally hyperlinked Mike Bird to my blog. I point this out because (1) we’re not the same person (2) I’m curious what Mike Bird might have written on this topic.

    Incidentally I think this plot I produced the other day, wherein I show health expenditures as a percentage of consumption (AIC) by AIC per capita, helps illustrate the strength of the long term over the long term (ala superior good) and how the US compares over time.

    P.S., In lieu of a link you might try copying and pasting this into your address bar.
    randomcriticalanalysis.files.wordpress.com/2017/02/health_expenditures_as_pct_consumption.png

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