Health spending negatively correlated with health outcomes

Tomoaki Katera writes,

life expectancy at age 40 for males in the 90th income percentile is 45.3 years whereas the corresponding indicator in the 10th income percentile is only 35.8. For comparison, according to the report from National Center for Health Statistics, if all cancer deaths were eliminated, life expectancy at birth would increase only by 3.2 years.

…inequality would seem to matter since it can create differences in access to medical services. Interestingly, however, when I compare average medical spending by income groups, low income individuals tend to spend more on healthcare than high income individuals in most ages. The second viewpoint is motivated by the income-health gradient. It is widely accepted that higher income individuals tend to be in much better health than lower income individuals even when they are young. Moreover, the gap widens as they age. Many papers in health economics point out that widening health disparities by income can potentially arise from differences in unhealthy behaviors.

Pointer from Tyler Cowen. In the paper, Katera argues that the lower life expectancy of lower-income individuals reflects differences in their behavior rather than differences in access to medical services. My thoughts:

1. This seems consistent with Hansonian medicine, in which on average the benefits of more health care spending are about zero. But it also could suggest a counter to the Hanson view. That is, it could be that at the margin everyone benefits from more health care spending, but because the people who spend more tend to be people who behave in unhealthy ways, the benefits of more spending are difficult to tease out from the data. It is like trying to measure the relationship between policing and crime. If areas with a lot of crime tend to require more police, then a simple correlation analysis might suggest that adding police does not help to reduce crime.

2. Katera’s findings are not politically correct. I am on the record as saying that academic economics is headed toward a state in which findings like this will make one almost unemployable. Imagine trying to get Katera hired in a sociology department. Katera’s experience as a job candidate will be help to indicate how far along we are on this path.

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8 Responses to Health spending negatively correlated with health outcomes

  1. collin says:

    2. Do we have to note this un-PC and whining that Katera is unemployable? This is no surprise and explains a lot of history:

    2a) Smarter and richer people tend to have a better healthy lifestyle.
    2b) Being poor makes the value of cheap unhealthy behavior more valuable. In reality, don’t modern people drink less alcohol than the beloved 1950s? Or the 1910s? Or the 1880s? Look at the charts of smoking.
    2c) Being richer gives them a lot room for error in your behavior. So George Bush Jr. could go nearly a decade being alcoholic without paying much a price compared to a poor person.

  2. Roger Sweeny says:

    Being richer gives them a lot room for error in your behavior. So George Bush Jr. could go nearly a decade being alcoholic without paying much a price compared to a poor person.

    This reminds me of Myron Magnet’s The Dream and the Nightmare: The Sixties’ Legacy to the Underclass. He argued that a morality of “if it feels good, do it” wasn’t so dangerous to people with money and good social support systems but was disastrous for people without. “When rich people sneeze, poor people get sick.”

  3. Fielding says:

    The first few comments on Cowen’s blog took issue with the framing of ‘unhealthy behaviors’, calling it pejorative.

    For those that have that reaction, here’s an alternative, though not-mutually-exclusive, framing. Some individuals have conditions that (1) negatively impact their ability to earn an income and (2) require above-population-average healthcare interventions. Of those individuals, some also have behavioral issues stemming from the condition or interventions to address the condition. Examples include schizophrenia and sickle cell anemia.

    Consistent with Arnold’s thought #1 and Katera’s findings.

    • Asdf says:

      I think what pops into people’s heads is obesity. Maybe drugs/alcohol/cigs, but obesity is what people think of first.

      I don’t know what level of “free will” to assign to people’s dietary or other choices. If your a materialists that thinks we are nothing more then sacks of meat, then human evolutionary drives are as hackable by food scientists and pharma companies as any other cause effect chemical reaction. The evolutionary solution to this was mortality, but we don’t do that anymore.

      Probably it’s best to drive home personal responsibility in public while also recognizing that statistical level results require controls at the statistical level. When I was in Singapore for instance I noticed that alcohol wasn’t illegal but expensive. Same with gambling, etc. They are big on personal responsibility but also set up the environment to help people succeed.

  4. Lord says:

    The ill spend more on healthcare. No one should be surprised by that. That smoking and drug abuse are more common among lower economic classes should also not surprise anyone. That doesn’t make them politically incorrect. The only thing that could make them incorrect is suggesting policies which would worsen them.

    • Kim says:

      What about policies where healthy people are forced to pay the expenses of self-inflicted ill health? Self-abusers are externalizing the costs of their behavior onto everyone else. By refusing to subsidize people’s obesity, inactivity, smoking and substance abuse, those costs are re-internalized to the person who engages in them, and thus actually helping them in the long run.

      Tough love.

  5. Brandon Berg says:

    Aside from the obvious politically incorrect explanation, I suspect that there’s also some element of reverse causality. Chronic illness may reduce productivity, leading to higher health care spending, shorter life expectancy, and lower income.

  6. Ray says:

    Nothing new here. The RAND Corporation health care study found the same thing. The RAND health insurance study assigned people randomly to different kinds of insurance plans and followed their behavior, from 1974 to 1982. They found little difference in health outcomes no matter how much money was spent on medical care.

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