I think it's tempting to leapfrog the semi-private ones because people don't like the idea of a "two-tiered" system, that you get something better if you have more money. Me, I'm happy to let the people with more money have their better things if there's a reasonable chance for me to get it just by paying some money, instead of having to scheme or get in endless lines or go abroad or just wait.
Also, the "publicly funded but privately run" is how Medicare Advantage and, increasingly, Medicaid is run in the US, where the state/federal gov't contracts with an insurance company and pays them some kind of risk-adjusted "per capita" rate per enrollee, and the company assumes all the risks as it tries to enroll the public plan beneficiaries.
Also, one thing that makes the US system worse is its being tied to employment; I wonder how many issues with the private market might be at least partially resolved with a new equilibrium where the employer-sponsored plan is no longer required nor tax-privileged.
EDIT: Medicare ADvantage is an alternative style of Medicare plan (for old people) where all your care is covered and handled by a company, instead of the government directly. The companies offering these plans are "at risk" for all the costs, which they're expected to manage through "value-based incentives" and things like that; and they have a limited menu of incentives they can offer to get you to sign up, like free transportation and gym memberships. But it's totally voluntary for seniors to sign up. The hope is that this can optimize and streamline costs in a way "Traditional fee-for-service" Medicare can't.
Since I had no idea who Dr. Ezekiel Emanuel was, my immediate reaction was "He's either Jewish or African, I'm not sure which" 😀 So I had to look him up and went "Oh, *he's* your brother?"
"Emanuel thinks the UK is probably close to the cost-quality Pareto frontier and not making any stupid mistakes, but has made the political decision to not fund its health system very much."
That's... certainly one way to look at it. I think the view in the UK would be (a) various governments have and are trying their best to privatise chunks of the NHS - there is some concern that large American healthcare businesses are competing for contracts and buying up lots of healthcare provision which they run for-profit, funnelling British taxpayer money back to the shareholders:
(b) there is constant meddling with the structure of the health care system in Britain which ends up with layers of bureaucracy and lack of efficiency (c) health is one of the huge drains on the budget, along with social welfare and education; no matter how much money you put into it, it always requires more (d) various Health Secretaries have been very unpopular, see Jeremy Hunt (and the, um, rhyming slang version of his name)
I found out that Singapore has one of the more reasonable healthcare systems out there, with only 4% of GDP spent on world-class service. Basically, it requires the citizens to pay a small part of the healthcare costs out of pocket, and the rest is financed by taxes. There's a lot of interesting intricacies that make it work well, all detailed in this 16-minute video by a good economics youtube channel: https://youtu.be/sKjHvpiHk3s
> People talk about how the US system is “privatized” and the Canadian system “socialized”, but a lot of this comes down to whether your payments for the same basic package are marked “paycheck deductions” vs. “taxes”.
Having compared what is for sale in America to what is provided under OHIP, this is very much not the case. OHIP provides far more comprehensive insurance and greater peace of mind than any insurance I was able to find for sale in the US. You quite literally cannot buy the kind of insurance I have in Ontario in America.
It might help to put healthcare within the context what the "public health" system is for each of these counties. Listen to Zeynep Tufekci's recent interview with Ezra Klein. She has an ability to put healthcare for individuals (whether public or private) within the context of the public health infrastructure of different counties. This begins to show why the US has done so poorly with Covid. Even countries like Vietnam have dealt with Covid better than the US. She doesn't say this but I do, if the concept/mindset that the government can't do anything right and we shouldn't invest in public institutions, then we won't be prepared for health emergencies. This seems obscene for the richest country in the world.
I read the comment "No country except the US pays anything like a market price for drugs[,]" and had to ask myself, "What does 'market price for drugs even mean?"
As I understand this section, in some countries, the price is set by government fiat. In other countries, the government or an entity indistinguishable from government negotiates the price. Neither of those seem like they could define “market price.”
The United States is different. But it seems suspect to say that the price paid in the US is the “market price,” since the combination of all of the other countries is (I suspect) a larger population and therefore a larger “market.”
And in the United States, the vast majority of consumers are not negotiating the price, their insurance is. I differ from Scott in as much as he says “Consumer’s don’t for drugs directly.” A small subset do, and they are paying a higher amount than those with access to insurance. So is the market price the price paid by the smallest, weakest part of the market?
I’m an economics near-illiterate, to say that almost everyone is paying below market price seems backwards.
ETA: I should say, can some explain this to me as if I am five, because my inability to figure this out indicates to me that I missing something. What would the proper measure of the "market price" of a drug be?
It seems like the size of the administrative body might play a role here. I don’t know how to make the connection or if I’m just restating a prior, but it’s easier to imagine 50 US states, some being well managed, some not so much, as opposed to the single US regulatory agency outperforming.
Maybe the summary is “picking a spot on the Pareto frontier involved value tradeoffs and the more people you have knocked, the more likely you’ll end up further from the frontier , since this lowers the number of pissed off stakeholders.”
Reading between the lines here, there are (presumably fascinating, enraging, etc) reasons for the differences in pricing, but the author didn’t have access to the driving forces behind the negotiations.
Ex post, the different systems have a story about why good X is costing them price Y. But that’s a justification, not an explanation.
It’s a bit like saying the border between these two European countries follows the river; the fact that it follows the river is the outcome of the forces one really wants to understand.
Life expectancy is a poor metric for healthcare outcomes, and varies a lot based on how countries calculated it. In particular, the US tries to save babies born very very prematurely, many of whom die, and this really brings down the average life expectancy by putting in a bunch of extra zeros that most of the world calls “miscarriages”.
Secondly, satisfaction with healthcare is a function of the PR and patriotism ala NHS as the UK’s National religion, not actual quality of care delivered. I remember seeing this “study” that purported to find the NHS as the best healthcare across a dozen western countries which seemed odd until you realized most of their survey was fuzzy metrics like “do you feel it’s affordable” or “how much do you like it” and not “what are your chances of not dying from cancer and can you even get a surgery for it scheduled”. Health outcomes were only 1/11 of the survey metrics and NHS did quite poorly on that.
There’s a reason the rich of the world come to US hospitals to get their serious procedures done.
I'll add another comment on why I think health care doesn't work like "normal economics". I think it does, but if something's completely regulated in a very complex way, you can't really predict specific effects or estimate any "market prices". (Relatedly, I remember wondering what actuaries working for health insurance companies even did, because they are very regulated on what they can rate on and what they have to cover anyway.)
My personal hypothesis, not one I have the resources to check, but that the source of "cost disease" is - when the majority of players in a market have a ton of money, like large corp/gov't level money and not individual/small business levels of money, then everything costs that much - and anyone smaller who tries to play in that market gets shafted. To me, the cost of e.g. college is directly driven by unlimited student loans and (ironically) things like the GI bill; and healthcare in the US driven by the fact that the payers are very large insurance companies, paid primarily by very large corporations/unions/governments, and large government payers themselves (CMS being the biggest one). If every reimbursement schedule is pegged to Medicare ("120% of Medicare, 90% of Medicare") it's not really market-based. If every hospital has 20 agreements with 20 different payers for how much they get paid, and these agreements all demand the "lowest price" or some kind of deep discount off "ticket price", of course price transparency will be lost.
On the subject of drugs, it seems like the US is basically where Pharma makes their profits. If everyone is trying to peg their price to "at cost" or "the average of everyone else", the money has to be made somewhere, and if you cut off the source of profit entirely, you lose the development pipeline -- which is primarily in the US (as far as I can tell), but can always migrate to less developed and more adventurous countries, like China or India. Further, the costs of getting drugs developed and approved in the US is driven up at least in part by the prohibitive hurdles to get anything approved, which you have documented often on your blog -- the whole system creating this government-pharma cabal, if you will, which eats up a lot of money and gets more and more entrenched with every new incremental policy change, regulation, etc. Again - too complex for simple modeling of specific prices or effects, but you can see the general direction of incentives and how it will affect costs.
I say this having worked in a health insurance company for a couple of years, but not at a high level or anything.
Many energy generators have very high market power, and it's hard to think of a universal way to get around this. If you think the energy coming from your coal plant is too expensive, too bad, it's the only one connected to your network.
Regulators get around the problem by *literally declaring that generators must offer the market price(EDIT: maginal cost)*. For example, the Western Australian market rules say:
"6.6.3. A Market Generator must not, for any Trading interval, offer prices within its Portfolio Supply Curve that do not reflect the Market Generator's reasonable expectation of the short run marginal cost of generating the relevant electricity when such behaviour relates to market power."
Bulket 1 isn’t really correct. Many years ago the UK spun many of its hospitals off into Trusts which operate pretty much like the 80% of US hospitals that are non-profit. They have a local board, they hire a CEO, they make a lot of their own decisions.
I can explain a bit about the Australian drug bargaining system. The outcome isn't always "we get the drug at a low price".
In terms of how the price gets set, we have algorithms we use to decide what we'll pay for drugs, based on the benefits to patients (compared to other options), how many patients in Australia would need them and what the budget hit for the government would be, etc. This is based on quality adjusted life years and the company has to provide evidence to the government about the benefits of the drug to justify the price they want, and we have a (slightly rubbery) limit on how much we'll pay for a given level of benefit.
Often this means that drugs will only be subisidised for a subset of patients, e.g. those with more severe disease or certain conditions. So for example bupropion is subisidised for tobacco cessation, because there aren't a lot of other options for that, but it isn't subisidised for depression, because there are. Some drugs are only subisidised if other (cheaper/more effective) treatments have been tried and failed, or if you have severe disease and will therefore get a large benefit that justifies the cost from the government's perspective.
If they can't come an agreement, there are a few possible outcomes.
Firstly, drugs that aren't covered through the government subsidy system are often still available, the patient just has to pay full price for them. This is often lower than the price in the US, because my understanding is that some elements of the US system hugely inflate the price of many drugs, so for example an anti-inflammatory that cost me $8 in Australia was like, $80 in California*. This happens a lot with stuff like anti-depressants and the pill, where the government won't pay more for something with equivalent outcomes if there are a bunch of cheap options that are already subsidised that do basically the same thing (on paper, if not for an individual patient).
Secondly, sometimes drugs do get covered, but there's a delay while the government negotiates with the company. This happened with the new hep C treatments when they came out - ultimately we got them at a great price and they're covered for everybody in Australia with like, a $20 co-pay from patients (the standard for our subsidised drugs), but we got them a couple of years later than they first became available in the US.
Finally, sometimes a drug isn't covered and that means it just isn't available here. This happens with expensive drugs for rare conditions, like some third-line chemo agents for rarer cancers, weird treatments for rare genetic conditions etc. If it costs $80,000 per course and the government won't pay for it, you just can't get it. I guess maybe sometimes rich people make special arrangements to access things at that cost, if they can find a private doctor who will help them sort that out, or maybe private insurance covers it in some cases, but most really expensive things like cancer treatment are done entirely through the public system anyway.
Because we're a small market, companies can walk away from us if they're not going to get a good deal on a drug for a rare condition - they don't really care if they miss out on sales for like, 500 patients. But for common conditions it works well.
*I think the reason for this is that in the US you have all these private insurers who will pay insane prices like $80 for an anti-inflammatory, because you don't have a single payer with huge bargaining power to keep prices down. So the companies can just try it on, some insurers will pay it, and patients without insurance will miss out. Whereas here, because private health insurance doesn't cover non-prescription medicines, if they charged $80 in Australia they just wouldn't get any sales at all. And for prescription medicines, insurance companies won't cover anything that's covered by the government, so again, there's no parallel private market to sustain high prices. The only medicines private insurance covers here are the ones that the government doesn't cover at all. But I suspect Australian patients' and insurance companies' low tolerance for high prices in general probably means they're still cheaper here than it is in the US.
As much as I've tried to approach the discussion of healthcare systems with an open mind, i.e., not applying my very libertarian defaults, I've never, ever heard a very convincing case as to why health care should be any more managed than grocery store products/prices. Lots of hand-waving about market failures without any convincing empirical data.
People love yelling "asymmetric information!" while ignoring that there is similar asymmetric information everywhere and also ignoring that the quintessential case of an asymmetric info market failure, the used-car lemon, seems to literally be the worst case you could pick, as I've never seen any analysis conclude something other than buying a car that has been used 2-3 years is your best value for the money.
People also love to talk about how you can't negotiate in an emergency, while ignoring that emergency care is but a sliver of overall costs, and 99% of the time you go see a doctor you have plenty of time to pick and choose, review, get second opinions, etc.
it is almost impossible to find information on how exactly it is decided how much money hospitals get in Germany but I think I found it: the combined insurance companies bargain with the hospital organization on a price. The compensation was based on the cost of providing these services. I think practices often get a flat amount per visit (limited to 1 per month per customer) and private insurers pay per service provided (much more money). The amount of practices per city is set by the doctors association.
Im not quite sure everything I've said is correct but I am reasonably convinced that the gist of it is. And yes - everything is a 3 letter acrynom. It's horrible.
I can imagine some of the issues with drug pricing being related to countries and companies having a lot of experience of what an “acceptable” price for drugs is. No drug company is going to sell atezolizumab or lisdexamphetamine for $5 a pop when they have patents on it and spent lots of money on trials etc. The NHS and NICE knows this, so their offers are likely to be somewhat reasonable so that drug companies are at least making a nice profit. Drug companies on the other hand know that the NHS will not let it’s eyes be gouged out by new cystic fibrosis drugs that cost too much (Or Alzheimer’s drugs that don’t even work), so there is a mutual understanding of what prices are likely to be, and then negotiation ends up in a much more narrow range. Related to this fact, it’s not unheard of for the nhs to not publicise what it’s paying for drugs as part of the agreement with the drug company (presumably for political reasons and also maybe to mess with other countries average algorithms). It’s not quite as random a process as it sounds.
One thing I don't understand and perhaps someone can help me here
What on earth is the justification for private insurance? You have 50 different electrical car companies, 10 years later you have the world's best set of electrical cars.
What do 50 different health insurance companies get you???
Living in Switzerland for many years: this is most certainly not true. Salaries are higher than neighboring countries, but so is cost of life. I have known people living in the fringes, and there's definitely plenty of misery. (It is less bad than what I know from Mediterranean countries, and government help does its job for those who know to seek it, but still.)
This overall higher cost of living / income helps with some stuff, like buying drugs that have the same price everywhere. But everything that involves a human is proportionally expensive. If at the end of the day it remains affordable, it's because insurance franchises are low (which doesn't happen without a fair amount of regulation), and because the government does subsidize those who can't pay it.
As per the Norway-gets-cheap-drugs issue, beware any modeling that lacks accounting of (1) scale and (2) iterations of equilibrium. Where one inquisits: "Emanuel praises this as a good decision. But Norway does even better: they take the average of the cheapest three countries in their basket. Obviously this works, but then why not the cheapest two? Why not just say your drug price will be Norway’s price minus one dollar? Half Norway’s price? I didn’t get a good sense of why some countries had cheaper algorithms and baskets than others. Maybe they had tougher negotiators?", I hope this is another one of those tongue-in-cheek digressions intended as irony to the insiders. Let's add scale and iterative considerations.
Norway is ~5 million people, or something like 0.5% of the wealthy population, and a rather smaller percentage including the not-quite-wealthy-but-not-exactly-poor, e.g., including China. Thus, to consider scale: an international drug manufacturing concern is unlikely to spend much sweat over a fractional loss of profit in an already tiny fraction of the market, especially where a failed negotiation has a large cost in goodwill (we can presume that the lowest-price drug markets are still profitable ones; this is unlikely to invoke a loss-leading strategy). Then, consider whether this equilibrium iterates: if the biggest, wealthiest markets (USA, Germany, &c.) banded together and demanded the Norway price, the manufacturer could easily be incentivized to swap its chemical engineering to some other, now-more-profitable task; that is, the negotiating power of the small+wealthy markets is floated along by the insouciance/indifference/sheer wealth of the large+wealthy markets.
A key factor for the US is that we have a large number of middle-men organizations, such as PBMs, which drive up costs. Other countries systems are complex and also have middle men organizations, but a key difference is that theirs are and have been non-profit for some time, while ours are for profit. One of the reasons the Left desires the seemingly large shift from our current system to Medicare for All is it would eliminate/minimize the role of for profit middle men, sidestepping the incredibly difficult seeming process of reforming them. To be reductionist, expanding an efficient government program to all is seemingly easier than reforming our current gnarled system, political considerations notwithstanding.
So the US basically has 3 systems working in parallel: VA (socialized medicine) Medicare (single payer) and (heavily regulated) private. Maybe 4, if you split out whatever Obamacare is (community pooling, notionally private but heavily subsidized and even more heavily regulated).
Which of these systems works the best in the US? Does the US “single payer” flavor compete with other countries that do single payer? If not, is there just something uniquely challenging about delivering healthcare to USians?
I kind of think it might be the last one? We spend a crap ton on health care because we have a fraction of really rich people who demand the best and have more disposable income to throw at it (some of this flows down and makes everyone’s care more expensive since you generally don’t have a rich person ER and a poor person ER - the docs and facilities and procedures are the same). But you also have a really poor population with generally shitty health outcomes.
So it looks like the US pays a lot for shitty outcomes. But what if the people paying a lot, and the people getting shitty outcomes, are just different people?
I don't know much about how to compare systems but I do know for years Canada's system has always lagged others according to studies from the Fraser Institute, CD Howe (two think tanks here) and the OECD. It's especially very pedestrian relative to the bragging. Oof, the boastful antics of Canadians regarding 'free' public health. It's so great we lost our civil liberties and wrecked the civil order to avoid 'overwhelming' the 'fragile' system - particularly in Quebec. Years of sheer corruption, mismanagement and ineptitude meant 15 days was never going to be enough and that the unvaccinated were to be blamed for its sorry state. Just my two pennies.
Life expectancy seems like a pretty rough and imprecise measure of healthcare quality. Like I would guess that part of the reason the US has lower life expectancy than other developed countries is due to non-healthcare factors, like violent crime, suicide, car accidents, etc.
If you look at more direct measures of healthcare quality, like 5-year cancer survival and heart attack survival, the US doesn't seem so bad:
The National Health Service doesn’t own and run all the hospitals in Britain - there’s a large and thriving private sector offering both insurance and treatment. Who blundered in claiming it does - Scott or Dr Emanuel?
As far as the quality of the NHS is concerned, complaining about it is a national pastime but it’s political suicide to even hint at wanting to scrap it. Of course, the system can perform only to the level of funding it receives and it has been underfunded since the Cameron administration’s austerity era. BJ has the political savvy to see the danger and has begun to address it.
The UK government isn't "the sole employer for doctors and other health professionals" - we do have private hospitals, private health insurance, and doctors who do NHS work and private work in the same hospital. Most people use the NHS, but private healthcare is a minority option, a bit like private schooling. It sounds like how you describe the Australian system.
(I'm not sure whether Emanuel missed that, or you misunderstood him, or I misunderstood your categorisations.)
I'd love to see Scott review of RFK Jr's The Real Anthony Fauci. If even 10% of it is true then Fauci should be locked up for crimes against humanity. It goes a long way toward explaining why science is so politicized (hint: it's the money). And why the American healthcare system spends so much for such mediocre outcomes and .
The thing that sprung out to me on why this doesn't make any sense may be that the information in the book is either wrong or only technically correct but not how it actually works in practice. Maybe you need to have been a citizen of a specific country or at least experienced the intricacies of its specific system for a couple months to be able to begin and understand it. I can only speak for Germany here, where even the most high-level view seems to be wrong: going by the descriptions, it fits much better into bucket 3 than 4 (the appropriate three-letter acronyms in this case are GKV and PKV). If Emanuel managed to get even that part wrong, I don't have high hopes whether any of his other opinions or facts on this matter can theoretically be correct.
As for one of your other questions: "Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?"
Hospitals that allow any of the government insurance companies have to allow all of them by law. There are basically two ways of being a health care provider: you serve everybody and are allowed to receive money from the government insurance companies (what exactly each procedure is allowed to cost is defined by law as well) OR you work in private practice and take only upfront cash (although with citizens, invoicing is usually preferred; the upfront cash part is only really used for foreign nationals) for procedures, where you (sometimes) have to use the same cost tables as with government insured people but are allowed to have a higher multiplier on the base rate. Those with private insurance can then get a reimbursement from their insurance if they so choose.
These systems feel so vast in the end that whatever emergent properties they developed could just be pure chance and the US just happened to get the worst deal? Or maybe that other popular theory by proponents of the US system may even be correct, i.e. that it's the US that's basically subsidizing the world in health care and multinational drug companies just accept different government prices around the world because they can always sell their pill for $10k a pop in the US? That's only the drug cost part of the problem obviously ... but honestly, I have no idea.
(EDIT: I've since seen some other comments claiming this is true of the UK as well. This makes my estimate of the trustworthiness of the purported facts from this book go down even more.)
Small note...the UK is not 100% socialised. Bupa and Mayo have surgeries/clinics here. Also, many employers offer supplemental private health insurance. Knowing this, it makes me question the analysis on the other types of health care systems. (and if politics was injected into the analysis)
Think about prices from the perspective of the pharma and med device companies. Unit costs are almost nothing. Research and dev costs are very high. When they succeed in bringing a drug to market, they make the large majority of their profits in the US, where they can set basically any prices they like. They take a relaxed approach to pricing with non-US countries because the US is the golden goose. Change that dynamic and the prices will either increase elsewhere or the investment in new drugs will sharply fall. If you try to make the US like the other countries, the whole system will have to adapt, likely to the detriment of other countries.
The reason the drug prices are lower in non-US countries is that each country is functionally its own market, in which either the government or some central cartel representing the whole health industry is a de facto monopsony (the only person buying the drugs) from the manufacturer’s perspective. The perfectly orthodox economic result is that a monopsony can buy at marginally above cost prices - few of the raw materials involved in drug manufacture are scarce, and the manufacturer’s choice is “sell at this price or don’t sell.”
The reason Germany and Germanesque countries’ systems don’t have inter-provider friction will be (I say confidently while knowing nothing about German healthcare) that the government lets them operate as huge cartel-like trade associations that do all the negotiating centrally and pressure everyone to join the associations. This probably wouldn’t work in the US for cultural reasons (e.g. the idea that the sole purpose of a business is to make money; businesses should be free to conduct their own separate negotiations). This system where everyone has to come together to semi-plan their own economy with government endorsement/instruction but not as a branch of the state is basically ordoliberalism, and is impossible for Anglo-Saxons to comprehend.
(More accurately, ordoliberalism is the result of their attempt to understand what we’re doing, then copy it but rounded off and fiddled with so it makes sense in their context)
I would like to see someone like Emanuel analyze a libertarian/free market system of the type proposed by various economists -- basically, government financed "catastrophic coverage" for big and unforeseeable expenses (cancer, heart attacks, major accidents, etc.), but with individuals responsible for paying cash and making consumer cost-benefit decisions for everything else (with the help of self-directed "medical savings accounts" that could be subsidized for lower income people).
The main idea is to bring market forces to bear in order to make the system more cost conscious and efficient, and to eliminate the massive transaction costs of insurance.
Russia uses the 1st model, where the state insures everyone, taxes everyone and pays for everyone's healthcare. Except that there are 1) sort of co-pay for some procedures, which can go really high for things like complicated surgeries 2) fully private hospitals where you pay completely out of pocket. As far as I know other post-soviet states have something similar.
The government-funded part is pretty bad, definitely way worse than the US system in terms of quality, but of course cheaper. Hard to compare wait times, I don't have much experience on either side. Doctors are horribly overworked, payed relatively low - better in the last decade or so I hear, but still the salary is similar to other non-glamorous intellectual jobs and probably a few times lower than programmers. There is a decent amount of corruption, and a huge amount of nepotism, where to get good (or in extreme cases any) medications, or better room in a hospital, or get to the head of the line for some complicated procedure you need to know the right people (and then perhaps you may need to pay them some anyway, but it depends). Wait times can be long, depending on the procedure, and don't expect anybody throughout the system to be polite to you - they might, but that's more of an exception.
Private hospitals work reasonably well, and there's some variety of options for different budgets, so some fields like dentistry and gynaecology/urology are probably dominated by private clinics, at least in larger cities. You definitely *can* get more serious procedures in a private clinic as well, but I'm not sure how common is it or how does it work or how much it costs except it's a lot. Their doctors are paid notably better and don't work crazy hours. Wait times are usually short to nonexistent, thanks to higher prices.
I feel like this post is going to cause a lot of people to start commenting on the situation on their country instead of going to sleep like they should.
As to why normal economics doesn't seem to work for health care in general, and as to why other countries have such low prices for drugs in particular, I have a very strong intuition that the USA subsidizes all of the world's healthcare.
To be very clear, I know nothing about any of this, and I am almost certainly wrong about virtually all the micro details and the vast majority of the macro ones. Which is why I would greatly appreciate the opinion of someone more knowledgeable on the subject.
But as to how this world-wide subsidy would work in general, I can't really say, but as to drug prices it seems much more straightforward: there are only a few big pharma companies, all of which develop and manufacture the drugs everyone needs. They upsell in the USA because they can, and they accept the low prices in other countries because the USA's overpayment makes the numbers add up.
As an American currently making the transition to living in the Netherlands but who otherwise knows essentially nothing about healthcare, I don't think it's quite accurate that the government pays 100% of your healthcare costs.
The Dutch healthcare system seems more like Obamacare, if the Obamacare mandate actually had teeth. There's a government-mandated health insurance package that's basically the same whoever you buy it from, though you can buy fancier insurance if you want. Whichever option you go with, you have to pay—a little bit more than €100 a month for the basic package. There's also an annual deductible, which varies inversely with your premium. Employers also have to chip in part of the cost. If you don't buy an insurance policy, you get a letter from the government that says you have to; if you still don't do it, you automatically get enrolled in an insurance policy (I'm not sure which one) at a higher cost than if you had just listened and bought insurance in the first place.
The main reason the US private insurance is different from the Netherlands or Germany is because most Americans get insurance through their employers, which significantly screws up the incentives insurance companies face. Unlike every other aspect of US healthcare (e.g., Medicare, VA), no other country in the world does anything like that. It's not for nothing that it's called "the original sin of the American healthcare system".
As I understand it, the drug price thing is heavily influenced by the fact that the US doesn't negotiate lower drug prices. The general argument is drug companies make enough off of America to cover R&D, so they can sell to the rest of the world at marginal cost. I haven't investigated to confirm that, but it sounds plausible.
Qualifications: I have a PhD in Econ, health econ was one of my fields in grad school, and I've taught undergrad health economics.
I received better and cheaper care out of pocket in Mexico (n = 2) than I ever did in Germany (n = 30-50) - and I've been both in the public and the private system in Germany.
Also curious: what's exactly how the question is worded for the public opinion data? I wasn't able to find that looking at the source.
If they asked "How satisfied are you with your health care system?" I suspect national pride has an influence on how respondents answer the question.
> [in the US] "Consumers don’t pay for drugs directly; only insurance companies pay for drugs."
This is not true in the general case. Insurance companies decide to cover, cover with copay, or not cover drugs, just like any other healthcare, and a quick googling suggests it's roughly a quarter to a third of Americans that have prescription medications that insurance doesn't cover.
"Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply."
Kind of true! The critical thing to understand is that "normal economics" usually means "economics with competition". Most of the principles of economics you probably imagine are really just stuff that happens under the particular (but overwhelmingly common) case of perfect or near-perfect competition. "Less money, less stuff" is one those things! In a competitive situations, goods tend to be produced for close to the cost of producing them; if you demand people give you the goods for less money, it isn't possible, and less stuff. But this isn't true of all goods! Monopolies and Oligopolies are the usual counterexample: they tend to already be charging prices substantially higher than the cost of production, so regulators can often force those prices lower without doing any harm. You can't generally do this sort of thing for ever -- eventually you lower the price down to close to the cost of production, at which point "less money less stuff" starts to bind. Think about, say, paperback print copies of Harry Potter. Setting a price cap that slightly reduced the price probably wouldn't affect sales, because it's still profitable to sell them; just the publisher or JK Rowling gets less money. But if you reduced the price enough, you'd start to cut into fundamental costs -- paper, bookbinding, shipping, shelf space -- and you'd get a reduction. (There might also be some long-term effects on future authors depending on how exactly this is done but those interactions are often weird and tricky to predict.)
Generally the amount you can influence the price of something through policy is a function of how close the price of the item is to its efficient production cost, which is often the same question as "how close is this to perfect competition". Healthcare is pretty far from perfect competition! On-patent drugs are fundamental monopolies. Providers, doctors and hospitals are often wildly imperfect substitutes due to variations in their quality. The common disconnect between the person who chooses the service (the patient) and the people that pay for it (the insurance, the employer) also has weird effects on the competitive process. There are often very high startup costs (especially for hospitals) both in terms of money and in terms of navigating a very complicated regulatory environment. All of these things push healthcare away from perfect competition and make a lot of the patterns you reasonably imagine should apply not apply. So a LOT of stuff can be possible that would never, ever work if you were instead trying to regulate, say, energy or food.
This distinction between what is essentially efficient and inefficient markets is often a point that gets overlooked in economic discussions and curriculums. One of my professors liked to say that any economics department will teach you about markets that work; only a good department will also teach you about the ones that don't.
I have an American friend who has been an NHS doctor in London for 20 years (MD from Penn). He is a big, big fan of the NHS, especially compared with the US system. FWIW from a provider perspective.
I have always assumed that all the other countries are able to pay such low prices *because* the US pays such high prices. That is, the drug companies develop their drugs with only the US market in mind, and everyone else is gravy. I think it's very likely that if the US started negotiating harder, either prices for everyone else would have to rise substantially, or we would get far less drug development. The US market (note: not necessarily US researchers/companies) is responsible for the overwhelming majority of innovation in healthcare, and every other country has essentially been leeching off of that largesse.
Health systems also in the extent to which everyone has a GP who is familiar with their health, is a trusted source of advice, and can coordinate the care they need. And related to this, do chronic patients have nurses visiting, checking that they take their medicines, keep their blood sugar under control etc? Such community level services not only improve care, but also reduce costs, since the alternative is for these patients to regularly shuttle in and out of hospital.
"In Germany, all the insurance companies get together and form a Drug Price Bargaining Group, which bargains with drug companies the same way a government would. Why don’t insurance companies do that in America? Is the problem just that this would be a monopoly (technically a monopsony, I guess?) Is only antitrust law preventing them from trying this?"
This does happen in the US. Pharmacy benefit managers (PBMs) do this as one of their core services. They essentially negotiate volume pricing with the drug manufacturers on behalf of their plan sponsor clients (i.e. the insurance companies). If they don't reach an agreement then the drug will not be included in the plan formulary (i.e. the list of drugs covered). There used to be independent PBMs but they're mostly gone now. Express Scripts was the last big independent one but they got bought by Cigna. United and CVS also have very big ones in-house. PBMs occasionally catch heat politically because the drug companies like to blame them for being "middlemen driving up prices." In my opinion that's not true. Really it's the opposite. But PBMs are often the reason why there's some very high "list price" for a drug that nobody actually pays.
And note it's not just private plans. PBMs negotiate on behalf of Medicare Part D plans and managed Medicaid.
Nit: It makes sense to set China aside since that's still a relatively poor country, but it's very strange to exclude Taiwan for that reason in 2022 (though a PPP adjustment may be in order).
On the point towards the end of Part I in the post - why do the systems in Germany in the Netherlands work when they seem to only fix part of the problem.
I'd say it must be because of the broader context of their nations. Many seemingly impossible things happen there due to some social factor which 'works' in ways that are totally non-intuitive.
If you look at German housing and property, you'll find many cooperatives and groups of tenants owning and managing theri units in unusual ways. Groups of renters have some inexplicable legal structure in which to operate and the people take advantage of that structure to do things like get solar panels on apartment buildings which they own through their coop.
In Germany the workers and unions are incredibly strong and if you compare economic inequality and the legal structure of the boards of companies where the unions are given formal seats and votes as any other executive with some government relations person sitting in as a sort of tie breaker.....that's may vague understanding of it at least....then you can see the negotiation and strategy and emphasis in terms of how they deal with insruance companies is very different.
The very idea of the union having a government mandate to sit on and comprise half of the corporate board would send western neo-liberal autocrats into fits of panic frothing at the mouth. When a US company negotiates with an insurance company for health coverge for their workers....the people doing it don't give a shit. It is jsut some salary package perk and anyone taking the job will just take it anyway. The US has a fully broken model in terms of incentives and who is pulling the levers of power. Random HR folks who couldn't care less and get better paid special plans for themselves.
It is the same with the apartments....why do apartment buildings get run by slumlords with nothing fixed and shitty builds with no closets or extra spaces for the people who live there? Because the types of property developers with enough funding to build apartment buildings...they don't live in the places they build. But when a German apartment cooperative spends a few years with members who get a custom small apartment complex made to their own needs and specifications....they don't skimp on themselves!
I truly have no idea other than saying 'something something, culture, culture' to describe how and why many things work so much better in Germany. People have power, they have tools, they have a very high self-organisation cost....and they somehow meet it without everyone arguing and everything falling apart.
In this way they are able to make a private healthcare and insurance model full of many negotiations work...because nearly all of the people engaging in those negotiations are direct 'stakeholders' and they actually care about what they are doing because it affects them personally. It is always inexplicable to me and overcomes many of the 'too hard' and 'people wouldn't cooperate' problems so often described in the anglosphere.
I suspect similar factors take place in the Netherlands where most of the people I've met from there and the brief descriptions of their legal and living environment seem more alien to me than I would have thought.
> I think if the government will pay you $2,000 per unit in 2020 and only $1,000 per unit in 2021, ... your care gets worse every year, but in real life this doesn’t seem to happen
I've talked a bunch to a (US) radiologist about this... they read a *lot* more images than they used to, and are reimbursed *much* less per image. Some of it is computers making it cheaper / faster to develop / read images than film, and some of it is just pressure to just read things faster (which probably has a quality trade-off).
> Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply. If you have the courage to say loudly and firmly “we refuse to pay a high price for this”, then providers have to give you a low price
I wonder in what % of health care spending the price is tied to the cost of production? On-patent drugs have a monopoly and are sold much higher than the unit production cost (low prices might affect what new drugs are invented, but that won't show up in a comparison of health systems).
The supply of doctors is usually bottlenecked by medical school / medicare-funded residency slots, etc. Salaries could hypothetically be cut while maintaining supply until there are no excess applicants to medical school (if you made medical school free and/or shortened+combined it with undergrad like some European countries, you probably could cut salaries even further).
Scott, you read the wrong book. My 2006 book, Crisis of Abundance, has real health care economics. On the 23rd on my substack, I'll try to summarize the main points.
-In grad school, I seem to recall my health policy professor giving the Commonwealth Fund’s data and analysis little credence. Things could have changed since then
-Two of the Commonwealth Fund’s data points seem suspect. Life Expectancy at birth of course captures all types of factors outside just the health care system. The US is way more violent than all other countries on the list. We’re also fatter.
-The % Satisfied figure seems way too low for the US. I’m guessing it’s pulled from a generic question of “Are you satisfied with your country’s healthcare system?” Seems like a reasonable question but this is a politicized topic in the US where the left thinks we have a hyper capitalistic system and the right thinks it’s governed by death panels. A better (but still flawed) approach would be to aggregate patient data about patient’s interactions with their providers. I’ve seen hospital survey data, and I don’t think I’ve ever seen 19% overall satisfaction. Probably never below 50%. Now, the downside to this approach is that it misses people that forego care which is real. Also, you would want to have survey data on members’ opinions of their health insurers. I still don’t think 81% are unsatisfied with their health insurers (but maybe, as I haven’t seen that data).
Medicare and Medicaid cost over a trillion dollars per year which comes to about the same per capita as what the NHS costs, except they only cover about half of the population, so it actually costs twice as much. I can't stand how people in the US just ignore these garbage programs.
it's also noteworthy that Germany has about twice as many doctors per capita as the US... much easier to become one and to emigrate there as a doctor from a poorer country.
From my experience here in Czech Republic the private insurance companies that were created after the "privatization" seem mostly pointless and possibly a negative thing compared to having one state-run insurance company. How it works here is that the state distributes the public insurance money between them and they are supposed to compete on the administrative cost and thus provide value. What actually happens is that they just pick the healthy people to insure and the chronically sick and risky ones are left for the state-run insurer.
I would say that for the mandatory insurance they are completely useless overhead providing no benefit. I can see their value for people buying additional benefits and that should be their role.
Basically it seems to me that this solves (to some degree) the issue of bad political incentives of rich people having completely separate insurance. This way they pay for the basic insurance in the public system (with only one public insurer), and they can buy additional benefits with private insurers.
"Is this some kind of weird horseshoe theory situation where the maximally socialist response overlaps with the maximally libertarian one?"
health care in many respects acts like a 'non-competitive market' in that the consumers have (relative to other markets) weaker ability to make competitive choices. Usually, there is one or very few 'best drugs' to deal with a given problem, making the patents/ip behind drugs the actual 'valuable thing' rather than the manufacturing processes. To the extent that the value of the static information is greater than the value of a given manufacturer's competitive competencies, 'socialization' (governments bidding the price down) will not cause any deadweight loss. Similar logic to the weird socialist-libertarianism that we see in georgism, which also deals with 'scarce resources that we need to continue existing'. what is 'efficient' gets loopy and strange when supply gets more and more fixed.
I'm surprised that the 80/20 rule isn't mentioned.
In the US, this rule means that most insurance companies must spend at least 85% of the money they take in from premiums on health care costs. So the ONLY way insurance companies can increase their profits is by increasing their spending. This means that they have only 2 ways to increase profits: either get more customers or spend more money per customer.
It seems to me that this creates a weird alignment problem with insurance companies. They want medical care costs to increase. If medical costs go up, they can raise premiums, and also increase their profit.
Insurance companies are disincentivized to negotiate prices for medical care and drugs.
Isn't there a really simple explanation for all the weird things: medical spending really quickly reaches a point of *severely* diminishing marginal returns. In other words, after you've got the basics most medical spending only has a minor effect on outcomes that's swamped by differences in eating, exercise and genetics between the countries? Well, probably there is some effect of a few new drugs but the drugs with the biggest health impacts are pretty much never not available in any of these countries.
In other words, from an EA point of view, most medical spending is probably wasteful. From a selfish POV those 'minor' differences might be quite significant even if it's only a year or two. But, I wouldn't be surprised if there aren't substantial differences between these countries about the experience of treatment (both the anxiety of having to pay as well as the issue of how quickly pain/depression gets alleviated).
By the way, have you read "Catastrophic Care", that began as a series in The Atlantic Monthly, written by a guy (David Goldhill) trying to figure out why his father was killed (like hundreds of thousands of others are, apparantly) unnecessarily, in a healthcare system where the individual components of the system all worked very well individually.
I think a big part of the bad US performance is the trouble we have with our primary care workforce: access is poor, continuity is poor, care coordination is poor and comprehensiveness is poor. See the late Barbara Starfield MD for characteristics of high quality primary care.
I'd add that I am very concerned that if the US goes single payer we lose a very very important market signal for drug prices. I'm sure we will still somehow manage to incentivize funding cancer drugs (to some extent) but I worry that without the US providing a market signal drugs that 'merely' improve someone's lifestyle (e.g. viagra) won't be sufficiently compensated. Sure, competition between insurance providers isn't great in the US but it does exist and lots of people do buy drugs without insurance providing insurers with a price signal. Maybe I'm being crazy but I worry that without at least one country providing such a signal we'll instead see drug prices being determined by what 'serious' people think they are worth ... meaning mere 'lifestyle' drugs will be undervalued even though I suspect they have huge well-being effects.
You might also like In Search of the Perfect Health System by Mark Britnell. It's a similar comparison of the healthcare in different countries, but has a wider range (25, about a third each of high income, middle income, and developing), and goes into more detail on the tradeoffs involved in design.
"Third, China also underpays its doctors, and they compensate by being corrupt and demanding bribes before treating patients."
There's been a major change in this, at least in the nice city where I live (Xiamen, southeast coast). 15 years ago, when my son was born, we gave the doctor an envelope stuffed with cash; today, that doesn't happen. I don't have a lot of contact with the healthcare system because we're all very healthy, but on the couple of occasions we've tried to "expedite" procedures (by offering money over and above the hospital bill) in the last few years, we've been cheerfully rebuffed.
It's still true that China underpays its doctors (though there are some poorly-understood perks); but a lot of the blatant bribery associated with day-to-day transactions that were common 20 and even 10 years ago have now vanished from (middle-class urban) life in China.
The most obvious reforms in the US health system are probably things like training more doctors, making it easier for foreign doctors to practice, and letting nurses do more things that needlessly require a doctor to be involved. These are things that 99% of health economists would support, whereas there'd be a lot less consensus about structural reforms.
> corresponds to a health care budget of $1 billion or whatever. Then doctors submit reports on how much health care they’ve done, ie “we have done 500,000 units of health care”, according to some list where a blood test counts as X units, a heart surgery as Y units, etc. Then the government says “Well, we said the budget was going to be $1 billion, doctors did 500,000 units of health care, so we’ll reimburse doctors $2,000 for each unit of health care they did”.
Scott has problems with this, but it seems straightforward to me. The budget is not going to plummet from year-to-year, and doctors and not going to double the number of health care units they do a year.
I see problems with it, but they're the normal problems you have in any market.
"He opposes euthanasia, which I interpret as demanding state-sponsored coercive violence to prevent torture victims from escaping, but I know other people interpret it differently."
You may know better than me about this, but my understanding of his opinion is that he believes (and I don't know if this is research or personal experience or what) that it is a complete myth that patients that use or want euthanasia do so because they're in pain. So your interpretation of his view seems misleading. He claims that people who seek euthanasia are generally depressed people -- and it seems weird to enable depressed people to kill themselves when we generally try to stop depressed people from killing themselves. I don't know if he's correct in his "euthanasia is mainly sought by depressed people rather than people in physical pain" thing -- but I live reasonably close to the Netherlands and the few people I knew of who wanted to use go on a one way trip there were depressed and not in physical pain.
"Autistic people suffer. They suffer because of their sensory sensitivities. They suffer because of self-injury. They suffer because they’re in institutions that restrain them or abuse them or just don’t let them have mp3 players. Even if none of those things happened at all, they would still suffer because of epilepsy and cerebral palsy and tuberous sclerosis. A worryingly high percent of the autistic people I encounter tend to be screaming, beating their heads against things, attacking nurses, or chewing off their own body parts. Once you’re trying to chew off your own body parts, I feel like the question “But is it really a disease or not?” sort of loses its oomph."
Cultural factors may be at play here also. For example, in the Netherlands, doctors are famously stubborn at taking complaints seriously. Stereotypically, a Dutch doctor will send you home with an aspirin when your leg is falling off, and they laugh off many symptoms as "ahh that's just a sign of getting older".
I imagine that might 'reduce costs' significantly, which could be being masked by the general good health of the population due to frequent daily exercise (e.g. cycling).
As I have gotten older and engaged with the US healthcare system from different perspectives I have only come to view it with a less and less favorable lens over time.
I have been uninsured, insured at a tech company with good insurance, paid out of pocket for a high quality insurance plan (very expensive), and now been the owner of a small business having to deal with insurance for my employees.
The strong coupling of business with insurance is definitely a huge negative for the system as a whole, and for small business. I think any system that moved us more in a direction of decoupling medical insurance from your place of employment would be a large positive.
Part of what may be going on with drug prices is that the U.S., as the largest market, ends up as the "privileged minority" producing the public good of making it worth the cost of developing new drugs. If the U.S. insists on paying low prices the companies produce fewer new drugs. If Austria pays low prices, the effect is much smaller. Think of it as a bargaining game among countries where everyone else ends up free riding on the US expenditure.
Perhaps stating the obvious, but the "efficient market" assumption where price = marginal cost is an idealized case with lots of buyers and lots of sellers and various other assumptions.
In real life, you often have a transaction where there's space between the maximum price the buyer would pay and the minimum price the seller would accept, which is why haggling was invented. Saying in a stern voice that you refuse to pay more than X is just haggling.
Also the thing where you create a pool of money and then divide it among workers proportionally to work done without adjusting the total money for the total work sounds a lot like how Amazon pays authors for Kindle Unlimited, AIUI.
Part of what may be going on with drug prices is a bargaining game among countries. If nobody pays high prices you don't get new drugs. The smaller a country is in the drug market, the less the effect of the prices it pays, so the biggest player ends up paying the most — it, and everyone else, knowing that if it refuses there will be fewer drugs. That makes the US a "privileged minority" in the production of the public good of getting new drugs produced.
I’ve heard great things (from people who use it) about Hong Kong’s system, which doesn’t seem to be covered in the breakdown of systems. It’s something like China or Australia except the private insurance is optional and opt-out, between the customer and the insurer, and paid as a reimbursement. It functions like private school vs public school in the US — if you could somehow buy insurance to reimburse you for attending private school (and attending school was an occasional thing). That is, you can go to your locally zoned government hospital for “free” care (featuring student doctors, waiting lists and multiple patients per room) or choose from multiple levels of private care (featuring top docs, no waiting and private suites) and pay out of pocket, getting reimbursed later in whatever way the insurance you bought covers you. Because capitalism, the cost of private care and insurance is relatively cheap/affordable. Because socialism, no one dies in the street. It appears to be the best version of all systems, one where you can spend time or money to get care.
Looking up data from Gapminder, and comparing spending PPP$ per person vs. life expectancy, the pareto frontier includes South Korea, Israel, Singapore, and Japan; with Malta, Spain, Italy, and New Zealand also doing well. So if I was looking for the best system, I'd look to see what those countries are doing.
"Emanuel thinks the UK is probably close to the cost-quality Pareto frontier and not making any stupid mistakes, but has made the political decision to not fund its health system very much."
So in UK politics rightists and centrists are very conscious of healthcare eating up a larger and larger part of GDP -- so there's an effort to make it sustainable to avoid an apocalypse where either everyone is dying on the streets, or the country goes bankrupt.
For this reason there's a mindset to avoid costs. GPs are gatekeepers. They don't quite turn you away three times to ensure you really in your heart know you need treatment -- but it's not so far off. A while ago my young son accidentally got acrylic paint in his eye. I cleaned out everything I could see but was worried. So I took him to the hospital. We were in the waiting room for four and a half hours. I'm told by doctor friends that sometimes they allow you to wait for a few hours to deter time wasters.
Friends of mine from the US or Germany get very angry about this and feel mistreated.
Anyways, that's some context.
I dispute that the NHS doesn't do anything silly though. I've probably told this story before, but I will repeat it here: a friend had certain health problem; and was told by our local hospital that they had ceased to offer treatment X (which he preferred), only treatment Y. My friend was annoyed because a recent meta-study done in the UK had shown that treatment X was at least as safe, and about two orders of magnitude cheaper (in medical costs, for the taxpayer) than treatment Y. He wrote a letter to his MP. Who had a meeting with the Health Minister, who called the head of the hospital. They then looped back and he was told by the MP that the head of the hospital confirmed that the procedure was safer and orders of magnitude cheaper, but they were now refusing to offer it because only doing treatment Y would improve the hospital's finances because the government paid them fixed rates per procedure -- and to the hospital's finances only the margin matters.
I would also say that there is a difference in culture I perceive between the US and UK medical establishments. (Can't comment for Europe.)
The UK has a steady stream of medical scandals where either the NHS did something awful intentionally (such as experimenting on children in a boarding school, most of whom died from being given blood that was known to be infected -- the doctors recorded the progression of their illnesses and gave this information to research institutions) or the NHS realised something it was doing was bad and its instinct was to cover it up (for example, the NHS realised a few years ago that its vaginal mesh operations were doing much more harm than good -- and decided the best thing to do would be to cover it up, and keep doing the operations that were known to be harmful). I have never heard of any criminal prosecutions, lawsuits, and so on, over this. In both these cases the current Minister of Health gives an apology -- when he had nothing to do with it in the first place. I get the impression that in the US they'd be quite hard nosed about it and people would just be sent to prison for this sort of gross malpractice?
I dunno about that post about bioethicists... I wouldn't say I was reflexively *hostile* to the idea before hand, but it left me feeling with more confidence what I already felt before I read it, which is "what's the point?". I guess the message for you was, don't consider them as your outgroup because they're not that different from you. That's fine. But I still don't have any particular respect for the field. Although I'm a person who already doesn't see the point of academic philosophy in general.
Having lived in Germany and Switzerland (and now going back-and-forth between the US and Canada), I think I can give some answers as to what's happening:
1) Standardisation: in Switzerland your health card is a smartcard that is fully standardised. All doctors can read it and it contains all basic information about you.
Reimbursement forms are also standardised: when I went to the doctor, the secretary gave me the choice of sending the payment directly to the insurance (in which case I pay nothing on the spot, and the insurance will bill me monthly, somewhat similar to a credit card company), or I can pay myself and keep a copy of the itemised invoice, which I would send as-is to the insurance, without having to fill any form whatsoever. The insurance either OCRs it, or they have data-entry people. I didn't have to care because the invoice already contains everything the insurance requires.
2) Doctors' autonomy: doctors are fully in charge of the treatment plan, meaning that in most cases they don't have to ask authorization to the insurance to order a certain test or treatment. Exceptions are made for very expensive surgeries. This means that the admin personnel of insurance companies is much smaller than in the US, which lowers costs.
3) Non-profit: in Germany most insurers are non-profit foundations, or are part of a larger insurance company which voluntarily runs the healthcare department at cost. In Switzerland, by law, healthcare insurers are mandated to be non-profit: most are departments of larger insurance companies, but they have entirely separate budget and all surplus must be reinvested or distributed as bonuses. The insurers compete on low admin costs and posh benefits for the supplementary care, and use the efficiency and good reputation of their healthcare unit to lure customers into life/house/car insurance which are quit profitable. Most Swiss stay with the same insurance company their whole life or maybe only change when they get married, and only the poorest shop around annually.
4) Price control: not just medicines, but the prices for medical services are set by the government. For example, the kantons set the maximum price for a 30-minute dermatologist visit and the doctors must give the same price to everyone, which means that insurance companies don't negotiate the prices of mandatory services with doctors or hospitals directly (as far as I know).
They might negotiate for some non-essential surgery.
5) Concierge service: wealthy people pay more for posh service, like a semi-private or fully private room in case of hospitalization, or being treated by the head of department instead of a lesser experienced doctor. Insurance companies lose money on regular patients and balance their budget (remember, no profits) with the "business/first class" patients.
6) Lower salaries: medical schools are essentially free in Switzerland, so doctors don't have huge debts to repay. Switzerland doesn't graduate enough doctors for their needs, but it attracts many foreign-educated doctors and the barriers for degree recognition are reasonably low (contrary to what I read about US and Canada where the doctors' associations have been very successful in blocking degree recognition). I don't have hard numbers, but my impression is that Swiss doctors make 60-80% of their US counterparts.
7) Focus on generic drugs: doctors are strongly encouraged to prescribe generics, which keeps the prices down. The kickbacks that US doctors get for prescribing very expensive drugs are non-existent for the most part.
I was happy to pay 480 CHF a month for a semi-private plan (and rarely using it), when other colleagues my age went for cheaper options around 220-240 CHF. My total annual deductible was 7000 CHF, which amounts to a maximum annual expense of 7000 + 480*12 = 12760 CHF (13900 USD).
If I were sicker I could opt for a 1500 CHF deductible and less fancy service, which would cap my expenses in the range of 5-7000.
It's still cheaper and higher quality than the US, especially considering Swiss salaries.
Scott how much did the book account for the fact that it is easier to have low wait times when people just don't bother to go because they can't afford it?
The combination of a system that's fee-for-service, looking for things they can charge you for at the highest possible price, and a public that's unwilling to bargain or accept limits on consumption. There are some moves to improve this with 'capitation' where you go in for some surgery and instead of charging you for every test and consultation and procedure and meal and other thing that gets done during that visit the insurer has a tariff: For this kind of surgery, they pay the hospital this much per patient. You win some you lose some. Hospitals that are efficient and avoid complications do well in the long run.
I also suspect, but have no data, that expenses balloon at the bottom and the top of the utility curve. At one end, pharma companies selling drugs that aren't needed to people who aren't ill. At the other end, extremely costly treatments and repeated surgeries in an undignified attempt to prolong life and extract the maximum 'consumer surplus'. Other systems would ration care based on too low QALY for the cost, and individuals in other cultures like the Amish that you mention would say you know what, I don't want to die in a hospital.
I live in The Netherlands and have some experience with our healthcare system (I have metastatic cancer) and if what I'm getting is top-tier, you all have my sympathies.
No one else is commenting on this particular thing, so I guess only my brain is failing to work here, but:
>"I think if the government will pay you $2,000 per unit in 2020 and only $1,000 per unit in 2021, then you stop doing all the health care with a value of between $1,000 and $2,000 per unit[...]"
Why? WHY? Why is this not making sense to me?
Wouldn't this rather make you stop doing health care with a value of > $2000/unit in 2020, and > $1000/unit in 2021?
Maybe I'm confused by what "value" means here. We're looking at what providers would do when the government assigns a value to their per-unit healthcare, right? So "value" can't mean "government-assigned value for this year" — it must be referring to the amount the unit costs to the provider. But if that's the case, I don't get the reasoning above.
I had an aha moment when I thought "wait... maybe it refers to the *value to the provider!*" — i.e., profit. But no, providers are compensated by the government in this model, right? They aren't profiting otherwise. And if it were profit, anyway, you'd want the highest regardless.
I'm clearly missing something. Boy, I feel dumb as hell.
I know everyone just wants their own country talked about, but I'm disappointed that Israel doesn't get a mention mainly because I'm curious how they measure up. The system seems to work remarkably well (compared to other countries and compared to other Israeli government services). Its super cheap. And since Covid I've realized how impressive it is that everything is universally synced in a robust online system.
The main thing I take away from her is path dependency effects. Almost impossible for US to cut costs because Healthcare professionals make too much already (and it's almost impossible to cut wages), hospitals have already been overbuilt with excessively swanky facilities (a problem that I see also with US colleges - these hotel grade dorms / top end gyms built in recent decades will make it almost impossible in future to cut cost of college) etc.
Separately, there is the argument that other countries can negotiate lower prices w/ drug makers largely because high prices in US subsidise whole system - basically Norway, UK etc. are just low marginal cost markets for drug makers who have already recouped all their costs and then some in US alone. If US also started to negotiate hardball the system wouldnt work, lots of new drug development would become uneconomical and get canned etc. Hard to prove how much this argument is true as opposed to drug industry crying poverty, but having invested in drug development in my previous life I could see that some of the argument is definitely true.
Which makes a distinction between insurance (pooling risk for unlikely but severe healthcare needs) and assurance (paying for things we will all need eventually, doctors appointments and old age care), and which rates the system used in Singapore highly.
I have some broad anecdotal experience having lived in or received medical care in many different countries:
- USA (20 years)
- Singapore (2 years)
- Kuwait (5 years)
- France (1 year)
- Switzerland (4 years, son was born here)
- UAE (4 years)
- South Korea (ad-hoc)
- China (ad-hoc)
I can't say I even know 1% of the regulations involved in these systems, but I have an overall impression from participating in them.
South Korea was by far my best experience - as a combination of quality of care and low price. They have a public system with private add-ons, but if you don't get regular check-ups then you can be denied care. They also have this incredible system for annual check-ups where you rapidly go from station to station with a mob of people and see more than 10 doctors in a couple of hours running all kinds of tests.
China was the worst experience. An overflowing hospital and waiting in line for six hours to get 3 minutes standing in front of a doctor who just prescribed a bunch of antibiotics without checking on my infant son.
Switzerland has high quality care but is very expensive - minimum $~400 per month for the basic insurance. But they also make the rules transparent and they encourage you to do preventative steps, like subsidizing gym memberships.
UAE is also great if you get coverage at a good hospital. This is done through my employer and we have 10-15% co-pays.
Singapore was a long time ago, so I can't remember if I had to pay anything, but I remember feeling that doctors unnecessarily prescribed antibiotics for everything.
Taiwan has a GDP of close to $33K per capita (and a lot higher using PPP). Not sure if excluding it for being poorer/less developed than other countries makes sense here. I've lived under the Swiss, American and now Taiwanese health care system, and Taiwan certainly holds its own.
> Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?
I am not an expert, but I do live in Germany. The reason this doesn't happen is that there is a law that if you accept patients from one "public insurance company" you must accept patients from all of them.
There are a few luxury clinics in wealthy areas that only accept privately-insured patients but as far as I know there are no actual hospitals that do that since there are very few people who are insured privately. The reason the privately insurance population is low is that you are only allowed to have private insurance if you make above a certain income threshold (I believe it is 150% of median income). Ironically private insurance is usually much cheaper than public insurance (~€150 vs ~€300 per month at the max cost-to-income scale), but there are some downsides which make most people reject it even if they are eligible. Namely, it is very difficult to return to the public insurance system, you need to pre-select a "menu" of coverage you think you'll need instead of just being covered for everything, it does not cover your partner and children for free, and the price scales with age. So a wealthy middle-aged person opting for private insurance is basically betting that they will still be wealthy as they age. If they have some misfortune and end up poorer when they are elderly they can have crushing medical insurance costs and be unable to switch back to the subsidized public insurance scheme. Germans, being frugal and cautious by nature, view this as a terrible bargain so most privately insured people are either Actually Rich or foreigners who do not intend to grow old in Germany.
The public insurance companies which cover ~90% of the population bargain collectively for acceptance with all doctors/clinics/hospitals/whatever and have extreme coercive power. However, this is balanced by the government basically setting prices for medical procedures in advance. This is done similar to the way they set prices for drugs.
I think the main reason that this works is the _style_ of negotiation. In US healthcare you have a multi-party _adversarial_ negotiation where if a bargain can't be struck then one party walks away and all their associated patients suffer. In Germany the parties are pretty much permanently legally bound to each other (or at least the law creates such a disincentive to walking away that it is effectively impossible) so instead it is a _cooperative_ nationwide negotiation between three roughly equally powerful parties: the German Health Ministry, the Health Insurance Association, and the Healthcare Provider Association. All of them need each other to exist and all agreements are "one for all and all for one" so there is no room for defection.
The result is a fairly functional, if a bit ponderous, healthcare system that most Germans are relatively satisfied with (insofar that a German can be satisfied with anything).
I know a guy who's lived in Portugal, Brazil, US, France, and UK. He confidently ranks US healthcare as the worst of these (unless you're rich) and France as the best, followed by Portugal and then I don't remember.
As a long-suffering user of the NHS, I wanted to add that the system in the UK isn’t quite how Scott / Emanuel characterises it.
Yes, most hospitals and doctors surgeries etc are run (awfully) by the government, but there are a substantial number of fully private hospitals / facilities, and, in addition, most of the best NHS hospitals have their own private wings, which help to subsidise the public sector care. Most doctors will also get some private work in as soon as they have enough experience, because the pay for highly trained medical professionals is *LOL*, when compared with equivalently smart / educated people doing things like Law / Finance / etc. In dentistry (also under the remit of the NHS, but in an inconceivably more stupid way), _everyone_ does private work; if you try to do only NHS work, you will either (a) commit fraud or (b) go bankrupt. There is no way for dental professionals to make any money on the NHS, so they use NHS patients as a funnel for private work (“Would you like a white filling? That’ll be £xx extra”). So, although it is different from Option 3 as listed above, I think the system also does broadly fall into that category, rather than standing alone as a purely socialised system, which it both is and isn’t.
Anyone who can afford to have insurance and go private, does; it took me personally one morning to complete some private appointments and tests, which would have taken me ~6 months to have completed and reviewed on the NHS (pre-COVID). Other than for emergencies (even then, call out times can often be multiple hours), no one would ever choose NHS care over private options
I think there is an orthogonal question of morality here that cannot be resolved merely by looking at how well each system performs. I maintain that it's unethical for government to be involved in healthcare of its citizens, and I see that I saw no country even close to following that model of non-involvement (despite what people think about the US, the US doesn't do that).
Even if in all the countries examined above, government had no role in healthcare beyond enforcing contracts, we may see different levels of performance and it is wrong to think that the relationship between government involvement and performance is independent of many other variables.
> 4: Single Payer Channeled Through Private Insurance is typical of Germany and the Netherlands. I think this is kind of like how charter schools work in the US: the government pays 100% of your costs,
This doesn't sound like the Germany I remember.
In Germany you have to pay for what they call "public" health insurance, but actually you are paying a private company of your choice. On the other hand they are so tightly regulated that the choice doesn't matter much. IIUC, it might seem like the government pays, because most people have the payment taken straight out of their paycheck, but if you are a self employed, you have to pay them yourself.
It strikes me as very similar to the post-Obama system in America, except presumably more orderly and, because it's German and not American.
You wondered how Germany avoids patients going to out-of-network doctors.
There's an official price list for (basically) every procedure a doctor might perform. Doctors are allowed to apply a factor to every price., but this factor has to be negotiated before the treatment.
In practice, the patient hands over their insurance card before the appointment, and the doctor sets the factor to whatever the insurance allows. This incentivizes doctors to give better treatment to high-factor patients, so that they don't go looking for a different clinic.
Some doctors state outright they will only work for a minimum factor*, then the patient has to cover the difference if its above their insurance's max factor, or negotiate, or go somewhere else.
* it's usually phrased as "we only accept these insurances: ..."
To the question of "why doesn't Germany suffer from higher costs", the answer is price controls. Costs for any particular intervention are set by a process of sectoral bargaining between the health insurance companies, hospital industry groups, and doctor's associations, with a healthy helping of government regulation and cracking the whip to make sure everyone comes to a reasonable compromise. It nestles nicely into Germany's cultural corporatism, where everything is subject to tedious consensus-building in highly centralized representative bodies that reach decisions that individual agents are required by law to adhere to (unless they fall into a narrow band of exceptions, in which case there are basically no rules but they tend to follow them anyway because Germans love following rules).
This is similar to how German wages are set: if you hire a metalworker, you have to pay them the union rate even if they're not in the union, but unions and employers' associations are generally very cozy with each other and work stoppages, when they happen at all, are symbolic; everyone knows eventually they'll meet in the middle and go back to work.
Basically, the German love of order and consensus prevents a lot of rent-seeking defection. The American culture of chaos, defection, and adversarial relationships is unlikely to be able to adopt much from the system without incurring severe psychological pain.
I'm telling a very culturally reductive story here but after a decade in Germany it's a little bit hard to come to any other conclusion. Germans are just wired differently than Americans, and that has upsides and downside. They're great at manufacturing but terrible at UX design. Go figure.
Regarding the german system: The adversarial vs cooperative point by @Atticus is excellent and can not be understated. To add some points on the german system (I'm also unsure about its correct catgorization in the book, but don't know enough about the used system to be sure enough):
- Doctors are free to reject patients with the statutory health insurances (which pay the predetermined rate) and only take privately paying patients, but the vast majority just take everyone and offer benefits to the (economically more viable) privately paying.
- Most doctors are not motivated primarily by money. One of the "people dying in germany while on the waiting list for a specialist" is a myth - every doctor I know triages referals to specialists (some specialist professions have notoriously long waiting lists), so that patients with a need for a speedier specialists opinion of treatment are referred faster by calling the specialist in advance and ask for an urgent appointment for the patient. An example would be dermatologists, who usually are booked full 3-4 months in advance (because they do often prioritize privately paying patients that want beauty treatments) - but if your general practitioner finds a suspicious skin change that might indicate a fast spreading skin cancer type, they just call the patients dermatologist and usually get an appointment on the next day. Note that this is all without looking at emergencies, which are treated non-discriminately immediately by everyone, *and* that this kind of triaging is neither charged extra or bonused in any way nor is it regulated by law. My only explanation here is just that doctors in general are simply philanthrophs in germany and make enough money to stay motivated - as well as people here not feeling the need to show off to everyone else how rich you are as it seems custom in the US.
- The rate for one insured "unit of work" is not as fixed as I've read between the lines here, but there's a negotiated, fixed base rate, that the doctors are able to multiply by a "difficulty factor" to adapt their work to the time needed. If a doctor is known from an insurer to have a statistically higher cost due to always using a high difficulty factor, they will get more and more trouble with the insurances, because these can challenge the factors to prevent fraud.
- The base rate and even which medication and treatments are payed for by the statutory health insurances based on their effectiveness for certain medical issues is regularly negotiated in a common nationwide commitee you already mentioned (Gemeinsamer Bundesausschuss). They *have* to base this on the effectiveness by law, which *has* to be based on scientific studys.
- If you are an edge-case where no treatment is being payed according to this committee, you have an independent escalation committee (Medizinischer Dienst der Krankenkassen), where you can appeal your specific case and get the treatment payed by anyway. This committee can also be called upon by your employer or your statutory health insurance, if they believe that you are fraudulently sick or otherwise trying to cheat the system - countering one of the often used arguments against a "quasi-socialized health system", where everyone "would just stay sick at home". You still have the right to sue for payment of your treatment afterwards.
- statutory health insurances' members are paying their insurance rate as fixed percentage of their income (14.6%), up to a maximum of 4.200€ of income. So the wealthier upper class is incentivized to still be insured in a statutory health insurances (because their effective rate is reduced with higher income due to the maximum).
- The statutory health insurances *are* able to pay for medical treatments and medication, that is *not* sanctioned by this committee, *but* they have to pay this out of their own pockets. For this, they are allowed to charge their members a monthly premium (which is around 0-2% of the income of the insured member). Each year, the insurances are rated against each other in their effectiveness (cost per insured member) and their premium is redistributed. This self-regulates each insurance to keep their effectiveness high.
- There were an absurd number of statutory health insurances in the past, but they have been reduced through mergers a lot in the past five decades to promote more efficiency (from ~1.800 in 1970 to 103 in 2021).
TLDR: The system in germany works so well, because it is capitalist based, heavily regulated by the state, with self-regulating feedback-loops to get the best outcome for the patient, while still balancing it with the necessary cost effectiveness.
I would add an additional point, which is that Americans, as a rule, live stupendously unhealthy lifestyles compared to these reference countries and that is going to be reflected in health outcomes and costs connected to things like care for chronic conditions. Terrible diet and sedentary lifestyles are the norm, notwithstanding the narrow sliver of society that is fitness-obsessed. It's not even a choice, really; unhealthy food is cheap, healthy food is unsubsidized, and most areas are hostile to non-automotive locomotion. I lost fifteen pounds without even trying when I moved to Germany.
> I spent a long time staring at this system trying to figure out how it could possibly work.
Someone else probably said it better already, but the answer is "Not very well." At least here in Germany there are dozens of small and less small problems that come from this system.
American expat in London here. I moved from an Anthem PPO plan in San Francisco to just plain NHS with no private insurance, and quite frankly the UK NHS is far better (the French system that I also have experience with is better yet, the Dutch is worse). I get access to physicians or hospital services much faster, including expensive tests like MRIs, my prescriptions for a chronic condition are completely free, and more topically so are Covid lateral flow tests. Not having to waste half an hour at the beginning of each appointment filling out insurance and HIPPA paperwork is also a boon and helps with the blood pressure :-)
They take preventive medicine seriously, and even the facilities are in better shape than the expensive SF CPMC or UCSF hospitals, despite the NHS being a cost-optimized cheap-and-cheerful basic service.
I do use private dentistry, but even the idea of free basic dental care would blow most Americans' mind.
Some notes on drug pricing regulation in the EU. The situation is interesting that even though it looks like monopoly/psony in a single country on the EU level it is much more competitive. Most drugs sold in the EU have EU universal (or almost universal) registration. If you are a pharmacy you can buy a drug in one country and repackage and sell it in another. In case of significantly different prices among the countries (south and east prices tend to be lower) that can lead to a deficit of the drug in low price countries and a huge second market that in reality is tiny (I have a client who runs a second market platform for pharmacies).
I haven't seen a comment yet on France (we are of course half a day ahead of you) so here are a few thoughts. I'm not sure I recognise the system from the brief description in the essay.
The basis of the French System is Social Security (the "Sécu") which covers everybody for most things and gives you a green card with a SS number and microchip which can be read by any pharmacy or any health provider in the system. This has all your medical details and all of your prescriptions. Because not all costs are covered (eg about 70% of the cost of the average prescription) almost everybody has a top-up system, known as a "Mutuelle", sometimes run as a wing of an insurance company, but also as friendly societies linked to professions (there's one for education, for example). This tops you up to 100%. In my case I pay the equivalent of about $100 a month for this insurance, though this figure reflects my age( I am 70). After that, I pay essentially nothing for medical treatment. At the pharmacy I give them my card and the prescription. They give me the medicines. That's it. The kinestherapist gives me a bill every six weeks or so, and by the time the cheque is cleared I have already been refunded. There are certain procedures that are not covered by the Sécu, and non-routine dental care can be quite expensive. Some drugs are not reimbursed, though you can pay for them if your doctor is really convinced and so are you. There are subtle nudges also: generics are provided free at the point of collection, whereas non-generics have to be paid for and then reimbursed. Some Mutuelles pay for special treatment (eg osteopathy), others don't. The French complain about their health services a lot: some of the bureaucracy that goes on behind the scenes is incredible, but it all seems to work. It's also true that successive governments have starved the system of resources and we are seeing the consequences.
However. And it's a big however. What the French and the UK system have in common is that they exist to look after you, not to make money. Whoever you are, and no matter how much or how little money you have, you will be taken in and looked after. The reality is that people don't think of their health, or of health care in general, like an economist, but like a citizen and a possible patient. To that extent, I really wonder to what extent health care economics, for all that it may be a nerdish subject of interest to specialists, should be allowed to inform policy-making. Thirty or forty years ago, when the NHS just concentrated on care, the system worked much better. With every attempt to introduce budgets and management, it's got worse. There's a lesson in that.
The discussion of the arbitrariness of health care budget setting reminded me of my experience negotiating with hotels to hold conferences. The complete arbitrariness and flexibility of the prices charged for the use of meeting rooms was a bit disconcerting; it bore no relationship to anything driven by costs, the way food service prices did. You might get some idea of this from the variability of cost of sleeping rooms, though that's driven much by supply and demand, which wasn't so much a factor in meeting rooms, as they weren't in such regular demand at least with these hotels.
1. UK GPs are independent contractors, and self-employed. Hospital doctors are employees. All can do private practice as well as NHS work, but if they do both they must not spend more than a small portion of their time on private work (they can do 100% private if they have the desire and the reputation for it). Consumers often have private insurance either for add-on services, or in gold-plated versions, that pay for private health care.
2. Canada confusingly refers to some of its separate provincial health care arrangements as insurance. It isn't: it's just taxation and government spending. Traditionally, doctors have been self-employed independent contractors (again with only one client). Negotiations take place at a provincial level between a medical society/union to set fees for all paid via fee for service. This is being gradually replaced by alternative funding plans where a group of physicians (say all the surgeons in a teaching hospital) get together and negotiate a pot of funds for their services in return for certain promises of work. They then split it up how they like. In effect, they become salaried employees but with no benefits as they are still, technically, self-employed. Government knows what the costs will be, rather than the open-ended fee-for-service system, and pays the docs less than under FFS, and the docs get to work much less for their income.
3. I'm not sure any Canadian hospitals are privately owned any more. Some may still technically belong to, say, a Catholic charity, but those just become a free building for the government to use as it sees fit. Attempts have been made to set up private surgical clinics, but the provinces always get them shut down. Privatised medicine is illegal in Canada, though tolerated in Québec. Consumers do have private insurance, for services not covered by government (drugs, dentistry, eyeglasses etc).
Explanation to why there is no "out of network" in Germany:
Doctors need a license to treat publicly insured patients (~90%) which limits their ability to reject patients or treatments.
Otherwise they they limit their clientele to a small more lucrative group of privately insured patients.
Since the doctor has to bill treatments based on a catalogue not specific to the insurer he has no incentive to exclude patients for that reason. The catalogue is the same for private patients, doctors are allowed to apply specific factors between 2.3 and 3.5 tho. Because of that there are reduced wait times for private patients and it's easier to be taken on as new patient.
There are specific treatments the doctor can offer which the patient has to pay out of pocket. Those can't be compulsory and are usually pointless.
Explanation why hospitals or doctors don't go bankrupt when costs rise:
One direct reason is that treatments can be made made more profitable with modification, e.g. the first night in the hospital is very lucrative and can be added to treatments which don't necessarily require it.
Some speculation on the topic:
I don't know the situation in the US, but I feel generic drugs are also widely accepted and handled sensibly in Germany and the EU which puts price pressure on the pharmaceutical companies.
A lot of hospitals are be ran by the state (university clinics) or charitable organizations so commercial hospitals can offload unprofitable treatments to those when they start running a deficit.
I've just spent four years in the Netherlands, after 3.5 years in Singapore, and much of my life in the UK before that.
The Dutch system is very good in many ways. The insurance costs can be high, but the facilities are often very good - modern, well-equipped hospitals etc. But Covid has shone a light on some structural problems: 1. Insurance funding starts to fail when a pandemic hits. Big time; 2. The Dutch system has little central control (parts are run on religious lines) and this was a problem in coordinating a pandemic response; 3. Worse, the Dutch government is good at sensible technocratic problems (water, normal health care) but bad at difficult and unpredictable crises (Covid), and this feeds through to the health system; 4. The Dutch aren't very good at being told what to do - Over the last two years I was in hospital for various reasons at various points (check-ups, a minor operation) and over all these points I'd guess at maybe <50% of people wearing masks (including staff!!!!); 5. The Dutch don't seem to rely heavily on pain relief - so you'll be given maybe 75% of the dose that you might receive elsewhere (a big deal for some procedures!). So it's a good system for normal times.
Singapore was terrific, and the insurance system works on very different tiers so the system isn't monolithic. They picked up a couple of big health problems that even required a full-scale exploratory operation - something that would never have happened in eg Britain. I suspect the nurses aren't as highly skilled as they can be (ie developing a nurse-practitioner career path) but that is certainly true of China and elsewhere in East Asia.
Britain has a terrific system of a sort, but its major flaw is political - it's so wedded to the NHS system that it's found it difficult to reform and to introduce mild market-led reforms (for instance involving insurance). This is a massive handicap! Even going through the GP doctor system to get the referral to a private doctor is difficult, as you're often faced with a degree of scorn from the medical staff (for jumping the queue, for undermining the secular religion of the NHS). They also let me and my family down badly on several occasions (this can happen, but these were preventable).
I think Random Critical Analysis' detailed and excellent work deserves much better than a 'see here for a contrarian take'. I spent a lot of time engaging with it a couple of months ago, and the strength of their arguments and analysis helped change my mind on a topic that I knew quite well, which is rare and wonderful. In fact, their collected posts should get a book review of their own!
Thesis: The governing factor in US healthcare is geography. No country with the geographic distribution of people similar to US have solved healthcare adequately.
To unpack: fundamentally, the screwed-upness is about insurance (which is about ~$1T revenue industry); which in turn, is about population density (or more precisely, the lack thereof), and the geographical distribution of population in the US, which makes a single-payer-system uneconomical. To unpack: you look at population density in the EU, you drop a hospital in any city >10K population, and it can also provide timely support to the neighbouring 5 villages, meaning you have reach of ~50-100K people. Quantitatively: US pop density ~36 per km^2 vs EU pop density 117 per km^2. You look at eg Utah on https://lh3.googleusercontent.com/fjk6tl9Zz-6PnzxKh-TmRj8McEd5nV_jidjuPvLTEMaiObBNKWuiXyHFu_aMG7QOzg earth at night, and it is infeasible to give coverage on an economical basis; which makes single-payer system impossible, or at least dependent on private sector, which in turn, asks for profit-maximization; which, in turn, pulls in insurance for revenue generation, which in turn gives rise to the misalignments we can all perceive.
To address objections: Canada doesn't count, being essentially a few hundred km^2 of population, and rest populated by polar bears. Russia's healthcare system is administered down the pub in the form of vodka (and months and months of queues); and China is practicing "traditional chineese medicine" in all non-Tier-1 areas. Probably the biggest anomaly is the US's insistence and enforcement of scientific-based healthcare practices -with all the full costs it entails.
I want to push back on the assertion you made, Scott that "Certainly rich people in America get good health care." After he published this book in June 2020, Ezekiel Emmanuel published an article in JAMA IM (link: https://bit.ly/3nGRHL8) called "Comparing Health Outcomes of Privileged US Citizens With Those of Average Residents of Other Developed Countries." He wanted to test the commonly stated trope that a feature of the US healthcare system is that the rich here get the very best care in the world. To do that, he looked at outcomes across six benchmark diseases (heart attack, colon cancer, breast cancer, infant mortality, maternal mortality, and pediatric acute lymphocytic leukemia). He compared outcomes for white people in the 1% of richest counties in the US, 5% richest counties in the US, and average outcomes in 12 rich countries (i'm not going to type them all out but they're places like Australia, Canada, and Germany). The results were...not so great for rich Americans!
While rich people in the US do better than average people in other rich countries with breast cancer, RICH children in the US have outcomes worse than AVERAGE citizens in 11/12 of this group of rich countries. Rich people in America have about the same outcomes after heart attack that average people in other rich countries have. In other words, in most cases, you're about as well off having a heart attack being the average bozo in France (for example) as you are having one in one of the wealthiest counties in the US. I was pretty shocked when I read this paper.
The reason I think this is important is because I think it's extremely politically useful sometimes to be able to claim that rich people in the US get great healthcare! People like to imagine themselves as more privileged than they are, and think that, if and when they get sick, they'll have access to this incredible care. So we should reframe from "average care in the US is shitty but care for the upper echelons is the envy of the world" to "average care in the US is shitty, and also in the upper echelons we are about the same as the average person in America's peer countries."
The whole article is worth a read (link again! https://bit.ly/3nGRHL8) as it's very relevant to the discussion here. It also touches upon the "satisfaction paradox" that many folks have commented on--satisfying healthcare isn't necessarily good healthcare:
"Choosing a concierge cardiologist or a hospital ranked highly by U.S. News & World Report may ensure prompt service and personalized attention, which have value, but it does not ensure the world’s best clinicians at each stage of care, at whatever facility is providing care, and does not ensure the best outcomes. A well-off US citizen cannot “buy out” of the uneven quality of care provided by the US health care system."
This doesn't look very rigorous: in particular, I don't see a clear distinction between payment systems for health care vs. health care provision.
And note that single payer blaberty blah is irrelevant.
Japan has a national single payer setup. However, they also have a medical pricing board which apparently pretty much all Japanese doctors/hospitals follow in their pricing. Kind of like Medicare but without the gigantic opposing negotiator component.
Thus any real measurement of health care should be looking at:
1) How bills are paid
2) How health providers price
To these I would add:
3) Relative supply of health care provision capability - which the book does indirectly reference via wait times
4) Private vs. Public choice - which can be public only, public or private, private only
2) matters because I 100% believe that private health care practitioners will base their pricing relative to public health care costs, if such costs are transparently available - if for no other reason than their customers also will be aware of their options.
I've lived in the US, China, Australia, Singapore and Spain. I'm really surprised that the book didn't even consider Spain, which has a pretty cheap system, the world's highest life expectancy at birth and, by far, the best health system of all those I've had a first-hand experience with. No need to tell you much about the US, and Australa's system is, in my limited experience, marginally better. Singapore is hyper-expensive and hyper-effective and anyone who includes China in such a comparison must be doing it for the laughs. Very expensive and second-rate at best in big cities, third-worldist for hundreds of millions in the countryside.
I’m an American and lived in the Netherlands for several years (2012-2018). The Dutch and also the expats loved to complain about it, but I thought the Dutch system was pretty great. By far the best part of it was the transparency. My health insurance actually covered my needs- I never saw a bill. No copays, no surprise mystery bills of the kind I’ve always received in the US, even with “Cadillac” level insurance.
It’s hard to measure expenses and satisfaction across systems because you’re dealing with such different expectations. One common complaint by my fellow American expats was that doctors didn’t “do anything”. This is what the non-interventionist default of Dutch doctors feels like to an American.
But “go home, take some Tylenol and come back if you don’t feel better” is actually quite an effective strategy in this GP-as-gatekeeper model. Most of your patients feel better and don’t come back, as you couldn’t have done anything for them anyway. This keeps costs down and keeps the emergency room just for actual emergencies.
Dutch people’s complaints seemed largely rooted in the perception that Germany and France had better healthcare. I’ve never lived in either place, so I can’t say. But the handful of people I met in the Netherlands who had been seriously sick, e.g. childhood cancer or a major injury, had much nicer things to say.
See also: the guy I know in the Netherlands who was able to get his severely autistic son into a residential program for children where he could receive 24-hour care. Almost nothing like that exists anywhere else, and I believe it was covered at least partially by insurance. I wonder how many of the satisfaction survey participants even considered the existence of such programs as part of their healthcare system.
> In Germany, all the insurance companies get together and form a Drug Price Bargaining Group, which bargains with drug companies the same way a government would. Why don’t insurance companies do that in America?
Since the ACA, health insurers in America are limited to making 20% profit on insurance premiums. If they want to make more profits, the only way they can do this is by spending more on healthcare. Not sure why anyone thought this was a good idea. See the 80/20 rule here: https://www.healthcare.gov/health-care-law-protections/rate-review/
No one has mentioned the regressive nature of US healthcare financing. Scott is right that what we call "premiums" are effectively just payroll taxes. For the typical American worker, healthcare-related premiums/taxes aren’t just “big.” They’re bigger than all non-healthcare-related income/payroll taxes combined. Healthcare is THE thing impacting take-home pay.
-- If we call employer-sponsored health insurance what it is - a tax - then about 70% of taxes taken from the paychecks of a typical American worker with family coverage go to healthcare. If the worker has individual coverage, that number is about 51%.
-- In hard dollars, the healthcare industry takes about $26,000 from the total compensation of a worker with family coverage whose salary is $50,000 (whose total compensation is actually about $70,000).
-- The structure and branding of healthcare financing (having the employer pay the bulk of it, and calling it a "premium" instead of a "tax”) leads the typical American to grossly underestimate 1) their healthcare costs and 2) their total taxes.
-- Because the US healthcare system is structured to overpay by 2x, this typical worker is overtaxed by about $13,000.
"Medicare For All asks that we go from one of the most privatized health systems in the world to one of the most socialized, leapfrogging over successful semiprivate ones like Germany and the Netherlands. This is especially odd since those systems seem to be some of the best performers. Why would this be tempting? Absent a theory of why Germany and the Netherlands work so much better than the US, I’m not sure."
Absent a theory of what's so great about the German and Dutch systems, you can't ask that the government to implement that theory. Probably the people calling for medicare for all don't actually know anything about the diversity of European systems. But what good would it do them to know which systems are best?
IMO, the most interesting model I've heard of is Israel's – consumers choose one of 4 non-profit HMO's to belong to, who are paid by the government per person who subscribes. HMO's offer much better incentive models for overall quality of care, and the competition keeps services consumer-oriented (compared to fully-socialized systems like the NHS).
So, I am curious about the percentage of uninsured people in each country and how this relates to overall health care costs and life expectancy? Also, what about Japan?
While reading the Amish healthcare link on SSC, I had an idea on how to keep costs down:
A members-only prepaid hospital. No obligation to treat any non-members. Accepts no insurance. Membership fees would cover the fixed costs of running the hospital plus help cover catastrophic things way below marginal cost. Everything else would be a fee-for-service near the marginal cost, prepaid by the patient with their payment-methods-on-file. Make all the members sign an arbitration clause forfeiting their right to lawsuits to the maximum extent allowable by law.
Then there is no need to ever pay:
* lawyers
* insurance overhead on either the hospital side or the insurance company side
* debt collectors
* people who process paperwork of newcomers. It'd all be done on a website before they ever visit the hospital.
* paying extra to compensate for those who who scam the hospital or can't afford to pay.
I'm not sure this would be entirely legal in the US, but it should be.
As a data point, here's my experience in Germany. I've been living in Berlin for 1.5 years.
As an employee, I pay 8% of my gross salary on health insurance. This is just 50% of the total cost, with my employer paying the other half. As long as you make less than 64.350 euros gross a year (and the threshold grows every year) you are compulsorily insured with public insurance. If you make more, you can switch to private. If you're young and fit, it will cost you much less than public insurance. But if you get in trouble and want to switch back to public, it can be very difficult. However, if your income falls back under the ever-growing threshold, you are forcibly switched back to public.
Even with public insurance, you must choose a provider, but like Scott said, they are all very similar, so the choice is easy. I chose my provider because they speak English. I can call them or write them at any time and they are very helpful.
I don't have health problems, but I've been doing a lot of medical exams. The system is smooth and efficient. I always come out very impressed. Like most people, I book my appointments on a popular online platform. I am not tied to a specific family doctor: I can go to anyone who has a free spot, so there's always a way to get an appointment within a few days. I can also directly book visits with specialists without going through a family doctor.
The clinics ooze a sense of wealth and high quality healthcare. Wait times are short and the doctors all speak English. Processes are streamlined as needed: in one case, a doctor wanted to send me to a specialist, so he just gave me a piece of paper and told me to see his friend downstairs. Ten minutes later I was done. In another case, a family doctor spared me a visit to a specialist and accelerated the waiting time for some physicals so I could get a vaccine sooner.
I am very prudent and careful about my health. I find that doctors here are understanding and willing to conduct exams. They have time to listen and engage and don't seem overworked.
There are almost no added costs. This includes dental work: I've had two or three cavities removed. Oh, and mental health: you can get at least 80 hours of therapy on the public scheme, with a therapist of your choice.
The drawbacks: the health scheme is extremely expensive, both for the individual and for the state. And the system was mostly designed with employees in mind, so it can be extremely burdensome for freelancers and the self-employed. As self-employed, you need to pay 14.6% of your gross income! And this on top of all the other taxes, which are very high in Germany!
As for Scott's questions:
"Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs?"
I don't know, but I assume it's because these industries are heavily regulated and don't have room for maneuver.
"Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?"
Again I don't know, but from the user's viewpoint, public insurance is a monolith. It doesn't matter which provider you have. When looking for doctors, you only have to check whether they accept public insurance (most do). I assume that providers are forbidden from not reaching agreements and imposing out-of-network costs.
Another idea: abolish the patentability of obvious me-too drugs. The patent application would have to prove the drug has a different mechanism of action than the prior drugs.
"People talk about how the US system is 'privatized' and the Canadian system 'socialized', but a lot of this comes down to whether your payments for the same basic package are marked 'paycheck deductions' vs. 'taxes'."
On average, these are the same. But if you make much less money than average, paying for health care via taxes is a much better deal than paying via paycheck deductions, and vice-versa if you make much more than average.
Also, you said that China and Taiwan are much poorer and less developed than the other countries on the list; this is definitely true of China, but in terms of PPP GDP per capita, Taiwan is on par with Germany and considerably wealthier than France or the UK. For some reason it looks much poorer in exchange-rate terms. Certainly it's much closer to Europe than to China.
I haven't been to Taiwan for several years, but last time I was there it didn't strike me as obviously less developed than Europe. It's getting hard to tell these days, though, with even poor countries having modern cities, and even rich countries having less-developed rural areas.
Honestly, I take someone saying the US as a "mostly private" system as agenda setting in the first place. As far as I can tell, slight majority of spending is private. But the most intensive care tends to be for older people and under single payer.
Having lived in both Germany and Switzerland, it is a red herring to put them into different categories, just because of the formal status of their insurance companies.
The main point is: In both systems, all insurance companies must offer exactly the same product, called basic insurance. It is not up to the company to decide which cases they cover or when they pay. This is regulated, and border case are resolved otherwise. (Some very minor variations are allowed in Germany, almost none in Switzerland). And they can't reject any costumer. In such a situation, the price will not depend on the type of company.
What actually makes a difference are very different things. In Germany, if I have disease X, then the doctor/hospital will be paid a fixed amount to treat X. But they have to treat it ("Behandlungspflicht"), they can't reject a difficult case, even though they lose money with it. In Switzerland, the doctor is paid proportional to the amount of time/effort treating X. In both cases, there are long and detailed price tables, all of which are independent of the insurance. I think this is the main reason why the Swiss system is more expensive than the German one. (It doesn't show in the table, but I suspect that it would show if you only consider basic insurance. Also, drugs are probably cheaper in Switzerland, relative to income.) For better or worse, Swiss doctors are not optimizing so hard for efficiency. I like the Swiss system better. Swiss doctors don't keep cutting me short. But it's expensive.
Of course, companies can offer things that go beyond basic insurance, but this is a completely different market, and probably much closer to US system. But those are luxuries, not necessities. For details on the two countries (I was referring to public insurances in Germany, which is only part of the system), there are excellent description of those systems by Lars (on Germany) and Er Matto (comparison between Germany and Switzerland) in the comments.
As I understand the Swiss system, basic healthcare is mandatory, rates are more or less fixed by the government, and providers must accept any citizen who applies. This avoids any bias in who does or does not get insured. Insurers can offer extra products at their discretion on top of that, from rebates if you use a fitness app to private rooms in hospital if you pay more.
In Switzerland, you receive your income before both income tax and healthcare technically-not-a-tax, but you still have to pay both of them.
1. Cultural differences. Comparing health systems across cultures is like comparing education systems; it's often not the system that differs but what the participants bring from home as it were. For education, if all the kids show up with an strong expectation that their job is to learn, and that they will learn, it hardly matters what the teachers do as long as it is non-violent. In the US, we expect that we can live how we want, eat all we want, and if something goes wrong we'll get a pill to fix our discomfort. I have lived in a variety of cultures, poor and rich, and in comparison am still astonished by how little care so many Americans take of themselves. We also expect physicians to be superhuman and are willing to pay them accordingly, whereas most of their job - at least in primary care - could be done by a nurse or a pharmacist. I have lived in places where in fact the first place you went for care was the pharmacy, and the pharmacist asked you a few questions, sold you some pills, and you were set. We expect the latest to be the best, and are eager to pay 10x more for a pill that works .1% better. We have a whole range of cultural assumptions about medicine that will not change simply by changing the system, and as long as we have those assumptions, most systems will not work well.
2. Related to this, but tangential, is what problems we expect the health system to manage. Just as in the US we somehow expect police to solve domestic disputes between spouses, we expect our health system to manage all the problems incurred by our lack of a safety net. I did a very simple study once (https://qualitysafety.bmj.com/content/20/10/826) which found that government expenditures on the social safety net explained differences in health outcomes (things like infant and maternal mortality, etc) better than government expenditures on health care; basically, spending more on social services can prevent a lot of health problems down the road. Subsequent studies have found similar patterns globally and across US states & counties.
For both these reasons, I don't think it makes much sense to compare 'health systems' across countries in isolation.
I like the joke at the end about negotiating a price of the book at the end. It actually highlights the difference between how pricing works in different markets.
Many people think that prices for goods and services are defined by the market, hence they are “legitimate”, for the lack of better word. There is also an intuitive belief that price of something is connected to the value it provides. So when price of something is exposed as arbitrary it naturally begs the question why does market forces would not influence it.
The issue is quite simple, the market equilibrium (and “fair price”) is achieved _only_ when there is competition on both ends - the buyers and the sellers. If there’s one seller and many buyers — seller defines the price.
If there’s one buyer and many sellers - buyer defines the price. So when government negotiates with many insurance providers, government can influence the price.
But when you sell books, there are many readers and many publishers, so price is less arbitrary.
Now this is interesting from an ethical POV. Is it ethical to take more risks with a brain-dead patient? I think so.
I'm thinking the "pig" kidneys are more likely to help than hurt the patient, and considering the brain-dead state, extreme measures are warrented (despite the obvious inability to give consent).
I'm pretty sure drug prices outside the US are only low because Americans are effectively subsidizing drugs for the rest of the world. Regardless of how much a drug sells for, it still costs pharma companies $1-4 billion to create a new drug from ideation to market. But manufacturing costs, especially for most small molecules, is basically negligible in comparison. So as long as a pharma company can recoup its R&D investment, say by selling the drug for lots of money in the US, then it still makes economic sense to sell it for basically any price in other markets.
If the US set drug prices like other countries, probably Americans would pay less and everyone else would make up the difference. Or even worse, prices would stay low and pharma companies would stop all expensive drug R&D. But there's no healthcare policy that can change the fact that drug discovery is damn expensive. (Probably changing FDA rules could do this by making approval cheaper/more efficient, but that's a separate issue)
Frankly, the rest of the world is free-riding off of US pharma spending. If I ran the zoo, I would say that drug companies must set prices in other countries as a ration of their per-capita GDP to America's.
So Switzerland would spend more per pill, but Peru quite a bit less. Only seems fair, right?
I feel like using life expectancy at birth is a very poor metric for judging healthcare systems. I lived in Japan for 15yrs and I'm pretty confident it's not the healthcare that gives them long lifespans. Genentics, diet, lifestyle would seem to me to have way more effect than healthcare.
My personal experience there is there are good doctor's but also many bad ones. By bad I mean they'd never have passed whatever tests are needed in the USA to practice medicine. Not going to laborate my bad experiences here but I did eventually fine doctors I liked..
On the other hand the government sets prices and you can basically visit any doctor you want anytime you want. Just show up and hand over your insurance card. I loved that part. That includes seeing many specialists. . Prices are very inexpensive compared to the USA.
This has probably already been said, but the requirement (in the US) for employers to provide health insurance for full time workers leads to hiring more part time workers. I know a few people working multiple customer service type jobs. It stinks, is how I view our healthcare.
Former Soviet Estonia pays about 2.5k per capita, life expectancy 78.5, infant mortality 1.9. I've heard we're one of the most 'effective' countries in underpaying our doctors : ) This creates the problem of some of them opting to work in neighbouring 2x richer Finland. Medics seem to be exceptionally duty-bound people though, are willing to do a lot of overtime, and mostly won't really leave for greener pastures.
We often have to do charity campaigns to raise money for rare cancers that aren't covered by our system. I gather oftentimes the pharma companies just aren't that interested in dealing with a folk of 1.3 million, among whom some rare cancer happens 10 times in 10 years. And we're also kind of too poor to pay 100k for a shot in the dark.
I see the common strategy of 'just try to be cheap more' emerging.
Dutchman here. It might be good to know that the *only* thing for which there is a meaningful market is additional insurance. The basic insurance is completely regulated, with premiums set annually by the government (and discussed in parliament) and regulated deductibles (basically around €350,- per year but you can get a slight discount on your premium if you max out at around 800).
Moreover, it is forbidden by law for healthcare insurers to make any profit. Any profit made has to be returned to the policy holders. It can also not be used to grant bonuses, buy back shares or any such shenanigans. The idea of the Liberal-Conservative (which is right-wing for Europe) government which abolished the Patient Fund (a government health insurance) was, originally, for profits to be introduced at a later point. But since the current system went into effect in 2006, this introduction has been postponed, and probably will be indefinitely, even though we've had several right-wing governments for the last decade. It's just kind of taken as a given by everyone that introducing profits for insurance companies would drive up cost and it's kind of gross to profit off of a basic human right.
Having said that, the only real bargaining power that insurance companies have, as far as I can see, is contracting hospitals to take their policy holders. There has been some push by both government and insurance companies to use this as a tool to force hospitals to specialize, but I'm not knowledgeable enough to know if this has helped any more than the regular tools of government funding and decision-making to achieve this goal.
The biggest problem Dutch people and doctors have with this system is that there is sometimes a bunch of unnecessary bureaucracy involved. For instance, some medications that are quite permanent (like type 1 diabetes medication) need to be re-approved every year by that patients insurance company, for which the doctor or their assistant needs to send a form. (As an aside: there is a campaign among medical staff to stamp these documents with a picture of a purple crocodile. Why a purple crocodile? Because a famous Dutch advertisement (ironically by an insurance company) features a purple crocodile lost by a little girl in the swimming pool, which an obstinate pool employee refuses to hand over even though it's right behind him, until the mother of the girl has filled out several forms in capitals. Eventually he tells her they can pick it up in the morning between 9 and 10. https://www.youtube.com/watch?v=mJipJwDPJ-g you can watch it here, it works quite well even if you don't understand Dutch.)
My take on the US and its drug care costs are two fold:
For drugs out of patent: ABSOLUTE INSANITY partially driven by FDA regulation making it quite difficult and expensive for generics to exist and it should be quite straightforward to improve the system.
For new drugs: US patients massively subsidize pharma research for the rest of the world, the system can probably be improved by lower/faster FDA regulatory costs but probably not by a whole lot.
Healthcare doesn't work like normal economics because people NEED it, it's not a good with a varying demand that can be terribly influenced by advertising. With or without healthcare or choices, if you break your arm, you almost certainly need to get seen by a doctor. So much of "traditional" and colloquial economics is built on a system that sidesteps necessity for consumerism. Markets can be used as a tool to make healthcare better, but that logic doesn't really apply to the thing itself.
Glad to see from the comments that not only can we not decide what sort of medical system works best, but we can't agree on whether the healthcare systems of individual countries are brilliant or terrible.
But I'm glad that options other than the status quo and the NHS are being moved towards the US overton window.
The business about health care being a bizarro world where normal economics rules don't apply is true, but it's true in that it's inherently broken. To have efficient markets you need good consumer information, the ability to easily comparison shop and change vendors, easy entry and exit of vendors from the market. If you wind up in a coma and are brought to an emergency room you can't open your eyes, discuss what the treatment will be and how much it's going to cost, do appropriate research and decide for yourself whether the doctors's recommendations for treatment are appropriate, decide that the amount being asked for is outrageous, find a potential competitor, have them open up a competing ER next door, and check in there. Every step of that can't happen. The seemingly weird and artificial things like government negotiated prices are compensating for the normal mechanisms of efficient markets not functioning. In the US I've had the experience of getting quoted a price for a drug at a pharmacy, commenting that it was completely outrageous, getting argued with that the insurance company was paying most of it, asking what it would be out of pocket, getting quoted a price lower than the copay, then glaring at the pharmacist who suggested swiping a magical card she had through the machine which got a price even lower. Under such circumstance the government putting their foot down and declaring that there can only be one price and they're negotiating it on behalf of consumers is completely reasonable.
One of the other major differences between the US healthcare system and the EU systems is that the European Commission does drug approvals for all of the EU (and there are other EU-wide paths to getting drugs approved, with approval by any regulatory body being sufficient for the drug to be approved); whereas, the FDA does approvals for just the US (and it doesn't compete with any other US regulators to do the approvals). This gives individual European countries much more leverage than the US would have for negotiating with drug manufacturers. Since most of the cost of drug manufacturing is the research, trials, and approval process, Norway (technically a non-EU member of the EEA, but they still accept approvals given by the European Commission) can offer drugmakers relatively low prices and still have them sell their drugs there because they're already going through the European Commission approval process to sell their drugs in the rest of Europe. If the USA starts setting drug prices particularly low, it will have a much bigger impact on the incentive to fund drug trials through the FDA approval process. This also changes the optics dramatically. There's not going to be a scandal over a drugmaker failing to push their drugs through the approval process the same way there would be over it refusing to sell drugs to a particular country where those drugs are approved. (And I think it's generally accepted that the FDA's process is slower, more stringent, and more expensive than Europe's.)
Relatedly, another thing that is always missing from discussions of healthcare spending is the extent to which Europe and Canada freeload on the rest of the world for medical research. Below are the total medical R&D expenses by country for years for which I could easily find data. The key takeaway is that even though US GDP is only 13x Canada's in 2018, US medical research spending was approximately 45x theirs. US GDP is only about 20% bigger than Europe's, but the US spent significantly more than 2x on medical research than they do; (and as far as I can tell from less complete data sources the disparity is growing).
United States (GDP $21T): 2007: $131B 2012: $119B 2013:$143B, 2014: $154B, 2015: $163B, 2016: $173B,2017: $182B, 2018: $194B
Japan (GDP $5T): 2007: $21B, 2012: $28B
All of Europe (GDP $17T): 2007: $56B, 2012: $54B
Canada (GDP $1.6T): $3B in 2009 and 2010, and $4B every other years since 2007 (rounded to the nearest billion) -- all of the other values are in USD; whereas the Canada numbers are in CAD.
I think the overall picture looks something like this:
The incremental cost of manufacturing a pill tends to be pretty cheap. A drug company has to make back its investment in R&D with returns to justify the investment somewhere (which is necessarily a high risk investment with a long time window between the investment and when it starts giving returns which standard economic theory says makes the required returns higher). But once it makes back its research investment anywhere, it has a pretty big incentive to just sell its drugs everywhere even if it is selling them heavily discounted in some markets relative to others. (The regulations around drugs are a particularly effective form of geofencing that eliminate the incentives that might otherwise exist to charge similar prices in different markets.) So we have a drug industry that basically works by researching drugs to sell them in the United States; but then also pushing the drugs through the relatively easier regulatory regimes in the rest of the world to also sell the drugs everywhere else possible where the only investment that those additional sells need to justify recouping is the cost of getting the approvals since all of the research is already done. And we end up with a system where drug development is worthwhile if and only if those drugs end up being sold in the United States, and where the FDA has the most stringent approval process, and nobody really has an incentive to change this. American regulators and politicians get disproportionately more power out of this arrangement. Drug companies make their profits. American insurers are able to pass along and distribute the costs across the population so they make their profits too. European countries get their drugs relatively inexpensively, and are existing in a legal context where that is their only real incentives since they really can't increase their ability to regulate drugs because the power that exists there is distributed throughout the EU rather than possessed by the governments of the member states. And the members of the EC probably are a bit unhappy and trying to increase their own ability to regulate things, but they're sufficiently disconnected from the powers of the member states that what they want doesn't really matter. (So Europe has somehow found a way to make the people who have the most incentive to increase the price of drug R&D there from having their voices heard.) And the American voters are the only people who really have an incentive to try to reduce those prices, but many of them are shareholders of the drug companies anyways, many of them aren't but see themselves as "temporarily embarrassed millionaires" who plan to own lots of stock someday, and all of them are participating in a political system where there is almost no ability to express your opinion on any given issue because that's how the American two party system works.
I'm very far from being an expert in health care systems, but I'd like to offer a bit of insight into the Brazilian system since Scott demanded to know what developing countries do and Brazil is my home country. Brazil is in a very curious position regarding health care, since the current Constitution established in 1988 provides that we will have universal health care provided by the State (Sistema Único de Saúde, or SUS to keep with the three letters) but at the same there is an abundant proliferation of private medicine practice - hospitals, clinics, insurance companies, doctors can work outside the universal public system in for profit systems and not get paid by the state. This basically means we have at the same time a system with a lot of state-run hospitals and clinics, as well as state-employed doctors, other facilities run by private operators but funded by the State (considered part of the universal system) and also 100% private enterprises. This creates a situation in which a very large portion of the middle, upper-middle and upper class all have private insurance - provided by their employers or paid by the user - and the poor have universal coverage under the public system. However, the universal public system ranges enormously in quality: for example, we have simultaneously one of the best vaccination systems in the world for free but months of waiting time to get a simple doctor's appointment or years of waiting to get a surgery. Some types of surgical procedures provided by the state are good and others are not, same with exams, and the state-run hospitals also vary enormously on quality. The users of most private insurance companies also have a lot of low quality services, albeit with shorter waiting times and more options. A few of the really expensive ones provide quality services for the richer individuals. Also it's worth noting that a lot of the best doctors don't accept insurance payment at all and charge a fee for each appointment.
So basically poor people get screwed regarding surgeries, appointments, laboratorial exams and so due to poor quality and waiting times but at least can count on some basic quality services for free such as vaccination, ambulances, and urgent first care. Middle class people fare slightly better with considerably shorter waiting times, marginally better services and can also use the public system in which it does well. And rich people get very good health care for a reasonably pricey amount.
Brazil also has a very commended drug price system involving patent breaking but I don't really know much about it, only that it really makes most drug prices really low.
The political side of things is also very complicated especially because the left-wing blocks any productive discussion on reform since it considers the public system untouchable and refuses to acknowledge its shortcomings most of the time - or blame them on underfunding and "neoliberal policies". A lot of upper class left-wing people haven't used the public system once in their life but still consider it perfect. Brazilian things.
The US is the only country that pays "full price" for drugs. Others pay as little as they can get away with.
This means US consumers alone finance most medical drug development, and the rest of the world gets a free ride.
Many Americans want to pay the lower prices the rest of the world enjoys. That would be great in the short run, but in the not very long run, most drug development would disappear, since there isn't a sustainable way to finance most of it.
This is also why the FDA has such an oversized influence on the whole world. Other regulatory agencies don't really matter much in comparison.
This is a rather bleak way to look at things, so I'd love if someone could convince me this is wrong?
Part of the reason that drug negotiation prices work is that researching the efficacy of a drug is a fixed cost, and so if you find that your drug works in America, then it probably works in Europe too (As someone who works in pharma I can tell you that different countries/regions have different regulatory requirements and some countries want evidence that the drug works for the people who live in their country specifically, but these requirements are usually rolled into existing clincal trials, usually at a fairly low cost).
The argument is often made that if the US negotiated to lower their drug prices then drug companies would fund less research and there would be less drug innovation. I have no idea how true this is in practice.
> How does the US model (which doesn’t work) differ from the superficially-similar Swiss, German, and Dutch models (which do)?
Well... what is it about the US model that we're saying doesn't work? The table you feature shows that the US is an outlier in customer satisfaction. It does not appear to be exceptional in life expectancy (where it's on the low end of the table, which is bad), or in frequency of unreasonable waits for specialists (where it's on the low end, which is good), or in amount of money spent on health care (where it's the highest value, which has no particular moral valence, and where it's quite similar to Switzerland [and, to be fair, the two of them are substantially higher than most of the rest of the table, with an honorable mention going to Norway]).
It is an outlier again in terms of health spending as a share of GDP. This tells us that Switzerland is, per capita, much richer than the United States. (Which is true: IMF estimates for 2021, according to wikipedia, are US$93,500 per capita for Switzerland and US$69,400 per capita for the US.) Is the problem that our health care system doesn't work, or that we're poor?
Demography has a significant influence on GDP. And the US is, by that metric, seriously handicapped compared to Switzerland; we have a bunch of low-earning Hispanics dragging our GDP per capita down and our life expectancy... up. What lesson do we draw from that?
Do we have a problem with our health care system other than that people are unhappy with it? By the standard aphorism of "reality is that which, when you stop believing in it, doesn't go away"... is there a real problem here?
The US does a really poor job of keeping (advertised) drug prices low because we a) have like 1M different purchasers of drugs, and b) those purchasers use a variety of different middlemen to actually purchase the drugs. We pay the middlemen a percentage of the drug costs.
For clarity, the dollar value chain is like this: Purchaser -> Insurer -> PBM -> Pharmacy -> Wholesaler -> Manufacturer.
All of the steps other than Purchaser (and small pharmacies now) make more money the higher drug prices go. Insurers can keep 15-20% of total premiums for their internal administrative costs and their profit margin under the Affordable Care Act's "Medical Loss Ratio" rule. That means that the only way for Aetna's profits to increase from 2021 to 2022 is for total "medical losses" to increase. They can keep 20% of $70B in 2021, and 20% of $80B in 2022, implying that drug+hospital+doctor costs HAVE to increase by $8B during the year, or else premiums can't go up and Aetna can't make more money.
The PBM step generally keeps an administrative cost per prescription plus a % of the cost of branded drugs. These companies are: CVS/Caremark, Express Scripts, OptumRx, Prime Therapeutics and a lot of minors. They negotiate "rebates" with manufacturers. This basically works like this: Humalog and Novolog are effectively equivalent drugs. They cost ~$300/month without insurance. The PBM will say to Lilly "That's a nice humalog you've got there. I'm going to need $150/month as a check back to me or else every patient on my plan gets Novolog unless the doctor fills out 500 pages of paperwork to get Humalog AND the patients pay $200 of the cost." Lilly says "ok fine." According to the PBM lobbying organization, PCMA, most of the rebate money goes back to purchasers, but IMO that just makes the problem worse because it makes purchasers complicit in the game by sending them checks that they use to reduce their premiums instead of reducing the cost of drugs to their plan members.
Consider for a moment that CVS/Caremark by themselves is the PBM for ~112M people in the USA. That's more than the entire population of Germany. If you think that Germany pays less for drugs that CVS/Caremark.........
Pharmacies generally get paid ~1-2% of the cost of branded drugs as their total compensation. On generic drugs, a typical pharmacy will get ~$10 per prescription on average as their compensation (to pay staff and rent etc).
Wholesalers like Cardinal, McKesson and AmeriSource Bergen (together controlling 95% of drug distribution) generally make their money by marking up generic drugs to pharmacies, and by taking a ~2% cut of the price of branded drugs.
Manufacturers make money by selling drugs for more than it costs to make them, including paying off all of the folks in the middle out of their revenues.
The actual prices realized in the US for branded drugs ARE likely higher than in other countries, but the differential is almost certainly not as large as it appears. grosstonetbubble.com is a site that talks about the size of the wedge between prices paid to manufacturers by wholesalers for drugs, and prices actually realized by manufacturers after accounting for rebates and other discounts paid to the PBMs and insurers.
Also... consider for a moment that NET drug prices (after rebates and other discounts) have DECLINED in the US for the past 3 years. Anyone that talks about "skyrocketing drug prices" and doesn't pay attention to the middlemen is just lying.
I've actually had that idea before: why don't governments act as a sole source purchaser for foreign copyright media, especially since distribution is nearly costless. E.g. Sports broadcast rights only having one govt sponsored rights buyer who then has to resell at marginal cost to distributors.
Or just ban exclusivity deals. That might work too.
One huge difference between healthcare in the US and elsewhere is advertising. The US has a whole industry dedicated to marketing drugs and medical services directly to patients, which just doesn't exist in most other countries.
I think this explains a big part of the cost disease. Ads for drugs are particularly common on daytime TV or cable news, I guess because they're watched by elderly people who tend to be sick and have Medicare. Most pharmaceutical companies actually spend more on marketing than on r&d, so high drug prices aren't really subsidizing new meds. They're subsidizing Fox and CNN waging the culture war.
And it's not just drugs. The are law firms, insurance companies, even hospitals promoting their emergency rooms. The whole purpose of these ads is to increase demand for healthcare, so as well as pushing up costs directly they probably lead to a lot of unnecessary doctors' visits and prescriptions.
As somebody who has seen both ends of the spectrum (lived in both the UK and US), my opinion is that this kind of analysis is overly complicated and virtually irrelevant. The problem in both countries is really the same: patients are disempowered from acting in their own interest.
In the US, there is no way for patients to choose cheaper healthcare.
In the UK, there is no way for patients to choose higher quality healthcare.
The inevitable result is that US healthcare is unaffordably expensive and UK healthcare is unacceptably low quality. This is only indirectly related to how it is paid for.
Why would other countries get better results than the US, even though the systems share many features? Probably because patients generally have a louder voice. Whether this is legal or cultural matters little.
As an aside, the part about each country averaging the costs of a basket of countries is the known network problem of consensus dynamics [1].
In practice, countries will always converge to a price, they will not fluctuate indefinitely. If they form communities (e.g. if all Western countries look at each other, all Eastern look at each other, and so on) they will first converge to the average of their community.
If the communities are connected (e.g. at least one country in a community looks at a country in he other communities) then eventually the whole system will converge to the average.
I describe it in more details in the network science book that I wrote [2], Section 8.5.
[1] Morris H DeGroot. Reaching a consensus. Journal of the American Statistical Association, 69(345):118–121, 1974
As to the reason why Germany and Netherlands work relatively well:
1: Evolution. German health care system has been around since Bismark. Lots and lots of evolutionary tinkering, mostly by people who at least party knew what they were doing.
I don't think this is not a simple question of who is paying and whether private not-for-profit, private for-profit, or public institutions do the work?
Drucker already stated that healthcare organizations were double-headed monsters! The fact is it there are way more than two heads. Many stakeholders are present in a healthcare system: general citizens and the politicians that represent them, healthcare managers (top level, intermediate level and local supervisors), physicians, nurses, nutritionists, healthcare technicians, psychologists, social care workers, drug and medical device makers, suppliers, professional schools and colleges selling healthcare degrees, etc.
In many countries, healthcare professions have bars that somehow may be protecting themselves more keenly than the patients they are supposed to serve. Inside those associations there are subgroups that are interested in keeping a low level deficit of resources in their specialty to keep a higher pay per service. Some of those groups may have considerable political and social power and have their interests be respected by politicians when healthcare decision making is made by ministries.
Regarding physicians:
- How are the labour relations between physicians and hospitals (public and private)? Is the work contract-based, physician groups-based, or physicians are working as independent contractors?
- Did physicians pay $200.000 for their college educations, or was it virtually free (as in some countries)? Will that cause escalating healthcare prices to pay college loans? Will physicians try their best to specialize in Urology or Plastic Surgery, instead of practicing General Medicine, just to have a higher pay and pay their debt?
- Is there uncertainty in continuity of practice (ie does the physician believe he may be prevented to practice in the near future because of failure to achieve a passing grade in the recertification exam, or he may be disbared because he commited a mistake while seeing his 56th patient that day)? What is the likelyhood of being sued (I am pretty sure there are way more healthcare related lawsuits in the USA comparing to Europe)? How much does he have to pay for professional insurance?
There are so many variables at stake I don't think anyone can fully explain why are some healthcare systems working better than others. Or, at least, there is no single reason for it. The USA may be a perfect storm of many bad decisions. And Denmark may have a great healthcare system because labour relations are more transparent and respectful than other countries. And that characteristic of the country is not specifically related to healthcare. Healthcare professionals burnout statistics may be very informative in this matter.
In 2010, Washington Post reporter T.R. Reid wrote "The Healing of America" on this topic (a comparative survey of developed countries' health care systems). While a dozen years out of date, it might still be more informative than Dr. Emmanuel's work.
I find I do not care about the best or worst national healthcare system.
I care about the best outcomes *for me in my current context* - I want the national system that provides that. If that system is more or less expensive for the nation, requires certain social setups or population types, involved oppression or celebrates specific kinds of humans or animals, melts the polar caps more or less... don't care. Best outcome for me, thanks.
I expect many people are this way once you remove the need to perform social caring or tribe affiliation or whatever.
This is why many arguments for or against system A or B tend to fail. Lots of arguments about what is good for the world, the nation, or the group.... and nobody cares. The 'best' national healthcare systems probably screw a lor of individuals in some way they would call screwed, and the worst probably take great care of some people.
The fundamental reason why the United States is so bad is because health care breaks the iron law of capitalism, which is that the person who uses a good or service should be the person who chooses it, and who pays the bill. Doctors & patients together choose a medical treatment, but insurance pays the bill. Individuals use insurance, but don't actually choose or pay for it; that's done by their employers, and the plans are so complicated that individual consumers can't make heads or tails of it anyway. Hospitals offer treatments, but just try asking a hospital how much it costs or shopping around; they flat out won't tell you. It truly is upside-down bizzarro world. Plus, the bureaucracy is impenetrable. Have you ever noticed how long it takes a pharmacist to fill a prescription? Taking the pills off the shelf takes 30 seconds. Calling the insurance company and waiting on hold -- that takes 15 minutes or more.
Wrt. to other countries, there's not a lot of difference between regulation and socialism. Sure, in Germany and the Netherlands insurance is provided by private companies (my wife is Dutch). But if all companies are required by law to charge the same rates, and offer the same coverage, then it doesn't really matter whether a private company or the government pays for it. A really easy way to lower costs in the U.S. would be to require all insurance companies to offer the same coverage and costs as Medicare. All hospitals would be forced to accept that, because otherwise they'd have no customers.
I lived in the UK for many years, and used the NHS. It was great. No paperwork, no insurance cards, and no weird bills for ludicrously high amounts when you leave. As a patient, I loved the simplicity of it. But there is a catch.
The NHS hospitals get a fixed amount of money per year, and they have to treat every patient that walks through their doors. Hospitals are non-profit, and success is measured by how many people they can treat given a limited budget, not by how much profit they can make by doing lots of expensive treatments. That's the main difference between "capitalism" and "socialism" in this case -- it's the metric you use to measure success. NHS hospitals do a cost/benefit analysis on every treatment, and focus their efforts on the low-cost, high-benefit treatments. If you want the hospital to do an MRI, or something fancy, then they will not agree unless your condition is life-threatening. But if you just want basic every-day care, they're pretty good at that. I think the life-expectancy numbers bear that out; high-cost low-efficacy treatments do not improve outcomes all that much at the aggregate level.
And the NHS is really good at pinching pennies in smart ways. When my wife needed to go to the hospital, I called the NHS hotline, and they asked if she was able to walk. Not far, but yes, she could. So they sent a taxi-cab to my door, who dropped us off at the hospital front entrance. It was totally free -- his fare was paid for by the NHS. In the United States, they'd send an ambulance, for 10X or 100X the price, then bill it to insurance, who would then send a co-pay to me for some hundreds of dollars. That doesn't help anybody.
In a way, the NHS actually satisfies the iron law of capitalism better than the US system does. It works because the hospitals/doctors both make the medical decisions, and they foot the bill.
Insurance companies negotiate lower prices collectively through Pharmacy Benefit Managers. If by market price for a drug you mean list price, almost no one actually pays the list price in the US system. I personally find that Zeke tends to handwave concerns about drug price controls and innovation a bit too much so he downplays the benefits of paying higher prices for medications.
Taiwan is a *very* measurable, and measured, health care environment. And yet many of the “key facts” published about the features of health care in TW don’t align with the ground truth.
This is a data point that raises doubts in my mind about the methodology and mindset of economists, public health researchers, and the other folks who try to collect good science on health care systems and economics.
Forgive me for not listing more than two examples, I’m writing with little time to spare.
- not correct: few or no private insurance providers in TW, few or no people in TW have private insurance
- also not correct: most patients in TW pay very little out of pocket for expensive tests or procedures
The patient experience in Taiwan for most health conditions is, on average, as quick and easy as anyone could hope for. And the citizens, government, and hospitals are proud of the NHI and the health care system. The VP is an epidemiologist, the mayor of the capital is a surgeon. Access is granted freely to researchers who want to study public health in Taiwan (I’ve done lung cancer treatment clinical trials in TW hospitals, measuring among other things the performance of oncologists). There is plenty of high-quality hard science done in Taiwan in clinical research, pharma, bioscience, and a solid pharma and medical device industry.
And yet despite all this happy openness…the conventional wisdom on the “health care system in Taiwan” is not aligned with the key and complex reality of the features of health care in TW.
Aside: yep, the doctors in TW see way more patients each day than in the States. The base pay is barely more than resident pay in the US. But there are plenty of career physicians who are wealthy enough to afford an above-average home in the large cities in Taiwan ($1m-$3m is the average price for an apartment) and a Tesla.
Thanks for this very interesting review. I suspect I'll get more from this than reading the book.
As an NHS (UK) doctor, it's always interesting to find people who can cut though our blinkered propaganda about having the "best" medical system in the world. Clearly the UK has one of the best compromises - and there is other data to suggest that we do well on value-for-money, but that our main problem is access. The pandemic has undermined what was already quite precarious and the UK is very likely to fall down the rankings. We shall see.
The single biggest omission from this book would appear to be the exclusion of Singapore (or did I miss that). They have consistently the best outcomes for the smallest %age of GDP (about 5% compared to nearly 20% in the US)
Taiwan also only gives out the exact amount of drugs, you're supposed to have for a treatment course. The patient is not left with a bunch of surplus drugs, because there's only two package sizes available. And you get your drugs from the doctor, instead of being sent on an errand to present a written paper to a specialized shop called "pharmacy".
At least, that was my experience when I got treated there.
I have no idea if handing out fewer pills/tablets/capsules actually saves costs meaningfully, though. For all I know the actual production cost per unit of the drug is not a relevant factor, if the actual cost is dominated by R&D and negotiation is done via bureaucracy magic, anyway.
Was nice to see, anyway. There's something very pleasant to that alien Taiwanese aesthetic of "don't get handed crap, you won't need".
The drug pricing, from what I know of, is through negotiation between big drug corps and US government and insurance company(not exactly sure but through negotiation).
And there are different types of drugs. For example, drugs including over-the-counter(generic) drugs. Usually even with the same chemical formula, the same drugs from different manufacturers will be priced very differently. For example, Vitamin12 from China is around 0.001cent/tablet but manufactured in US probably cost around $0.01/tablet(numbers are forged here just to give one example).
I think some other types of drugs are usually patented in US, which lacks of direct competitor in the market and also the R&D costs are high (1 billion dollar for one small molecule anti-cancer drug). This contributes the drug price as well. US indeed has very large pharmaceutical industry (EU has second largest I assume) and many drugs are only available in US. The drug prices in other countries are more affordable and people complain less about the price may also partly because --- they don't even have that option. These novel drugs are not allowed in imported/circulated in the country. Both India and China are famous for sham drugs as they usually have to wait for 20 years after the US patents are over and they can start manufacturing that drugs. China/India may be the driving force to pull down the manufacturing cost for any chemical drugs.
Third, from what I have known of -- US has many more patented, advanced medical devices. They all contribute to the cost of the healthcare. US healthcare is expensive but the quality, once you get to see the specialist, is usually good. US is probably good at high end medicare and difficult diseases but China/India is better at general medicare (home treatment) as they are fast and more economical.
Drug pricing has many models behind and indeed is a very intriguing question.
Afaik a properly functioning Obamacare would look basically the same as the German system. The American version is just too complex and the courts + Republicans have made it much worse, but the basic thrust is the same.
I’m very ignorant, though, so feel free to correct me, but I’m still surprised Scott (or the book) did not mention the implications of Obamacare.
Going by the descriptions of the categories, Germany is actually a mix of 3 and 4:
"Single payer channeled through private insurance with substantial (different kind of) private insurance".
Lars elsewhere in the comments explains characteristics of the German healthcare system far better than I could and in far more detail than I would have, but let me just say that this bit from the description of Australia in category 3 applies to Germany almosy exactly if you just read "government" as "regular insurers" and "private" as "different kind of private insurers" (and some minor changes in parentheses):
"For example, in [Germany] sometimes the private insurance has shorter waiting times, or can get you nicer rooms in more luxurious hospitals. Often (mostly) the same doctors and hospitals treat the government and private patients, but give the private patients more time and resources, which leads to resentment and scandals (don't remember any scandals, but plenty of resentment). On the other hand, the private patients sometimes (very often) subsidize the public ones - ie a hospital charges extra for private patients and uses that to make up a funding shortfall if the government doesn’t pay them enough."
I've had the enormous privilege of having good private health insurance in Germany my entire life so far, and I have virtually no (personal) complaints about the healthcare (and pricing) available to me, it's really really good (for my own personal experience).
>This part confused me, because it seems to be both a government decision and a negotiation. The government sets a price based on some method. Then the drug companies - well, as far as I can tell, they accept. This article makes me think that in theory drug companies have the right to refuse an unfairly low price, but that in practice neither side wants the PR hit of a country going without a drug, both sides try pretty hard for an agreement, and it’s very rare for the process to fail.
>But this made it hard for me to understand this section of the book, which praised countries who managed to keep drug prices low. “Keeping drug prices low” mostly seems to involve having a process that reliably generates low numbers for the government’s offers.
The power in that negotiation rests almost entirely with the government, not the pharmaceutical company. This is what happens if the pharma company plays hardball:
Government: Sell your drug at price X.
Pharma company: No, we want price Y (Y > X).
Government: Fine, your patent's revoked. Now you have to compete with generics and will get Z (X > Z ~= cost of production).
The only real thing the pharma company can say then is "then we'll bribe the US government to be nastier to you in trade talks", which may or may not work.
The real question here is, what is the kabbalistic significance of being named "Ezekiel Emanuel"? That definitely seems like a name with a lot of... something.
> Taiwan works its doctors incredibly hard - they see about 2-3x as many patients per day as in other countries, for less money, and I’m not sure why they stay in medicine or how they stay sane.
The joke-but-also-true answer is that working over-long hours for unclear reasons is part of Taiwanese culture.
>Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply. If you have the courage to say loudly and firmly “we refuse to pay a high price for this”, then providers have to give you a low price, and your health care system will be great and affordable.
My guess for this is that basically, there is a gap between 'A: The amount it would cost for it to be worth our time and effort to provide good health care' and 'B: The amount we're able to charge for healthcare in a supply/demand economy given that people don't have much choice not to buy, generally only have one or a few providers in their area to choose between, don't really understand what they're buying or have the knowledge or time to comparison shop, have principle/agent problems with their insurance discouraging them from saving money, we're ea prestigious profession that people expect to be expensive and they tend to trust when we tell them what things cost, and also we have IP laws giving us monopolies on most of what we do anyway'.
My guess is that B is larger than A, and that in fact B is SO MUCH larger than A that any sane-sounding effort to cut B - like B-10, or .8B, or whatever - still ends up being far larger than A, and so it's still worth everyone's time and effort to keep providing the same good healthcare at that cost.
idk if anyone will see this but re: the drug-pricing section: is it possible that the US is basically subsidizing everyone else by paying so much for drugs?
The book leaves out Japan. Having lived here for over 20 years and in the uSA for 45 years, I would say the system in Japan is better in many ways. The doctors are very good, the hospitals better in terms of after care and nursing, the after insurance costs are unbelievably low compared to the US. Universal coverage from day 1 with private insurance available for upgraded rooms and special treatments. As an older person, no way would I endure the system in the US.
Zooming in on pharmaceutical costs (which are a fraction of the total dollar spent on healthcare) while ignoring very high physician incomes, a broken medical educational system, the huge amount of wasted money spent on salaries and bonuses for healthcare, insurance and middlemen (PBM) executives...High pharmaceutical costs spur innovation and actually help frive down ancillary hospitalization costs. But Ezekiel is an MD, so bringing up physician renumeration (4x times that in the rest of the world) will never be a problem for him.
I have an idea for reforming our health insurance system in the United States, which I have never seen advocated for elsewhere. You all are way smarter than me, so thought I would throw it out to see whether this has any merit. Maybe nobody is pushing this idea because it is too dumb to work, or maybe it just hasn't occurred to anyone else yet, so here goes.
First off, we institute a nationwide, federal government provided, catastrophic health plan that covers every American person regardless of age, employment status, pre-existing condition, or any other disqualifiers. The annual deductible is $30,000 for single and $40,000 for a family. Funding could be through a surcharge on all citizens payable with their annual income tax filing, payroll deduction, or some other similar mechanism. Monthly cost for a $13,700 deductible plan in my area is $1,184/mo so increasing the deductible by more than 100% has to cut the cost appreciably. Also, this catastrophic plan covers absolutely nothing until you have spent through the deductible. Current plans have a rabbit warren of services that are not paid out of pocket, like annual physicals and bloodwork, which increase the cost of all these plans. Shifting responsibility for those services to the end user should result in more incentive for price discovery. On average 20% of people spend enough to satisfy their deductible each year. That would be much lower at this higher deductible and focus the care on the truly extreme cases where there is often little choice in the matter.
By implementing a catastrophic health plan for all, no more families need to file bankruptcy due to a child's cancer diagnosis, being involved in a car crash, or contracting a rare debilitating disease. Those major medical events get paid for now in an extremely inefficient and often soul crushing way. If you have good coverage, the insurance company pays for it and raises premiums on everyone else to compensate. If you don’t have insurance, the hospital charges you, you file bankruptcy, costing ridiculous amounts of time and legal expense, not to mention ruining your financial life for a decade. The hospital doesn't get paid, so raises its rates for those who do pay to compensate. In between those options are numerous iterations of varying soul-crushiness and taxpayer subsidy. Spreading the catastrophic situations more broadly and paying for it in a consistent way will reduce waste and inefficiency.
What about the $0-$30,000? That is where the free market would be let loose to do it's thing. Private insurance policies covering that amount should be cheap and easy to obtain. With an upper limit on annual cost, companies wouldn't have to worry about insuring someone taking a drug that costs $350,000 a month. For the young and healthy, risk tolerant, or those unable to afford private insurance, they would take the risk of needing health care that costs up to $30,000. Not an insubstantial sum, but certainly more manageable than $1 million or more for a brain tumor resection and several rounds of chemo.
With a large chunk of annual health spending required to be out of pocket, price discovery would actually take place. Attempts have been made to lift the veil on this, but until the end user has real incentive to find out whether that hip replacement is $4,800 or $9,200, true change won't happen.
All of the above has been tried in some form or another, and is not revolutionary. The unique part of my idea might solve the last part of this problem.
For all the $0-$30,000 spending that is not covered by a private insurance plan, or if those private insurance plans do not come into being, hospitals could be stuck with large outstanding bills to people unable to pay, much like they are now with uninsured patients. We solve this problem by requiring hospitals to offer payment plans at a reasonable rate of interest, say 1% over the Fed Funds target rate. Payment amounts are capped at 5% of Adjusted Gross Income, so the repayment term could be as short as 1 year or as long as 15 years, but be manageable for the vast majority of people. For example, $30,000 AGI would result in $125/mo available to pay toward healthcare costs, so a $5,000 bill takes 3.5 years to pay off at the minimum. Discounts for early payoff would incentivize full payment whenever possible.
That stream of income would be an attractive investment for the bond market. Hospitals could sell that pool of medical debt, much like banks sell secondary market mortgage loans, significantly improving their cash flow. The debt can then be packaged together in the same way Mortgage Backed Securities are today. We could set up an agency similar to Fannie Mae, I would call it the Healthcare Underwriting and Repayment Trust (HURT).
An industry with the technical expertise to service this medical debt already exists for servicing home mortgages. A 25bp packaging fee for HURT would provide the income necessary to maintain infrastructure and guaranty repayment on the bonds. Another 25bp servicing fee would be paid to the servicers for collecting and distributing payments to investors. Yield hungry institutional investors are clamoring for options, and a safe asset offering a variable yield of 50bp over the Fed Funds rate would be vastly oversubscribed in a world with 30 day T-bills yielding 5bp.
In the interest of relative brevity, I’ll leave it at that, and see what others think of the idea.
2. The companies that make the drugs are mostly in the US, and can lobby the US directly. Those companies also pay taxes to the US. This creates a different situation when it comes to the US negotiating prices then other countries are in, for the most part.
A simple change the US ought to make is "single price". No provider should be allowed to charge different prices to different payers (although different providers could charge different prices from each other). We could write into the next Medicare contract with providers- you are not allowed to charge any customer more than you charge Medicare. This would immediately eliminate the out of network problem, the uninsured retail cost problem, and the cross-subsidy problem. It would eliminate the expensive process of providers negotiating a price with each insurer. It would achieve the supposed monopsony power of single payer without the bureaucracy of single payer.
I am coming to this really late. While the talk here is of how the cost of treatment in the US is higher than in other parts of the world, my colleague Akshay and I did an analysis of cost of treatment compared to income last year, when there was irrational use of tests and medicines in India.
While individual drugs may be cheaper in India compared to higher income countries, when many of them are used irrationally, the cost becomes significant. Add the cost of a CT scan and blood tests and a person with asymptomatic to mildly symptomatic Covid spends something like 120 USD for no reason at all, which is close to the average monthly income of an Indian, but in reality, far more than what 90% of Indians earn.
There is no safety net in India. 80% of patients from all strata of society pay upfront for their tests and treatment and even though there are Govt schemes and insurance, there is significant copay involved.
Point being that even in a poor country with apparently low costs, the costs are not really low when compared to what people earn.
Finally getting around to reading this (really enjoyed it).
As a strong proponent of my own UK system, without getting too post-structuralist, the definition of ‘better’ does a lot of heavy lifting here. Patient choice and waiting times are interesting metrics, but in my ‘socialist’ heart of hearts, I can’t weight them as heavily or even in the same category as health outcomes such as mortality statistics and life expectancy (particularly via measures such as QALYs). Do I want a health system that makes me happy, or that saves the maximum lives per dollar?
Subjective micro-oriented measurements, like patient satisfaction, risk missing the point that we’re all a bunch of self-important, entitled, demanding a**holes whenever we experience even the slightest bit of pain. The lawyer’s knee replacement on a six month waiting list begins to look much less pressing when compared to the office cleaner with life-threatening pneumonia, but the lawyer doesn’t have that context and only one of them is going to answer a phone survey or fill out a grumpy patient satisfaction questionnaire on discharge. The Rawlsian and the utilitarian ethicist in me are pretty united however in terms of which patient should be prioritised.
On this basis, the UK or ‘socialist’ model has several major advantages:
1.) It gives excellent value in terms of £/$/€ per extra year of satisfactory life expectancy
2.) It generates monopsony power for health buyers that effectively balances monopoly pharmaceutical power, helping to mitigate a system that relies partly on high R&D spending / IP rights
3.) While still only partially realised, the improved ability of a more integrated system to drive effective medical practice / epidemiology / pharmacology through data analysis has been very significant in UK health policy and academia during the COVID-19 epidemic; this also has spillover benefits for other health systems
I’m not saying that our current health system is optimal - like the author I’m intrigued to learn from the German / Canadian / Scandinavian models and would be very prepared to accept that other systems are ‘better’. However, I’d like to be very sure of my definition of ‘better’ before undertaking any radical steps towards reform…
If you look at the number of insurance policies offered in The Netherlands, you might think there are dozens. However, many insurances are brands or daughter companies of bigger groups. In effect, four big companies rule the market with around 85% market share in 2021. They are Zilveren Kruis (Achmea), VGZ, CZ and Menzis. https://www.zorgwijzer.nl/faq/welke-zorgverzekeraars-zijn-er
Since the minimum standard for the 'basic insurance' is set by law and the insurance companies are obliged to accept everyone, they mostly compete on price, brand and additional insurances (e.g. dental, physiotherapy when it's not medically urgent).
> Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs? I thought I understood the reasons why US health care doesn’t work, but Germany and the Netherlands seem to replicate its apparent disadvantages without running into the same problems. Why?
It does happen that health care providers are unable to reach an agreement with an insurance company. If you are a small practice (GP, physiotherapy, independent psychologist) it's basically impossible to NOT enter into contract with one of the 'big four', since 20% of your patients will get upset that they have to pay premiums.
Hospitals face a similar issue, but since they are much larger they have more bargaining power. An insurer would definitely lose face and it would make them seem like money grubbers if they are not able to reach agreement with a mayor hospital. It does happen from time to time.
In short - though I'm not knowledgeable on the topic - it seems that insurance companies in NL DO have market power over health providers.
Health costs have risen enormously over the last years and spending as % of GDP is up. However, most experts seem to agree it could have been much worse. Due to the increasing average age, there is an issue for the future when it comes to the ability to pay for health care as a community and find enough employees willing to work in health care.
so I take it he aint offed himself yet.
I think it's tempting to leapfrog the semi-private ones because people don't like the idea of a "two-tiered" system, that you get something better if you have more money. Me, I'm happy to let the people with more money have their better things if there's a reasonable chance for me to get it just by paying some money, instead of having to scheme or get in endless lines or go abroad or just wait.
Also, the "publicly funded but privately run" is how Medicare Advantage and, increasingly, Medicaid is run in the US, where the state/federal gov't contracts with an insurance company and pays them some kind of risk-adjusted "per capita" rate per enrollee, and the company assumes all the risks as it tries to enroll the public plan beneficiaries.
Also, one thing that makes the US system worse is its being tied to employment; I wonder how many issues with the private market might be at least partially resolved with a new equilibrium where the employer-sponsored plan is no longer required nor tax-privileged.
EDIT: Medicare ADvantage is an alternative style of Medicare plan (for old people) where all your care is covered and handled by a company, instead of the government directly. The companies offering these plans are "at risk" for all the costs, which they're expected to manage through "value-based incentives" and things like that; and they have a limited menu of incentives they can offer to get you to sign up, like free transportation and gym memberships. But it's totally voluntary for seniors to sign up. The hope is that this can optimize and streamline costs in a way "Traditional fee-for-service" Medicare can't.
Since I had no idea who Dr. Ezekiel Emanuel was, my immediate reaction was "He's either Jewish or African, I'm not sure which" 😀 So I had to look him up and went "Oh, *he's* your brother?"
"Emanuel thinks the UK is probably close to the cost-quality Pareto frontier and not making any stupid mistakes, but has made the political decision to not fund its health system very much."
That's... certainly one way to look at it. I think the view in the UK would be (a) various governments have and are trying their best to privatise chunks of the NHS - there is some concern that large American healthcare businesses are competing for contracts and buying up lots of healthcare provision which they run for-profit, funnelling British taxpayer money back to the shareholders:
https://www.ft.com/content/4f428fc8-fefe-11e9-b7bc-f3fa4e77dd47
https://www.theguardian.com/society/2021/feb/26/nhs-gp-practice-operator-with-500000-patients-passes-into-hands-of-us-health-insurer
(b) there is constant meddling with the structure of the health care system in Britain which ends up with layers of bureaucracy and lack of efficiency (c) health is one of the huge drains on the budget, along with social welfare and education; no matter how much money you put into it, it always requires more (d) various Health Secretaries have been very unpopular, see Jeremy Hunt (and the, um, rhyming slang version of his name)
https://en.wikipedia.org/wiki/Jeremy_Hunt%27s_tenure_as_Health_Secretary
https://www.thecanary.co/trending/2018/06/25/the-bbc-accidentally-referred-to-jeremy-hunt-in-rhyming-slang-again/
The NHS is doing its best but there are a lot of problems. Then again, compared with the Irish HSE, it's much better.
I found out that Singapore has one of the more reasonable healthcare systems out there, with only 4% of GDP spent on world-class service. Basically, it requires the citizens to pay a small part of the healthcare costs out of pocket, and the rest is financed by taxes. There's a lot of interesting intricacies that make it work well, all detailed in this 16-minute video by a good economics youtube channel: https://youtu.be/sKjHvpiHk3s
> People talk about how the US system is “privatized” and the Canadian system “socialized”, but a lot of this comes down to whether your payments for the same basic package are marked “paycheck deductions” vs. “taxes”.
Having compared what is for sale in America to what is provided under OHIP, this is very much not the case. OHIP provides far more comprehensive insurance and greater peace of mind than any insurance I was able to find for sale in the US. You quite literally cannot buy the kind of insurance I have in Ontario in America.
It might help to put healthcare within the context what the "public health" system is for each of these counties. Listen to Zeynep Tufekci's recent interview with Ezra Klein. She has an ability to put healthcare for individuals (whether public or private) within the context of the public health infrastructure of different counties. This begins to show why the US has done so poorly with Covid. Even countries like Vietnam have dealt with Covid better than the US. She doesn't say this but I do, if the concept/mindset that the government can't do anything right and we shouldn't invest in public institutions, then we won't be prepared for health emergencies. This seems obscene for the richest country in the world.
I read the comment "No country except the US pays anything like a market price for drugs[,]" and had to ask myself, "What does 'market price for drugs even mean?"
As I understand this section, in some countries, the price is set by government fiat. In other countries, the government or an entity indistinguishable from government negotiates the price. Neither of those seem like they could define “market price.”
The United States is different. But it seems suspect to say that the price paid in the US is the “market price,” since the combination of all of the other countries is (I suspect) a larger population and therefore a larger “market.”
And in the United States, the vast majority of consumers are not negotiating the price, their insurance is. I differ from Scott in as much as he says “Consumer’s don’t for drugs directly.” A small subset do, and they are paying a higher amount than those with access to insurance. So is the market price the price paid by the smallest, weakest part of the market?
I’m an economics near-illiterate, to say that almost everyone is paying below market price seems backwards.
ETA: I should say, can some explain this to me as if I am five, because my inability to figure this out indicates to me that I missing something. What would the proper measure of the "market price" of a drug be?
It seems like the size of the administrative body might play a role here. I don’t know how to make the connection or if I’m just restating a prior, but it’s easier to imagine 50 US states, some being well managed, some not so much, as opposed to the single US regulatory agency outperforming.
Maybe the summary is “picking a spot on the Pareto frontier involved value tradeoffs and the more people you have knocked, the more likely you’ll end up further from the frontier , since this lowers the number of pissed off stakeholders.”
Reading between the lines here, there are (presumably fascinating, enraging, etc) reasons for the differences in pricing, but the author didn’t have access to the driving forces behind the negotiations.
Ex post, the different systems have a story about why good X is costing them price Y. But that’s a justification, not an explanation.
It’s a bit like saying the border between these two European countries follows the river; the fact that it follows the river is the outcome of the forces one really wants to understand.
Life expectancy is a poor metric for healthcare outcomes, and varies a lot based on how countries calculated it. In particular, the US tries to save babies born very very prematurely, many of whom die, and this really brings down the average life expectancy by putting in a bunch of extra zeros that most of the world calls “miscarriages”.
Secondly, satisfaction with healthcare is a function of the PR and patriotism ala NHS as the UK’s National religion, not actual quality of care delivered. I remember seeing this “study” that purported to find the NHS as the best healthcare across a dozen western countries which seemed odd until you realized most of their survey was fuzzy metrics like “do you feel it’s affordable” or “how much do you like it” and not “what are your chances of not dying from cancer and can you even get a surgery for it scheduled”. Health outcomes were only 1/11 of the survey metrics and NHS did quite poorly on that.
There’s a reason the rich of the world come to US hospitals to get their serious procedures done.
https://www.fragiledeal.com/t/coping-with-medicare-for-all/3107/33
US: the largest per capita cost (by far) with the smallest percentage satisfaction.
That's quite damning.
How was efficacy measured? Did it take into account the baseline health of the population? Americans are much less healthy by lifestyle.
I'll add another comment on why I think health care doesn't work like "normal economics". I think it does, but if something's completely regulated in a very complex way, you can't really predict specific effects or estimate any "market prices". (Relatedly, I remember wondering what actuaries working for health insurance companies even did, because they are very regulated on what they can rate on and what they have to cover anyway.)
My personal hypothesis, not one I have the resources to check, but that the source of "cost disease" is - when the majority of players in a market have a ton of money, like large corp/gov't level money and not individual/small business levels of money, then everything costs that much - and anyone smaller who tries to play in that market gets shafted. To me, the cost of e.g. college is directly driven by unlimited student loans and (ironically) things like the GI bill; and healthcare in the US driven by the fact that the payers are very large insurance companies, paid primarily by very large corporations/unions/governments, and large government payers themselves (CMS being the biggest one). If every reimbursement schedule is pegged to Medicare ("120% of Medicare, 90% of Medicare") it's not really market-based. If every hospital has 20 agreements with 20 different payers for how much they get paid, and these agreements all demand the "lowest price" or some kind of deep discount off "ticket price", of course price transparency will be lost.
On the subject of drugs, it seems like the US is basically where Pharma makes their profits. If everyone is trying to peg their price to "at cost" or "the average of everyone else", the money has to be made somewhere, and if you cut off the source of profit entirely, you lose the development pipeline -- which is primarily in the US (as far as I can tell), but can always migrate to less developed and more adventurous countries, like China or India. Further, the costs of getting drugs developed and approved in the US is driven up at least in part by the prohibitive hurdles to get anything approved, which you have documented often on your blog -- the whole system creating this government-pharma cabal, if you will, which eats up a lot of money and gets more and more entrenched with every new incremental policy change, regulation, etc. Again - too complex for simple modeling of specific prices or effects, but you can see the general direction of incentives and how it will affect costs.
I say this having worked in a health insurance company for a couple of years, but not at a high level or anything.
On the topic of determining market prices...
Many energy generators have very high market power, and it's hard to think of a universal way to get around this. If you think the energy coming from your coal plant is too expensive, too bad, it's the only one connected to your network.
Regulators get around the problem by *literally declaring that generators must offer the market price(EDIT: maginal cost)*. For example, the Western Australian market rules say:
"6.6.3. A Market Generator must not, for any Trading interval, offer prices within its Portfolio Supply Curve that do not reflect the Market Generator's reasonable expectation of the short run marginal cost of generating the relevant electricity when such behaviour relates to market power."
Problem solved, I guess?
Bulket 1 isn’t really correct. Many years ago the UK spun many of its hospitals off into Trusts which operate pretty much like the 80% of US hospitals that are non-profit. They have a local board, they hire a CEO, they make a lot of their own decisions.
This aside:
> "One of my favorite books is David Friedman’s Legal Systems Very Different From Ours,"
made me wonder, is there a list of your favorite/recommended works anywhere, Scott?
I can explain a bit about the Australian drug bargaining system. The outcome isn't always "we get the drug at a low price".
In terms of how the price gets set, we have algorithms we use to decide what we'll pay for drugs, based on the benefits to patients (compared to other options), how many patients in Australia would need them and what the budget hit for the government would be, etc. This is based on quality adjusted life years and the company has to provide evidence to the government about the benefits of the drug to justify the price they want, and we have a (slightly rubbery) limit on how much we'll pay for a given level of benefit.
Often this means that drugs will only be subisidised for a subset of patients, e.g. those with more severe disease or certain conditions. So for example bupropion is subisidised for tobacco cessation, because there aren't a lot of other options for that, but it isn't subisidised for depression, because there are. Some drugs are only subisidised if other (cheaper/more effective) treatments have been tried and failed, or if you have severe disease and will therefore get a large benefit that justifies the cost from the government's perspective.
If they can't come an agreement, there are a few possible outcomes.
Firstly, drugs that aren't covered through the government subsidy system are often still available, the patient just has to pay full price for them. This is often lower than the price in the US, because my understanding is that some elements of the US system hugely inflate the price of many drugs, so for example an anti-inflammatory that cost me $8 in Australia was like, $80 in California*. This happens a lot with stuff like anti-depressants and the pill, where the government won't pay more for something with equivalent outcomes if there are a bunch of cheap options that are already subsidised that do basically the same thing (on paper, if not for an individual patient).
Secondly, sometimes drugs do get covered, but there's a delay while the government negotiates with the company. This happened with the new hep C treatments when they came out - ultimately we got them at a great price and they're covered for everybody in Australia with like, a $20 co-pay from patients (the standard for our subsidised drugs), but we got them a couple of years later than they first became available in the US.
Finally, sometimes a drug isn't covered and that means it just isn't available here. This happens with expensive drugs for rare conditions, like some third-line chemo agents for rarer cancers, weird treatments for rare genetic conditions etc. If it costs $80,000 per course and the government won't pay for it, you just can't get it. I guess maybe sometimes rich people make special arrangements to access things at that cost, if they can find a private doctor who will help them sort that out, or maybe private insurance covers it in some cases, but most really expensive things like cancer treatment are done entirely through the public system anyway.
Because we're a small market, companies can walk away from us if they're not going to get a good deal on a drug for a rare condition - they don't really care if they miss out on sales for like, 500 patients. But for common conditions it works well.
*I think the reason for this is that in the US you have all these private insurers who will pay insane prices like $80 for an anti-inflammatory, because you don't have a single payer with huge bargaining power to keep prices down. So the companies can just try it on, some insurers will pay it, and patients without insurance will miss out. Whereas here, because private health insurance doesn't cover non-prescription medicines, if they charged $80 in Australia they just wouldn't get any sales at all. And for prescription medicines, insurance companies won't cover anything that's covered by the government, so again, there's no parallel private market to sustain high prices. The only medicines private insurance covers here are the ones that the government doesn't cover at all. But I suspect Australian patients' and insurance companies' low tolerance for high prices in general probably means they're still cheaper here than it is in the US.
As much as I've tried to approach the discussion of healthcare systems with an open mind, i.e., not applying my very libertarian defaults, I've never, ever heard a very convincing case as to why health care should be any more managed than grocery store products/prices. Lots of hand-waving about market failures without any convincing empirical data.
People love yelling "asymmetric information!" while ignoring that there is similar asymmetric information everywhere and also ignoring that the quintessential case of an asymmetric info market failure, the used-car lemon, seems to literally be the worst case you could pick, as I've never seen any analysis conclude something other than buying a car that has been used 2-3 years is your best value for the money.
People also love to talk about how you can't negotiate in an emergency, while ignoring that emergency care is but a sliver of overall costs, and 99% of the time you go see a doctor you have plenty of time to pick and choose, review, get second opinions, etc.
it is almost impossible to find information on how exactly it is decided how much money hospitals get in Germany but I think I found it: the combined insurance companies bargain with the hospital organization on a price. The compensation was based on the cost of providing these services. I think practices often get a flat amount per visit (limited to 1 per month per customer) and private insurers pay per service provided (much more money). The amount of practices per city is set by the doctors association.
Im not quite sure everything I've said is correct but I am reasonably convinced that the gist of it is. And yes - everything is a 3 letter acrynom. It's horrible.
I can imagine some of the issues with drug pricing being related to countries and companies having a lot of experience of what an “acceptable” price for drugs is. No drug company is going to sell atezolizumab or lisdexamphetamine for $5 a pop when they have patents on it and spent lots of money on trials etc. The NHS and NICE knows this, so their offers are likely to be somewhat reasonable so that drug companies are at least making a nice profit. Drug companies on the other hand know that the NHS will not let it’s eyes be gouged out by new cystic fibrosis drugs that cost too much (Or Alzheimer’s drugs that don’t even work), so there is a mutual understanding of what prices are likely to be, and then negotiation ends up in a much more narrow range. Related to this fact, it’s not unheard of for the nhs to not publicise what it’s paying for drugs as part of the agreement with the drug company (presumably for political reasons and also maybe to mess with other countries average algorithms). It’s not quite as random a process as it sounds.
One thing I don't understand and perhaps someone can help me here
What on earth is the justification for private insurance? You have 50 different electrical car companies, 10 years later you have the world's best set of electrical cars.
What do 50 different health insurance companies get you???
> they said everyone in Switzerland is rich
Living in Switzerland for many years: this is most certainly not true. Salaries are higher than neighboring countries, but so is cost of life. I have known people living in the fringes, and there's definitely plenty of misery. (It is less bad than what I know from Mediterranean countries, and government help does its job for those who know to seek it, but still.)
This overall higher cost of living / income helps with some stuff, like buying drugs that have the same price everywhere. But everything that involves a human is proportionally expensive. If at the end of the day it remains affordable, it's because insurance franchises are low (which doesn't happen without a fair amount of regulation), and because the government does subsidize those who can't pay it.
As per the Norway-gets-cheap-drugs issue, beware any modeling that lacks accounting of (1) scale and (2) iterations of equilibrium. Where one inquisits: "Emanuel praises this as a good decision. But Norway does even better: they take the average of the cheapest three countries in their basket. Obviously this works, but then why not the cheapest two? Why not just say your drug price will be Norway’s price minus one dollar? Half Norway’s price? I didn’t get a good sense of why some countries had cheaper algorithms and baskets than others. Maybe they had tougher negotiators?", I hope this is another one of those tongue-in-cheek digressions intended as irony to the insiders. Let's add scale and iterative considerations.
Norway is ~5 million people, or something like 0.5% of the wealthy population, and a rather smaller percentage including the not-quite-wealthy-but-not-exactly-poor, e.g., including China. Thus, to consider scale: an international drug manufacturing concern is unlikely to spend much sweat over a fractional loss of profit in an already tiny fraction of the market, especially where a failed negotiation has a large cost in goodwill (we can presume that the lowest-price drug markets are still profitable ones; this is unlikely to invoke a loss-leading strategy). Then, consider whether this equilibrium iterates: if the biggest, wealthiest markets (USA, Germany, &c.) banded together and demanded the Norway price, the manufacturer could easily be incentivized to swap its chemical engineering to some other, now-more-profitable task; that is, the negotiating power of the small+wealthy markets is floated along by the insouciance/indifference/sheer wealth of the large+wealthy markets.
A key factor for the US is that we have a large number of middle-men organizations, such as PBMs, which drive up costs. Other countries systems are complex and also have middle men organizations, but a key difference is that theirs are and have been non-profit for some time, while ours are for profit. One of the reasons the Left desires the seemingly large shift from our current system to Medicare for All is it would eliminate/minimize the role of for profit middle men, sidestepping the incredibly difficult seeming process of reforming them. To be reductionist, expanding an efficient government program to all is seemingly easier than reforming our current gnarled system, political considerations notwithstanding.
So the US basically has 3 systems working in parallel: VA (socialized medicine) Medicare (single payer) and (heavily regulated) private. Maybe 4, if you split out whatever Obamacare is (community pooling, notionally private but heavily subsidized and even more heavily regulated).
Which of these systems works the best in the US? Does the US “single payer” flavor compete with other countries that do single payer? If not, is there just something uniquely challenging about delivering healthcare to USians?
I kind of think it might be the last one? We spend a crap ton on health care because we have a fraction of really rich people who demand the best and have more disposable income to throw at it (some of this flows down and makes everyone’s care more expensive since you generally don’t have a rich person ER and a poor person ER - the docs and facilities and procedures are the same). But you also have a really poor population with generally shitty health outcomes.
So it looks like the US pays a lot for shitty outcomes. But what if the people paying a lot, and the people getting shitty outcomes, are just different people?
I don't know much about how to compare systems but I do know for years Canada's system has always lagged others according to studies from the Fraser Institute, CD Howe (two think tanks here) and the OECD. It's especially very pedestrian relative to the bragging. Oof, the boastful antics of Canadians regarding 'free' public health. It's so great we lost our civil liberties and wrecked the civil order to avoid 'overwhelming' the 'fragile' system - particularly in Quebec. Years of sheer corruption, mismanagement and ineptitude meant 15 days was never going to be enough and that the unvaccinated were to be blamed for its sorry state. Just my two pennies.
Life expectancy seems like a pretty rough and imprecise measure of healthcare quality. Like I would guess that part of the reason the US has lower life expectancy than other developed countries is due to non-healthcare factors, like violent crime, suicide, car accidents, etc.
If you look at more direct measures of healthcare quality, like 5-year cancer survival and heart attack survival, the US doesn't seem so bad:
https://en.wikipedia.org/wiki/List_of_countries_by_quality_of_healthcare
The National Health Service doesn’t own and run all the hospitals in Britain - there’s a large and thriving private sector offering both insurance and treatment. Who blundered in claiming it does - Scott or Dr Emanuel?
As far as the quality of the NHS is concerned, complaining about it is a national pastime but it’s political suicide to even hint at wanting to scrap it. Of course, the system can perform only to the level of funding it receives and it has been underfunded since the Cameron administration’s austerity era. BJ has the political savvy to see the danger and has begun to address it.
The UK government isn't "the sole employer for doctors and other health professionals" - we do have private hospitals, private health insurance, and doctors who do NHS work and private work in the same hospital. Most people use the NHS, but private healthcare is a minority option, a bit like private schooling. It sounds like how you describe the Australian system.
(I'm not sure whether Emanuel missed that, or you misunderstood him, or I misunderstood your categorisations.)
I'd love to see Scott review of RFK Jr's The Real Anthony Fauci. If even 10% of it is true then Fauci should be locked up for crimes against humanity. It goes a long way toward explaining why science is so politicized (hint: it's the money). And why the American healthcare system spends so much for such mediocre outcomes and .
Scott's week : 12/01 : announced his wedding. Warn that posts will be sparce during honeymoon.
18/01 : quasi book review.
19/01 : book review.
21/01 : much more than you wanted to know.
22/01 : announces his divorce ?
Please take your time off, we can survive without you for a couple days !
Health Care Budget Setting is like two wolves and a sheep sitting down to decide the price of a kidney.
The thing that sprung out to me on why this doesn't make any sense may be that the information in the book is either wrong or only technically correct but not how it actually works in practice. Maybe you need to have been a citizen of a specific country or at least experienced the intricacies of its specific system for a couple months to be able to begin and understand it. I can only speak for Germany here, where even the most high-level view seems to be wrong: going by the descriptions, it fits much better into bucket 3 than 4 (the appropriate three-letter acronyms in this case are GKV and PKV). If Emanuel managed to get even that part wrong, I don't have high hopes whether any of his other opinions or facts on this matter can theoretically be correct.
As for one of your other questions: "Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?"
Hospitals that allow any of the government insurance companies have to allow all of them by law. There are basically two ways of being a health care provider: you serve everybody and are allowed to receive money from the government insurance companies (what exactly each procedure is allowed to cost is defined by law as well) OR you work in private practice and take only upfront cash (although with citizens, invoicing is usually preferred; the upfront cash part is only really used for foreign nationals) for procedures, where you (sometimes) have to use the same cost tables as with government insured people but are allowed to have a higher multiplier on the base rate. Those with private insurance can then get a reimbursement from their insurance if they so choose.
These systems feel so vast in the end that whatever emergent properties they developed could just be pure chance and the US just happened to get the worst deal? Or maybe that other popular theory by proponents of the US system may even be correct, i.e. that it's the US that's basically subsidizing the world in health care and multinational drug companies just accept different government prices around the world because they can always sell their pill for $10k a pop in the US? That's only the drug cost part of the problem obviously ... but honestly, I have no idea.
(EDIT: I've since seen some other comments claiming this is true of the UK as well. This makes my estimate of the trustworthiness of the purported facts from this book go down even more.)
Small note...the UK is not 100% socialised. Bupa and Mayo have surgeries/clinics here. Also, many employers offer supplemental private health insurance. Knowing this, it makes me question the analysis on the other types of health care systems. (and if politics was injected into the analysis)
Think about prices from the perspective of the pharma and med device companies. Unit costs are almost nothing. Research and dev costs are very high. When they succeed in bringing a drug to market, they make the large majority of their profits in the US, where they can set basically any prices they like. They take a relaxed approach to pricing with non-US countries because the US is the golden goose. Change that dynamic and the prices will either increase elsewhere or the investment in new drugs will sharply fall. If you try to make the US like the other countries, the whole system will have to adapt, likely to the detriment of other countries.
Germany is listed under #4 but it has a private sector similar to #3.
https://en.wikipedia.org/wiki/Healthcare_in_Germany#Private_insurance
The reason the drug prices are lower in non-US countries is that each country is functionally its own market, in which either the government or some central cartel representing the whole health industry is a de facto monopsony (the only person buying the drugs) from the manufacturer’s perspective. The perfectly orthodox economic result is that a monopsony can buy at marginally above cost prices - few of the raw materials involved in drug manufacture are scarce, and the manufacturer’s choice is “sell at this price or don’t sell.”
The reason Germany and Germanesque countries’ systems don’t have inter-provider friction will be (I say confidently while knowing nothing about German healthcare) that the government lets them operate as huge cartel-like trade associations that do all the negotiating centrally and pressure everyone to join the associations. This probably wouldn’t work in the US for cultural reasons (e.g. the idea that the sole purpose of a business is to make money; businesses should be free to conduct their own separate negotiations). This system where everyone has to come together to semi-plan their own economy with government endorsement/instruction but not as a branch of the state is basically ordoliberalism, and is impossible for Anglo-Saxons to comprehend.
(More accurately, ordoliberalism is the result of their attempt to understand what we’re doing, then copy it but rounded off and fiddled with so it makes sense in their context)
I would like to see someone like Emanuel analyze a libertarian/free market system of the type proposed by various economists -- basically, government financed "catastrophic coverage" for big and unforeseeable expenses (cancer, heart attacks, major accidents, etc.), but with individuals responsible for paying cash and making consumer cost-benefit decisions for everything else (with the help of self-directed "medical savings accounts" that could be subsidized for lower income people).
The main idea is to bring market forces to bear in order to make the system more cost conscious and efficient, and to eliminate the massive transaction costs of insurance.
>What about the former Soviet states
Russia uses the 1st model, where the state insures everyone, taxes everyone and pays for everyone's healthcare. Except that there are 1) sort of co-pay for some procedures, which can go really high for things like complicated surgeries 2) fully private hospitals where you pay completely out of pocket. As far as I know other post-soviet states have something similar.
The government-funded part is pretty bad, definitely way worse than the US system in terms of quality, but of course cheaper. Hard to compare wait times, I don't have much experience on either side. Doctors are horribly overworked, payed relatively low - better in the last decade or so I hear, but still the salary is similar to other non-glamorous intellectual jobs and probably a few times lower than programmers. There is a decent amount of corruption, and a huge amount of nepotism, where to get good (or in extreme cases any) medications, or better room in a hospital, or get to the head of the line for some complicated procedure you need to know the right people (and then perhaps you may need to pay them some anyway, but it depends). Wait times can be long, depending on the procedure, and don't expect anybody throughout the system to be polite to you - they might, but that's more of an exception.
Private hospitals work reasonably well, and there's some variety of options for different budgets, so some fields like dentistry and gynaecology/urology are probably dominated by private clinics, at least in larger cities. You definitely *can* get more serious procedures in a private clinic as well, but I'm not sure how common is it or how does it work or how much it costs except it's a lot. Their doctors are paid notably better and don't work crazy hours. Wait times are usually short to nonexistent, thanks to higher prices.
I feel like this post is going to cause a lot of people to start commenting on the situation on their country instead of going to sleep like they should.
As to why normal economics doesn't seem to work for health care in general, and as to why other countries have such low prices for drugs in particular, I have a very strong intuition that the USA subsidizes all of the world's healthcare.
To be very clear, I know nothing about any of this, and I am almost certainly wrong about virtually all the micro details and the vast majority of the macro ones. Which is why I would greatly appreciate the opinion of someone more knowledgeable on the subject.
But as to how this world-wide subsidy would work in general, I can't really say, but as to drug prices it seems much more straightforward: there are only a few big pharma companies, all of which develop and manufacture the drugs everyone needs. They upsell in the USA because they can, and they accept the low prices in other countries because the USA's overpayment makes the numbers add up.
As an American currently making the transition to living in the Netherlands but who otherwise knows essentially nothing about healthcare, I don't think it's quite accurate that the government pays 100% of your healthcare costs.
The Dutch healthcare system seems more like Obamacare, if the Obamacare mandate actually had teeth. There's a government-mandated health insurance package that's basically the same whoever you buy it from, though you can buy fancier insurance if you want. Whichever option you go with, you have to pay—a little bit more than €100 a month for the basic package. There's also an annual deductible, which varies inversely with your premium. Employers also have to chip in part of the cost. If you don't buy an insurance policy, you get a letter from the government that says you have to; if you still don't do it, you automatically get enrolled in an insurance policy (I'm not sure which one) at a higher cost than if you had just listened and bought insurance in the first place.
Also, it's free for kids.
The main reason the US private insurance is different from the Netherlands or Germany is because most Americans get insurance through their employers, which significantly screws up the incentives insurance companies face. Unlike every other aspect of US healthcare (e.g., Medicare, VA), no other country in the world does anything like that. It's not for nothing that it's called "the original sin of the American healthcare system".
As I understand it, the drug price thing is heavily influenced by the fact that the US doesn't negotiate lower drug prices. The general argument is drug companies make enough off of America to cover R&D, so they can sell to the rest of the world at marginal cost. I haven't investigated to confirm that, but it sounds plausible.
Qualifications: I have a PhD in Econ, health econ was one of my fields in grad school, and I've taught undergrad health economics.
I received better and cheaper care out of pocket in Mexico (n = 2) than I ever did in Germany (n = 30-50) - and I've been both in the public and the private system in Germany.
Also curious: what's exactly how the question is worded for the public opinion data? I wasn't able to find that looking at the source.
If they asked "How satisfied are you with your health care system?" I suspect national pride has an influence on how respondents answer the question.
> [in the US] "Consumers don’t pay for drugs directly; only insurance companies pay for drugs."
This is not true in the general case. Insurance companies decide to cover, cover with copay, or not cover drugs, just like any other healthcare, and a quick googling suggests it's roughly a quarter to a third of Americans that have prescription medications that insurance doesn't cover.
"Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply."
Kind of true! The critical thing to understand is that "normal economics" usually means "economics with competition". Most of the principles of economics you probably imagine are really just stuff that happens under the particular (but overwhelmingly common) case of perfect or near-perfect competition. "Less money, less stuff" is one those things! In a competitive situations, goods tend to be produced for close to the cost of producing them; if you demand people give you the goods for less money, it isn't possible, and less stuff. But this isn't true of all goods! Monopolies and Oligopolies are the usual counterexample: they tend to already be charging prices substantially higher than the cost of production, so regulators can often force those prices lower without doing any harm. You can't generally do this sort of thing for ever -- eventually you lower the price down to close to the cost of production, at which point "less money less stuff" starts to bind. Think about, say, paperback print copies of Harry Potter. Setting a price cap that slightly reduced the price probably wouldn't affect sales, because it's still profitable to sell them; just the publisher or JK Rowling gets less money. But if you reduced the price enough, you'd start to cut into fundamental costs -- paper, bookbinding, shipping, shelf space -- and you'd get a reduction. (There might also be some long-term effects on future authors depending on how exactly this is done but those interactions are often weird and tricky to predict.)
Generally the amount you can influence the price of something through policy is a function of how close the price of the item is to its efficient production cost, which is often the same question as "how close is this to perfect competition". Healthcare is pretty far from perfect competition! On-patent drugs are fundamental monopolies. Providers, doctors and hospitals are often wildly imperfect substitutes due to variations in their quality. The common disconnect between the person who chooses the service (the patient) and the people that pay for it (the insurance, the employer) also has weird effects on the competitive process. There are often very high startup costs (especially for hospitals) both in terms of money and in terms of navigating a very complicated regulatory environment. All of these things push healthcare away from perfect competition and make a lot of the patterns you reasonably imagine should apply not apply. So a LOT of stuff can be possible that would never, ever work if you were instead trying to regulate, say, energy or food.
This distinction between what is essentially efficient and inefficient markets is often a point that gets overlooked in economic discussions and curriculums. One of my professors liked to say that any economics department will teach you about markets that work; only a good department will also teach you about the ones that don't.
>>Consider telling Dr. Emanuel that you will only pay however much the Norwegians pay for their books.<<
LOL!
FWIW: I'm 79 and the last few years have been some of the happiest of my life.
I have an American friend who has been an NHS doctor in London for 20 years (MD from Penn). He is a big, big fan of the NHS, especially compared with the US system. FWIW from a provider perspective.
I have always assumed that all the other countries are able to pay such low prices *because* the US pays such high prices. That is, the drug companies develop their drugs with only the US market in mind, and everyone else is gravy. I think it's very likely that if the US started negotiating harder, either prices for everyone else would have to rise substantially, or we would get far less drug development. The US market (note: not necessarily US researchers/companies) is responsible for the overwhelming majority of innovation in healthcare, and every other country has essentially been leeching off of that largesse.
Fun fact: Another Emanuel brother is Ari Emanuel. Ari Gold, the asshole talent agent from _Entourage_, is inspired by him.
Lack of price caps for US healthcare, including drugs, goes hand in hand with the US being an invaluable leader in healthcare innovations.
Health systems also in the extent to which everyone has a GP who is familiar with their health, is a trusted source of advice, and can coordinate the care they need. And related to this, do chronic patients have nurses visiting, checking that they take their medicines, keep their blood sugar under control etc? Such community level services not only improve care, but also reduce costs, since the alternative is for these patients to regularly shuttle in and out of hospital.
"In Germany, all the insurance companies get together and form a Drug Price Bargaining Group, which bargains with drug companies the same way a government would. Why don’t insurance companies do that in America? Is the problem just that this would be a monopoly (technically a monopsony, I guess?) Is only antitrust law preventing them from trying this?"
This does happen in the US. Pharmacy benefit managers (PBMs) do this as one of their core services. They essentially negotiate volume pricing with the drug manufacturers on behalf of their plan sponsor clients (i.e. the insurance companies). If they don't reach an agreement then the drug will not be included in the plan formulary (i.e. the list of drugs covered). There used to be independent PBMs but they're mostly gone now. Express Scripts was the last big independent one but they got bought by Cigna. United and CVS also have very big ones in-house. PBMs occasionally catch heat politically because the drug companies like to blame them for being "middlemen driving up prices." In my opinion that's not true. Really it's the opposite. But PBMs are often the reason why there's some very high "list price" for a drug that nobody actually pays.
And note it's not just private plans. PBMs negotiate on behalf of Medicare Part D plans and managed Medicaid.
Nit: It makes sense to set China aside since that's still a relatively poor country, but it's very strange to exclude Taiwan for that reason in 2022 (though a PPP adjustment may be in order).
On the point towards the end of Part I in the post - why do the systems in Germany in the Netherlands work when they seem to only fix part of the problem.
I'd say it must be because of the broader context of their nations. Many seemingly impossible things happen there due to some social factor which 'works' in ways that are totally non-intuitive.
If you look at German housing and property, you'll find many cooperatives and groups of tenants owning and managing theri units in unusual ways. Groups of renters have some inexplicable legal structure in which to operate and the people take advantage of that structure to do things like get solar panels on apartment buildings which they own through their coop.
In Germany the workers and unions are incredibly strong and if you compare economic inequality and the legal structure of the boards of companies where the unions are given formal seats and votes as any other executive with some government relations person sitting in as a sort of tie breaker.....that's may vague understanding of it at least....then you can see the negotiation and strategy and emphasis in terms of how they deal with insruance companies is very different.
The very idea of the union having a government mandate to sit on and comprise half of the corporate board would send western neo-liberal autocrats into fits of panic frothing at the mouth. When a US company negotiates with an insurance company for health coverge for their workers....the people doing it don't give a shit. It is jsut some salary package perk and anyone taking the job will just take it anyway. The US has a fully broken model in terms of incentives and who is pulling the levers of power. Random HR folks who couldn't care less and get better paid special plans for themselves.
It is the same with the apartments....why do apartment buildings get run by slumlords with nothing fixed and shitty builds with no closets or extra spaces for the people who live there? Because the types of property developers with enough funding to build apartment buildings...they don't live in the places they build. But when a German apartment cooperative spends a few years with members who get a custom small apartment complex made to their own needs and specifications....they don't skimp on themselves!
I truly have no idea other than saying 'something something, culture, culture' to describe how and why many things work so much better in Germany. People have power, they have tools, they have a very high self-organisation cost....and they somehow meet it without everyone arguing and everything falling apart.
In this way they are able to make a private healthcare and insurance model full of many negotiations work...because nearly all of the people engaging in those negotiations are direct 'stakeholders' and they actually care about what they are doing because it affects them personally. It is always inexplicable to me and overcomes many of the 'too hard' and 'people wouldn't cooperate' problems so often described in the anglosphere.
I suspect similar factors take place in the Netherlands where most of the people I've met from there and the brief descriptions of their legal and living environment seem more alien to me than I would have thought.
> I think if the government will pay you $2,000 per unit in 2020 and only $1,000 per unit in 2021, ... your care gets worse every year, but in real life this doesn’t seem to happen
I've talked a bunch to a (US) radiologist about this... they read a *lot* more images than they used to, and are reimbursed *much* less per image. Some of it is computers making it cheaper / faster to develop / read images than film, and some of it is just pressure to just read things faster (which probably has a quality trade-off).
> Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply. If you have the courage to say loudly and firmly “we refuse to pay a high price for this”, then providers have to give you a low price
I wonder in what % of health care spending the price is tied to the cost of production? On-patent drugs have a monopoly and are sold much higher than the unit production cost (low prices might affect what new drugs are invented, but that won't show up in a comparison of health systems).
The supply of doctors is usually bottlenecked by medical school / medicare-funded residency slots, etc. Salaries could hypothetically be cut while maintaining supply until there are no excess applicants to medical school (if you made medical school free and/or shortened+combined it with undergrad like some European countries, you probably could cut salaries even further).
Scott, you read the wrong book. My 2006 book, Crisis of Abundance, has real health care economics. On the 23rd on my substack, I'll try to summarize the main points.
A couple of things:
-In grad school, I seem to recall my health policy professor giving the Commonwealth Fund’s data and analysis little credence. Things could have changed since then
-Two of the Commonwealth Fund’s data points seem suspect. Life Expectancy at birth of course captures all types of factors outside just the health care system. The US is way more violent than all other countries on the list. We’re also fatter.
-The % Satisfied figure seems way too low for the US. I’m guessing it’s pulled from a generic question of “Are you satisfied with your country’s healthcare system?” Seems like a reasonable question but this is a politicized topic in the US where the left thinks we have a hyper capitalistic system and the right thinks it’s governed by death panels. A better (but still flawed) approach would be to aggregate patient data about patient’s interactions with their providers. I’ve seen hospital survey data, and I don’t think I’ve ever seen 19% overall satisfaction. Probably never below 50%. Now, the downside to this approach is that it misses people that forego care which is real. Also, you would want to have survey data on members’ opinions of their health insurers. I still don’t think 81% are unsatisfied with their health insurers (but maybe, as I haven’t seen that data).
Medicare and Medicaid cost over a trillion dollars per year which comes to about the same per capita as what the NHS costs, except they only cover about half of the population, so it actually costs twice as much. I can't stand how people in the US just ignore these garbage programs.
it's also noteworthy that Germany has about twice as many doctors per capita as the US... much easier to become one and to emigrate there as a doctor from a poorer country.
From my experience here in Czech Republic the private insurance companies that were created after the "privatization" seem mostly pointless and possibly a negative thing compared to having one state-run insurance company. How it works here is that the state distributes the public insurance money between them and they are supposed to compete on the administrative cost and thus provide value. What actually happens is that they just pick the healthy people to insure and the chronically sick and risky ones are left for the state-run insurer.
I would say that for the mandatory insurance they are completely useless overhead providing no benefit. I can see their value for people buying additional benefits and that should be their role.
Basically it seems to me that this solves (to some degree) the issue of bad political incentives of rich people having completely separate insurance. This way they pay for the basic insurance in the public system (with only one public insurer), and they can buy additional benefits with private insurers.
"Is this some kind of weird horseshoe theory situation where the maximally socialist response overlaps with the maximally libertarian one?"
health care in many respects acts like a 'non-competitive market' in that the consumers have (relative to other markets) weaker ability to make competitive choices. Usually, there is one or very few 'best drugs' to deal with a given problem, making the patents/ip behind drugs the actual 'valuable thing' rather than the manufacturing processes. To the extent that the value of the static information is greater than the value of a given manufacturer's competitive competencies, 'socialization' (governments bidding the price down) will not cause any deadweight loss. Similar logic to the weird socialist-libertarianism that we see in georgism, which also deals with 'scarce resources that we need to continue existing'. what is 'efficient' gets loopy and strange when supply gets more and more fixed.
I'm surprised that the 80/20 rule isn't mentioned.
In the US, this rule means that most insurance companies must spend at least 85% of the money they take in from premiums on health care costs. So the ONLY way insurance companies can increase their profits is by increasing their spending. This means that they have only 2 ways to increase profits: either get more customers or spend more money per customer.
It seems to me that this creates a weird alignment problem with insurance companies. They want medical care costs to increase. If medical costs go up, they can raise premiums, and also increase their profit.
Insurance companies are disincentivized to negotiate prices for medical care and drugs.
See: https://www.healthcare.gov/health-care-law-protections/rate-review/
Isn't there a really simple explanation for all the weird things: medical spending really quickly reaches a point of *severely* diminishing marginal returns. In other words, after you've got the basics most medical spending only has a minor effect on outcomes that's swamped by differences in eating, exercise and genetics between the countries? Well, probably there is some effect of a few new drugs but the drugs with the biggest health impacts are pretty much never not available in any of these countries.
In other words, from an EA point of view, most medical spending is probably wasteful. From a selfish POV those 'minor' differences might be quite significant even if it's only a year or two. But, I wouldn't be surprised if there aren't substantial differences between these countries about the experience of treatment (both the anxiety of having to pay as well as the issue of how quickly pain/depression gets alleviated).
By the way, have you read "Catastrophic Care", that began as a series in The Atlantic Monthly, written by a guy (David Goldhill) trying to figure out why his father was killed (like hundreds of thousands of others are, apparantly) unnecessarily, in a healthcare system where the individual components of the system all worked very well individually.
Fantastic book.
Catastrophic Care: Why Everything We Think We Know about Health Care Is Wrong https://www.amazon.com/dp/034580273X/ref=cm_sw_r_apan_glt_i_06QNMGTWQR0S3JKTHZXR
I think a big part of the bad US performance is the trouble we have with our primary care workforce: access is poor, continuity is poor, care coordination is poor and comprehensiveness is poor. See the late Barbara Starfield MD for characteristics of high quality primary care.
I'd add that I am very concerned that if the US goes single payer we lose a very very important market signal for drug prices. I'm sure we will still somehow manage to incentivize funding cancer drugs (to some extent) but I worry that without the US providing a market signal drugs that 'merely' improve someone's lifestyle (e.g. viagra) won't be sufficiently compensated. Sure, competition between insurance providers isn't great in the US but it does exist and lots of people do buy drugs without insurance providing insurers with a price signal. Maybe I'm being crazy but I worry that without at least one country providing such a signal we'll instead see drug prices being determined by what 'serious' people think they are worth ... meaning mere 'lifestyle' drugs will be undervalued even though I suspect they have huge well-being effects.
You might also like In Search of the Perfect Health System by Mark Britnell. It's a similar comparison of the healthcare in different countries, but has a wider range (25, about a third each of high income, middle income, and developing), and goes into more detail on the tradeoffs involved in design.
"Third, China also underpays its doctors, and they compensate by being corrupt and demanding bribes before treating patients."
There's been a major change in this, at least in the nice city where I live (Xiamen, southeast coast). 15 years ago, when my son was born, we gave the doctor an envelope stuffed with cash; today, that doesn't happen. I don't have a lot of contact with the healthcare system because we're all very healthy, but on the couple of occasions we've tried to "expedite" procedures (by offering money over and above the hospital bill) in the last few years, we've been cheerfully rebuffed.
It's still true that China underpays its doctors (though there are some poorly-understood perks); but a lot of the blatant bribery associated with day-to-day transactions that were common 20 and even 10 years ago have now vanished from (middle-class urban) life in China.
The most obvious reforms in the US health system are probably things like training more doctors, making it easier for foreign doctors to practice, and letting nurses do more things that needlessly require a doctor to be involved. These are things that 99% of health economists would support, whereas there'd be a lot less consensus about structural reforms.
> corresponds to a health care budget of $1 billion or whatever. Then doctors submit reports on how much health care they’ve done, ie “we have done 500,000 units of health care”, according to some list where a blood test counts as X units, a heart surgery as Y units, etc. Then the government says “Well, we said the budget was going to be $1 billion, doctors did 500,000 units of health care, so we’ll reimburse doctors $2,000 for each unit of health care they did”.
Scott has problems with this, but it seems straightforward to me. The budget is not going to plummet from year-to-year, and doctors and not going to double the number of health care units they do a year.
I see problems with it, but they're the normal problems you have in any market.
"He opposes euthanasia, which I interpret as demanding state-sponsored coercive violence to prevent torture victims from escaping, but I know other people interpret it differently."
You may know better than me about this, but my understanding of his opinion is that he believes (and I don't know if this is research or personal experience or what) that it is a complete myth that patients that use or want euthanasia do so because they're in pain. So your interpretation of his view seems misleading. He claims that people who seek euthanasia are generally depressed people -- and it seems weird to enable depressed people to kill themselves when we generally try to stop depressed people from killing themselves. I don't know if he's correct in his "euthanasia is mainly sought by depressed people rather than people in physical pain" thing -- but I live reasonably close to the Netherlands and the few people I knew of who wanted to use go on a one way trip there were depressed and not in physical pain.
This made me remember a previous post of yours where you said ( https://slatestarcodex.com/2015/10/12/against-against-autism-cures/ )
"Autistic people suffer. They suffer because of their sensory sensitivities. They suffer because of self-injury. They suffer because they’re in institutions that restrain them or abuse them or just don’t let them have mp3 players. Even if none of those things happened at all, they would still suffer because of epilepsy and cerebral palsy and tuberous sclerosis. A worryingly high percent of the autistic people I encounter tend to be screaming, beating their heads against things, attacking nurses, or chewing off their own body parts. Once you’re trying to chew off your own body parts, I feel like the question “But is it really a disease or not?” sort of loses its oomph."
Cultural factors may be at play here also. For example, in the Netherlands, doctors are famously stubborn at taking complaints seriously. Stereotypically, a Dutch doctor will send you home with an aspirin when your leg is falling off, and they laugh off many symptoms as "ahh that's just a sign of getting older".
I imagine that might 'reduce costs' significantly, which could be being masked by the general good health of the population due to frequent daily exercise (e.g. cycling).
I found a lot of good stuff in John Goodman's New Way To Care.
As I have gotten older and engaged with the US healthcare system from different perspectives I have only come to view it with a less and less favorable lens over time.
I have been uninsured, insured at a tech company with good insurance, paid out of pocket for a high quality insurance plan (very expensive), and now been the owner of a small business having to deal with insurance for my employees.
The strong coupling of business with insurance is definitely a huge negative for the system as a whole, and for small business. I think any system that moved us more in a direction of decoupling medical insurance from your place of employment would be a large positive.
Part of what may be going on with drug prices is that the U.S., as the largest market, ends up as the "privileged minority" producing the public good of making it worth the cost of developing new drugs. If the U.S. insists on paying low prices the companies produce fewer new drugs. If Austria pays low prices, the effect is much smaller. Think of it as a bargaining game among countries where everyone else ends up free riding on the US expenditure.
Perhaps stating the obvious, but the "efficient market" assumption where price = marginal cost is an idealized case with lots of buyers and lots of sellers and various other assumptions.
In real life, you often have a transaction where there's space between the maximum price the buyer would pay and the minimum price the seller would accept, which is why haggling was invented. Saying in a stern voice that you refuse to pay more than X is just haggling.
Also the thing where you create a pool of money and then divide it among workers proportionally to work done without adjusting the total money for the total work sounds a lot like how Amazon pays authors for Kindle Unlimited, AIUI.
Part of what may be going on with drug prices is a bargaining game among countries. If nobody pays high prices you don't get new drugs. The smaller a country is in the drug market, the less the effect of the prices it pays, so the biggest player ends up paying the most — it, and everyone else, knowing that if it refuses there will be fewer drugs. That makes the US a "privileged minority" in the production of the public good of getting new drugs produced.
I’ve heard great things (from people who use it) about Hong Kong’s system, which doesn’t seem to be covered in the breakdown of systems. It’s something like China or Australia except the private insurance is optional and opt-out, between the customer and the insurer, and paid as a reimbursement. It functions like private school vs public school in the US — if you could somehow buy insurance to reimburse you for attending private school (and attending school was an occasional thing). That is, you can go to your locally zoned government hospital for “free” care (featuring student doctors, waiting lists and multiple patients per room) or choose from multiple levels of private care (featuring top docs, no waiting and private suites) and pay out of pocket, getting reimbursed later in whatever way the insurance you bought covers you. Because capitalism, the cost of private care and insurance is relatively cheap/affordable. Because socialism, no one dies in the street. It appears to be the best version of all systems, one where you can spend time or money to get care.
Looking up data from Gapminder, and comparing spending PPP$ per person vs. life expectancy, the pareto frontier includes South Korea, Israel, Singapore, and Japan; with Malta, Spain, Italy, and New Zealand also doing well. So if I was looking for the best system, I'd look to see what those countries are doing.
"Emanuel thinks the UK is probably close to the cost-quality Pareto frontier and not making any stupid mistakes, but has made the political decision to not fund its health system very much."
So in UK politics rightists and centrists are very conscious of healthcare eating up a larger and larger part of GDP -- so there's an effort to make it sustainable to avoid an apocalypse where either everyone is dying on the streets, or the country goes bankrupt.
For this reason there's a mindset to avoid costs. GPs are gatekeepers. They don't quite turn you away three times to ensure you really in your heart know you need treatment -- but it's not so far off. A while ago my young son accidentally got acrylic paint in his eye. I cleaned out everything I could see but was worried. So I took him to the hospital. We were in the waiting room for four and a half hours. I'm told by doctor friends that sometimes they allow you to wait for a few hours to deter time wasters.
Friends of mine from the US or Germany get very angry about this and feel mistreated.
Anyways, that's some context.
I dispute that the NHS doesn't do anything silly though. I've probably told this story before, but I will repeat it here: a friend had certain health problem; and was told by our local hospital that they had ceased to offer treatment X (which he preferred), only treatment Y. My friend was annoyed because a recent meta-study done in the UK had shown that treatment X was at least as safe, and about two orders of magnitude cheaper (in medical costs, for the taxpayer) than treatment Y. He wrote a letter to his MP. Who had a meeting with the Health Minister, who called the head of the hospital. They then looped back and he was told by the MP that the head of the hospital confirmed that the procedure was safer and orders of magnitude cheaper, but they were now refusing to offer it because only doing treatment Y would improve the hospital's finances because the government paid them fixed rates per procedure -- and to the hospital's finances only the margin matters.
I would also say that there is a difference in culture I perceive between the US and UK medical establishments. (Can't comment for Europe.)
The UK has a steady stream of medical scandals where either the NHS did something awful intentionally (such as experimenting on children in a boarding school, most of whom died from being given blood that was known to be infected -- the doctors recorded the progression of their illnesses and gave this information to research institutions) or the NHS realised something it was doing was bad and its instinct was to cover it up (for example, the NHS realised a few years ago that its vaginal mesh operations were doing much more harm than good -- and decided the best thing to do would be to cover it up, and keep doing the operations that were known to be harmful). I have never heard of any criminal prosecutions, lawsuits, and so on, over this. In both these cases the current Minister of Health gives an apology -- when he had nothing to do with it in the first place. I get the impression that in the US they'd be quite hard nosed about it and people would just be sent to prison for this sort of gross malpractice?
Wonder if the middleman-heaviness of the US system gets any consideration, see this classic: https://siderea.dreamwidth.org/1182366.html
I dunno about that post about bioethicists... I wouldn't say I was reflexively *hostile* to the idea before hand, but it left me feeling with more confidence what I already felt before I read it, which is "what's the point?". I guess the message for you was, don't consider them as your outgroup because they're not that different from you. That's fine. But I still don't have any particular respect for the field. Although I'm a person who already doesn't see the point of academic philosophy in general.
Having lived in Germany and Switzerland (and now going back-and-forth between the US and Canada), I think I can give some answers as to what's happening:
1) Standardisation: in Switzerland your health card is a smartcard that is fully standardised. All doctors can read it and it contains all basic information about you.
Reimbursement forms are also standardised: when I went to the doctor, the secretary gave me the choice of sending the payment directly to the insurance (in which case I pay nothing on the spot, and the insurance will bill me monthly, somewhat similar to a credit card company), or I can pay myself and keep a copy of the itemised invoice, which I would send as-is to the insurance, without having to fill any form whatsoever. The insurance either OCRs it, or they have data-entry people. I didn't have to care because the invoice already contains everything the insurance requires.
2) Doctors' autonomy: doctors are fully in charge of the treatment plan, meaning that in most cases they don't have to ask authorization to the insurance to order a certain test or treatment. Exceptions are made for very expensive surgeries. This means that the admin personnel of insurance companies is much smaller than in the US, which lowers costs.
3) Non-profit: in Germany most insurers are non-profit foundations, or are part of a larger insurance company which voluntarily runs the healthcare department at cost. In Switzerland, by law, healthcare insurers are mandated to be non-profit: most are departments of larger insurance companies, but they have entirely separate budget and all surplus must be reinvested or distributed as bonuses. The insurers compete on low admin costs and posh benefits for the supplementary care, and use the efficiency and good reputation of their healthcare unit to lure customers into life/house/car insurance which are quit profitable. Most Swiss stay with the same insurance company their whole life or maybe only change when they get married, and only the poorest shop around annually.
4) Price control: not just medicines, but the prices for medical services are set by the government. For example, the kantons set the maximum price for a 30-minute dermatologist visit and the doctors must give the same price to everyone, which means that insurance companies don't negotiate the prices of mandatory services with doctors or hospitals directly (as far as I know).
They might negotiate for some non-essential surgery.
5) Concierge service: wealthy people pay more for posh service, like a semi-private or fully private room in case of hospitalization, or being treated by the head of department instead of a lesser experienced doctor. Insurance companies lose money on regular patients and balance their budget (remember, no profits) with the "business/first class" patients.
6) Lower salaries: medical schools are essentially free in Switzerland, so doctors don't have huge debts to repay. Switzerland doesn't graduate enough doctors for their needs, but it attracts many foreign-educated doctors and the barriers for degree recognition are reasonably low (contrary to what I read about US and Canada where the doctors' associations have been very successful in blocking degree recognition). I don't have hard numbers, but my impression is that Swiss doctors make 60-80% of their US counterparts.
7) Focus on generic drugs: doctors are strongly encouraged to prescribe generics, which keeps the prices down. The kickbacks that US doctors get for prescribing very expensive drugs are non-existent for the most part.
I was happy to pay 480 CHF a month for a semi-private plan (and rarely using it), when other colleagues my age went for cheaper options around 220-240 CHF. My total annual deductible was 7000 CHF, which amounts to a maximum annual expense of 7000 + 480*12 = 12760 CHF (13900 USD).
If I were sicker I could opt for a 1500 CHF deductible and less fancy service, which would cap my expenses in the range of 5-7000.
It's still cheaper and higher quality than the US, especially considering Swiss salaries.
Scott how much did the book account for the fact that it is easier to have low wait times when people just don't bother to go because they can't afford it?
The combination of a system that's fee-for-service, looking for things they can charge you for at the highest possible price, and a public that's unwilling to bargain or accept limits on consumption. There are some moves to improve this with 'capitation' where you go in for some surgery and instead of charging you for every test and consultation and procedure and meal and other thing that gets done during that visit the insurer has a tariff: For this kind of surgery, they pay the hospital this much per patient. You win some you lose some. Hospitals that are efficient and avoid complications do well in the long run.
I also suspect, but have no data, that expenses balloon at the bottom and the top of the utility curve. At one end, pharma companies selling drugs that aren't needed to people who aren't ill. At the other end, extremely costly treatments and repeated surgeries in an undignified attempt to prolong life and extract the maximum 'consumer surplus'. Other systems would ration care based on too low QALY for the cost, and individuals in other cultures like the Amish that you mention would say you know what, I don't want to die in a hospital.
I live in The Netherlands and have some experience with our healthcare system (I have metastatic cancer) and if what I'm getting is top-tier, you all have my sympathies.
No one else is commenting on this particular thing, so I guess only my brain is failing to work here, but:
>"I think if the government will pay you $2,000 per unit in 2020 and only $1,000 per unit in 2021, then you stop doing all the health care with a value of between $1,000 and $2,000 per unit[...]"
Why? WHY? Why is this not making sense to me?
Wouldn't this rather make you stop doing health care with a value of > $2000/unit in 2020, and > $1000/unit in 2021?
Maybe I'm confused by what "value" means here. We're looking at what providers would do when the government assigns a value to their per-unit healthcare, right? So "value" can't mean "government-assigned value for this year" — it must be referring to the amount the unit costs to the provider. But if that's the case, I don't get the reasoning above.
I had an aha moment when I thought "wait... maybe it refers to the *value to the provider!*" — i.e., profit. But no, providers are compensated by the government in this model, right? They aren't profiting otherwise. And if it were profit, anyway, you'd want the highest regardless.
I'm clearly missing something. Boy, I feel dumb as hell.
I know everyone just wants their own country talked about, but I'm disappointed that Israel doesn't get a mention mainly because I'm curious how they measure up. The system seems to work remarkably well (compared to other countries and compared to other Israeli government services). Its super cheap. And since Covid I've realized how impressive it is that everything is universally synced in a robust online system.
Anyway maybe it's mentioned in the book.
Megan McArdle has written some good stuff on the topic over the years. Here is a random pick from Google to give a flavor: https://www.theatlantic.com/business/archive/2009/04/ask-the-editors-why-does-health-care-cost-so-much/12998/
The main thing I take away from her is path dependency effects. Almost impossible for US to cut costs because Healthcare professionals make too much already (and it's almost impossible to cut wages), hospitals have already been overbuilt with excessively swanky facilities (a problem that I see also with US colleges - these hotel grade dorms / top end gyms built in recent decades will make it almost impossible in future to cut cost of college) etc.
Separately, there is the argument that other countries can negotiate lower prices w/ drug makers largely because high prices in US subsidise whole system - basically Norway, UK etc. are just low marginal cost markets for drug makers who have already recouped all their costs and then some in US alone. If US also started to negotiate hardball the system wouldnt work, lots of new drug development would become uneconomical and get canned etc. Hard to prove how much this argument is true as opposed to drug industry crying poverty, but having invested in drug development in my previous life I could see that some of the argument is definitely true.
I remember liking this analysis:
https://www.theregister.com/2015/01/04/healthcare_provision_look_anywhere_you_like_for_answers_just_not_the_us/
Which makes a distinction between insurance (pooling risk for unlikely but severe healthcare needs) and assurance (paying for things we will all need eventually, doctors appointments and old age care), and which rates the system used in Singapore highly.
I have some broad anecdotal experience having lived in or received medical care in many different countries:
- USA (20 years)
- Singapore (2 years)
- Kuwait (5 years)
- France (1 year)
- Switzerland (4 years, son was born here)
- UAE (4 years)
- South Korea (ad-hoc)
- China (ad-hoc)
I can't say I even know 1% of the regulations involved in these systems, but I have an overall impression from participating in them.
South Korea was by far my best experience - as a combination of quality of care and low price. They have a public system with private add-ons, but if you don't get regular check-ups then you can be denied care. They also have this incredible system for annual check-ups where you rapidly go from station to station with a mob of people and see more than 10 doctors in a couple of hours running all kinds of tests.
China was the worst experience. An overflowing hospital and waiting in line for six hours to get 3 minutes standing in front of a doctor who just prescribed a bunch of antibiotics without checking on my infant son.
Switzerland has high quality care but is very expensive - minimum $~400 per month for the basic insurance. But they also make the rules transparent and they encourage you to do preventative steps, like subsidizing gym memberships.
UAE is also great if you get coverage at a good hospital. This is done through my employer and we have 10-15% co-pays.
Singapore was a long time ago, so I can't remember if I had to pay anything, but I remember feeling that doctors unnecessarily prescribed antibiotics for everything.
Taiwan has a GDP of close to $33K per capita (and a lot higher using PPP). Not sure if excluding it for being poorer/less developed than other countries makes sense here. I've lived under the Swiss, American and now Taiwanese health care system, and Taiwan certainly holds its own.
> Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?
I am not an expert, but I do live in Germany. The reason this doesn't happen is that there is a law that if you accept patients from one "public insurance company" you must accept patients from all of them.
There are a few luxury clinics in wealthy areas that only accept privately-insured patients but as far as I know there are no actual hospitals that do that since there are very few people who are insured privately. The reason the privately insurance population is low is that you are only allowed to have private insurance if you make above a certain income threshold (I believe it is 150% of median income). Ironically private insurance is usually much cheaper than public insurance (~€150 vs ~€300 per month at the max cost-to-income scale), but there are some downsides which make most people reject it even if they are eligible. Namely, it is very difficult to return to the public insurance system, you need to pre-select a "menu" of coverage you think you'll need instead of just being covered for everything, it does not cover your partner and children for free, and the price scales with age. So a wealthy middle-aged person opting for private insurance is basically betting that they will still be wealthy as they age. If they have some misfortune and end up poorer when they are elderly they can have crushing medical insurance costs and be unable to switch back to the subsidized public insurance scheme. Germans, being frugal and cautious by nature, view this as a terrible bargain so most privately insured people are either Actually Rich or foreigners who do not intend to grow old in Germany.
The public insurance companies which cover ~90% of the population bargain collectively for acceptance with all doctors/clinics/hospitals/whatever and have extreme coercive power. However, this is balanced by the government basically setting prices for medical procedures in advance. This is done similar to the way they set prices for drugs.
I think the main reason that this works is the _style_ of negotiation. In US healthcare you have a multi-party _adversarial_ negotiation where if a bargain can't be struck then one party walks away and all their associated patients suffer. In Germany the parties are pretty much permanently legally bound to each other (or at least the law creates such a disincentive to walking away that it is effectively impossible) so instead it is a _cooperative_ nationwide negotiation between three roughly equally powerful parties: the German Health Ministry, the Health Insurance Association, and the Healthcare Provider Association. All of them need each other to exist and all agreements are "one for all and all for one" so there is no room for defection.
The result is a fairly functional, if a bit ponderous, healthcare system that most Germans are relatively satisfied with (insofar that a German can be satisfied with anything).
I know a guy who's lived in Portugal, Brazil, US, France, and UK. He confidently ranks US healthcare as the worst of these (unless you're rich) and France as the best, followed by Portugal and then I don't remember.
As a long-suffering user of the NHS, I wanted to add that the system in the UK isn’t quite how Scott / Emanuel characterises it.
Yes, most hospitals and doctors surgeries etc are run (awfully) by the government, but there are a substantial number of fully private hospitals / facilities, and, in addition, most of the best NHS hospitals have their own private wings, which help to subsidise the public sector care. Most doctors will also get some private work in as soon as they have enough experience, because the pay for highly trained medical professionals is *LOL*, when compared with equivalently smart / educated people doing things like Law / Finance / etc. In dentistry (also under the remit of the NHS, but in an inconceivably more stupid way), _everyone_ does private work; if you try to do only NHS work, you will either (a) commit fraud or (b) go bankrupt. There is no way for dental professionals to make any money on the NHS, so they use NHS patients as a funnel for private work (“Would you like a white filling? That’ll be £xx extra”). So, although it is different from Option 3 as listed above, I think the system also does broadly fall into that category, rather than standing alone as a purely socialised system, which it both is and isn’t.
Anyone who can afford to have insurance and go private, does; it took me personally one morning to complete some private appointments and tests, which would have taken me ~6 months to have completed and reviewed on the NHS (pre-COVID). Other than for emergencies (even then, call out times can often be multiple hours), no one would ever choose NHS care over private options
I think there is an orthogonal question of morality here that cannot be resolved merely by looking at how well each system performs. I maintain that it's unethical for government to be involved in healthcare of its citizens, and I see that I saw no country even close to following that model of non-involvement (despite what people think about the US, the US doesn't do that).
Even if in all the countries examined above, government had no role in healthcare beyond enforcing contracts, we may see different levels of performance and it is wrong to think that the relationship between government involvement and performance is independent of many other variables.
> 4: Single Payer Channeled Through Private Insurance is typical of Germany and the Netherlands. I think this is kind of like how charter schools work in the US: the government pays 100% of your costs,
This doesn't sound like the Germany I remember.
In Germany you have to pay for what they call "public" health insurance, but actually you are paying a private company of your choice. On the other hand they are so tightly regulated that the choice doesn't matter much. IIUC, it might seem like the government pays, because most people have the payment taken straight out of their paycheck, but if you are a self employed, you have to pay them yourself.
It strikes me as very similar to the post-Obama system in America, except presumably more orderly and, because it's German and not American.
You wondered how Germany avoids patients going to out-of-network doctors.
There's an official price list for (basically) every procedure a doctor might perform. Doctors are allowed to apply a factor to every price., but this factor has to be negotiated before the treatment.
In practice, the patient hands over their insurance card before the appointment, and the doctor sets the factor to whatever the insurance allows. This incentivizes doctors to give better treatment to high-factor patients, so that they don't go looking for a different clinic.
Some doctors state outright they will only work for a minimum factor*, then the patient has to cover the difference if its above their insurance's max factor, or negotiate, or go somewhere else.
* it's usually phrased as "we only accept these insurances: ..."
To the question of "why doesn't Germany suffer from higher costs", the answer is price controls. Costs for any particular intervention are set by a process of sectoral bargaining between the health insurance companies, hospital industry groups, and doctor's associations, with a healthy helping of government regulation and cracking the whip to make sure everyone comes to a reasonable compromise. It nestles nicely into Germany's cultural corporatism, where everything is subject to tedious consensus-building in highly centralized representative bodies that reach decisions that individual agents are required by law to adhere to (unless they fall into a narrow band of exceptions, in which case there are basically no rules but they tend to follow them anyway because Germans love following rules).
This is similar to how German wages are set: if you hire a metalworker, you have to pay them the union rate even if they're not in the union, but unions and employers' associations are generally very cozy with each other and work stoppages, when they happen at all, are symbolic; everyone knows eventually they'll meet in the middle and go back to work.
Basically, the German love of order and consensus prevents a lot of rent-seeking defection. The American culture of chaos, defection, and adversarial relationships is unlikely to be able to adopt much from the system without incurring severe psychological pain.
I'm telling a very culturally reductive story here but after a decade in Germany it's a little bit hard to come to any other conclusion. Germans are just wired differently than Americans, and that has upsides and downside. They're great at manufacturing but terrible at UX design. Go figure.
Regarding the german system: The adversarial vs cooperative point by @Atticus is excellent and can not be understated. To add some points on the german system (I'm also unsure about its correct catgorization in the book, but don't know enough about the used system to be sure enough):
- Doctors are free to reject patients with the statutory health insurances (which pay the predetermined rate) and only take privately paying patients, but the vast majority just take everyone and offer benefits to the (economically more viable) privately paying.
- Most doctors are not motivated primarily by money. One of the "people dying in germany while on the waiting list for a specialist" is a myth - every doctor I know triages referals to specialists (some specialist professions have notoriously long waiting lists), so that patients with a need for a speedier specialists opinion of treatment are referred faster by calling the specialist in advance and ask for an urgent appointment for the patient. An example would be dermatologists, who usually are booked full 3-4 months in advance (because they do often prioritize privately paying patients that want beauty treatments) - but if your general practitioner finds a suspicious skin change that might indicate a fast spreading skin cancer type, they just call the patients dermatologist and usually get an appointment on the next day. Note that this is all without looking at emergencies, which are treated non-discriminately immediately by everyone, *and* that this kind of triaging is neither charged extra or bonused in any way nor is it regulated by law. My only explanation here is just that doctors in general are simply philanthrophs in germany and make enough money to stay motivated - as well as people here not feeling the need to show off to everyone else how rich you are as it seems custom in the US.
- The rate for one insured "unit of work" is not as fixed as I've read between the lines here, but there's a negotiated, fixed base rate, that the doctors are able to multiply by a "difficulty factor" to adapt their work to the time needed. If a doctor is known from an insurer to have a statistically higher cost due to always using a high difficulty factor, they will get more and more trouble with the insurances, because these can challenge the factors to prevent fraud.
- The base rate and even which medication and treatments are payed for by the statutory health insurances based on their effectiveness for certain medical issues is regularly negotiated in a common nationwide commitee you already mentioned (Gemeinsamer Bundesausschuss). They *have* to base this on the effectiveness by law, which *has* to be based on scientific studys.
- If you are an edge-case where no treatment is being payed according to this committee, you have an independent escalation committee (Medizinischer Dienst der Krankenkassen), where you can appeal your specific case and get the treatment payed by anyway. This committee can also be called upon by your employer or your statutory health insurance, if they believe that you are fraudulently sick or otherwise trying to cheat the system - countering one of the often used arguments against a "quasi-socialized health system", where everyone "would just stay sick at home". You still have the right to sue for payment of your treatment afterwards.
- statutory health insurances' members are paying their insurance rate as fixed percentage of their income (14.6%), up to a maximum of 4.200€ of income. So the wealthier upper class is incentivized to still be insured in a statutory health insurances (because their effective rate is reduced with higher income due to the maximum).
- The statutory health insurances *are* able to pay for medical treatments and medication, that is *not* sanctioned by this committee, *but* they have to pay this out of their own pockets. For this, they are allowed to charge their members a monthly premium (which is around 0-2% of the income of the insured member). Each year, the insurances are rated against each other in their effectiveness (cost per insured member) and their premium is redistributed. This self-regulates each insurance to keep their effectiveness high.
- There were an absurd number of statutory health insurances in the past, but they have been reduced through mergers a lot in the past five decades to promote more efficiency (from ~1.800 in 1970 to 103 in 2021).
TLDR: The system in germany works so well, because it is capitalist based, heavily regulated by the state, with self-regulating feedback-loops to get the best outcome for the patient, while still balancing it with the necessary cost effectiveness.
I would add an additional point, which is that Americans, as a rule, live stupendously unhealthy lifestyles compared to these reference countries and that is going to be reflected in health outcomes and costs connected to things like care for chronic conditions. Terrible diet and sedentary lifestyles are the norm, notwithstanding the narrow sliver of society that is fitness-obsessed. It's not even a choice, really; unhealthy food is cheap, healthy food is unsubsidized, and most areas are hostile to non-automotive locomotion. I lost fifteen pounds without even trying when I moved to Germany.
> I spent a long time staring at this system trying to figure out how it could possibly work.
Someone else probably said it better already, but the answer is "Not very well." At least here in Germany there are dozens of small and less small problems that come from this system.
American expat in London here. I moved from an Anthem PPO plan in San Francisco to just plain NHS with no private insurance, and quite frankly the UK NHS is far better (the French system that I also have experience with is better yet, the Dutch is worse). I get access to physicians or hospital services much faster, including expensive tests like MRIs, my prescriptions for a chronic condition are completely free, and more topically so are Covid lateral flow tests. Not having to waste half an hour at the beginning of each appointment filling out insurance and HIPPA paperwork is also a boon and helps with the blood pressure :-)
They take preventive medicine seriously, and even the facilities are in better shape than the expensive SF CPMC or UCSF hospitals, despite the NHS being a cost-optimized cheap-and-cheerful basic service.
I do use private dentistry, but even the idea of free basic dental care would blow most Americans' mind.
Some notes on drug pricing regulation in the EU. The situation is interesting that even though it looks like monopoly/psony in a single country on the EU level it is much more competitive. Most drugs sold in the EU have EU universal (or almost universal) registration. If you are a pharmacy you can buy a drug in one country and repackage and sell it in another. In case of significantly different prices among the countries (south and east prices tend to be lower) that can lead to a deficit of the drug in low price countries and a huge second market that in reality is tiny (I have a client who runs a second market platform for pharmacies).
I haven't seen a comment yet on France (we are of course half a day ahead of you) so here are a few thoughts. I'm not sure I recognise the system from the brief description in the essay.
The basis of the French System is Social Security (the "Sécu") which covers everybody for most things and gives you a green card with a SS number and microchip which can be read by any pharmacy or any health provider in the system. This has all your medical details and all of your prescriptions. Because not all costs are covered (eg about 70% of the cost of the average prescription) almost everybody has a top-up system, known as a "Mutuelle", sometimes run as a wing of an insurance company, but also as friendly societies linked to professions (there's one for education, for example). This tops you up to 100%. In my case I pay the equivalent of about $100 a month for this insurance, though this figure reflects my age( I am 70). After that, I pay essentially nothing for medical treatment. At the pharmacy I give them my card and the prescription. They give me the medicines. That's it. The kinestherapist gives me a bill every six weeks or so, and by the time the cheque is cleared I have already been refunded. There are certain procedures that are not covered by the Sécu, and non-routine dental care can be quite expensive. Some drugs are not reimbursed, though you can pay for them if your doctor is really convinced and so are you. There are subtle nudges also: generics are provided free at the point of collection, whereas non-generics have to be paid for and then reimbursed. Some Mutuelles pay for special treatment (eg osteopathy), others don't. The French complain about their health services a lot: some of the bureaucracy that goes on behind the scenes is incredible, but it all seems to work. It's also true that successive governments have starved the system of resources and we are seeing the consequences.
However. And it's a big however. What the French and the UK system have in common is that they exist to look after you, not to make money. Whoever you are, and no matter how much or how little money you have, you will be taken in and looked after. The reality is that people don't think of their health, or of health care in general, like an economist, but like a citizen and a possible patient. To that extent, I really wonder to what extent health care economics, for all that it may be a nerdish subject of interest to specialists, should be allowed to inform policy-making. Thirty or forty years ago, when the NHS just concentrated on care, the system worked much better. With every attempt to introduce budgets and management, it's got worse. There's a lesson in that.
The discussion of the arbitrariness of health care budget setting reminded me of my experience negotiating with hotels to hold conferences. The complete arbitrariness and flexibility of the prices charged for the use of meeting rooms was a bit disconcerting; it bore no relationship to anything driven by costs, the way food service prices did. You might get some idea of this from the variability of cost of sleeping rooms, though that's driven much by supply and demand, which wasn't so much a factor in meeting rooms, as they weren't in such regular demand at least with these hotels.
Technical deficiencies in some descriptions:
1. UK GPs are independent contractors, and self-employed. Hospital doctors are employees. All can do private practice as well as NHS work, but if they do both they must not spend more than a small portion of their time on private work (they can do 100% private if they have the desire and the reputation for it). Consumers often have private insurance either for add-on services, or in gold-plated versions, that pay for private health care.
2. Canada confusingly refers to some of its separate provincial health care arrangements as insurance. It isn't: it's just taxation and government spending. Traditionally, doctors have been self-employed independent contractors (again with only one client). Negotiations take place at a provincial level between a medical society/union to set fees for all paid via fee for service. This is being gradually replaced by alternative funding plans where a group of physicians (say all the surgeons in a teaching hospital) get together and negotiate a pot of funds for their services in return for certain promises of work. They then split it up how they like. In effect, they become salaried employees but with no benefits as they are still, technically, self-employed. Government knows what the costs will be, rather than the open-ended fee-for-service system, and pays the docs less than under FFS, and the docs get to work much less for their income.
3. I'm not sure any Canadian hospitals are privately owned any more. Some may still technically belong to, say, a Catholic charity, but those just become a free building for the government to use as it sees fit. Attempts have been made to set up private surgical clinics, but the provinces always get them shut down. Privatised medicine is illegal in Canada, though tolerated in Québec. Consumers do have private insurance, for services not covered by government (drugs, dentistry, eyeglasses etc).
Explanation to why there is no "out of network" in Germany:
Doctors need a license to treat publicly insured patients (~90%) which limits their ability to reject patients or treatments.
Otherwise they they limit their clientele to a small more lucrative group of privately insured patients.
Since the doctor has to bill treatments based on a catalogue not specific to the insurer he has no incentive to exclude patients for that reason. The catalogue is the same for private patients, doctors are allowed to apply specific factors between 2.3 and 3.5 tho. Because of that there are reduced wait times for private patients and it's easier to be taken on as new patient.
There are specific treatments the doctor can offer which the patient has to pay out of pocket. Those can't be compulsory and are usually pointless.
Explanation why hospitals or doctors don't go bankrupt when costs rise:
One direct reason is that treatments can be made made more profitable with modification, e.g. the first night in the hospital is very lucrative and can be added to treatments which don't necessarily require it.
Some speculation on the topic:
I don't know the situation in the US, but I feel generic drugs are also widely accepted and handled sensibly in Germany and the EU which puts price pressure on the pharmaceutical companies.
A lot of hospitals are be ran by the state (university clinics) or charitable organizations so commercial hospitals can offload unprofitable treatments to those when they start running a deficit.
I've just spent four years in the Netherlands, after 3.5 years in Singapore, and much of my life in the UK before that.
The Dutch system is very good in many ways. The insurance costs can be high, but the facilities are often very good - modern, well-equipped hospitals etc. But Covid has shone a light on some structural problems: 1. Insurance funding starts to fail when a pandemic hits. Big time; 2. The Dutch system has little central control (parts are run on religious lines) and this was a problem in coordinating a pandemic response; 3. Worse, the Dutch government is good at sensible technocratic problems (water, normal health care) but bad at difficult and unpredictable crises (Covid), and this feeds through to the health system; 4. The Dutch aren't very good at being told what to do - Over the last two years I was in hospital for various reasons at various points (check-ups, a minor operation) and over all these points I'd guess at maybe <50% of people wearing masks (including staff!!!!); 5. The Dutch don't seem to rely heavily on pain relief - so you'll be given maybe 75% of the dose that you might receive elsewhere (a big deal for some procedures!). So it's a good system for normal times.
Singapore was terrific, and the insurance system works on very different tiers so the system isn't monolithic. They picked up a couple of big health problems that even required a full-scale exploratory operation - something that would never have happened in eg Britain. I suspect the nurses aren't as highly skilled as they can be (ie developing a nurse-practitioner career path) but that is certainly true of China and elsewhere in East Asia.
Britain has a terrific system of a sort, but its major flaw is political - it's so wedded to the NHS system that it's found it difficult to reform and to introduce mild market-led reforms (for instance involving insurance). This is a massive handicap! Even going through the GP doctor system to get the referral to a private doctor is difficult, as you're often faced with a degree of scorn from the medical staff (for jumping the queue, for undermining the secular religion of the NHS). They also let me and my family down badly on several occasions (this can happen, but these were preventable).
I think Random Critical Analysis' detailed and excellent work deserves much better than a 'see here for a contrarian take'. I spent a lot of time engaging with it a couple of months ago, and the strength of their arguments and analysis helped change my mind on a topic that I knew quite well, which is rare and wonderful. In fact, their collected posts should get a book review of their own!
Thesis: The governing factor in US healthcare is geography. No country with the geographic distribution of people similar to US have solved healthcare adequately.
To unpack: fundamentally, the screwed-upness is about insurance (which is about ~$1T revenue industry); which in turn, is about population density (or more precisely, the lack thereof), and the geographical distribution of population in the US, which makes a single-payer-system uneconomical. To unpack: you look at population density in the EU, you drop a hospital in any city >10K population, and it can also provide timely support to the neighbouring 5 villages, meaning you have reach of ~50-100K people. Quantitatively: US pop density ~36 per km^2 vs EU pop density 117 per km^2. You look at eg Utah on https://lh3.googleusercontent.com/fjk6tl9Zz-6PnzxKh-TmRj8McEd5nV_jidjuPvLTEMaiObBNKWuiXyHFu_aMG7QOzg earth at night, and it is infeasible to give coverage on an economical basis; which makes single-payer system impossible, or at least dependent on private sector, which in turn, asks for profit-maximization; which, in turn, pulls in insurance for revenue generation, which in turn gives rise to the misalignments we can all perceive.
To address objections: Canada doesn't count, being essentially a few hundred km^2 of population, and rest populated by polar bears. Russia's healthcare system is administered down the pub in the form of vodka (and months and months of queues); and China is practicing "traditional chineese medicine" in all non-Tier-1 areas. Probably the biggest anomaly is the US's insistence and enforcement of scientific-based healthcare practices -with all the full costs it entails.
I want to push back on the assertion you made, Scott that "Certainly rich people in America get good health care." After he published this book in June 2020, Ezekiel Emmanuel published an article in JAMA IM (link: https://bit.ly/3nGRHL8) called "Comparing Health Outcomes of Privileged US Citizens With Those of Average Residents of Other Developed Countries." He wanted to test the commonly stated trope that a feature of the US healthcare system is that the rich here get the very best care in the world. To do that, he looked at outcomes across six benchmark diseases (heart attack, colon cancer, breast cancer, infant mortality, maternal mortality, and pediatric acute lymphocytic leukemia). He compared outcomes for white people in the 1% of richest counties in the US, 5% richest counties in the US, and average outcomes in 12 rich countries (i'm not going to type them all out but they're places like Australia, Canada, and Germany). The results were...not so great for rich Americans!
While rich people in the US do better than average people in other rich countries with breast cancer, RICH children in the US have outcomes worse than AVERAGE citizens in 11/12 of this group of rich countries. Rich people in America have about the same outcomes after heart attack that average people in other rich countries have. In other words, in most cases, you're about as well off having a heart attack being the average bozo in France (for example) as you are having one in one of the wealthiest counties in the US. I was pretty shocked when I read this paper.
The reason I think this is important is because I think it's extremely politically useful sometimes to be able to claim that rich people in the US get great healthcare! People like to imagine themselves as more privileged than they are, and think that, if and when they get sick, they'll have access to this incredible care. So we should reframe from "average care in the US is shitty but care for the upper echelons is the envy of the world" to "average care in the US is shitty, and also in the upper echelons we are about the same as the average person in America's peer countries."
The whole article is worth a read (link again! https://bit.ly/3nGRHL8) as it's very relevant to the discussion here. It also touches upon the "satisfaction paradox" that many folks have commented on--satisfying healthcare isn't necessarily good healthcare:
"Choosing a concierge cardiologist or a hospital ranked highly by U.S. News & World Report may ensure prompt service and personalized attention, which have value, but it does not ensure the world’s best clinicians at each stage of care, at whatever facility is providing care, and does not ensure the best outcomes. A well-off US citizen cannot “buy out” of the uneven quality of care provided by the US health care system."
This doesn't look very rigorous: in particular, I don't see a clear distinction between payment systems for health care vs. health care provision.
And note that single payer blaberty blah is irrelevant.
Japan has a national single payer setup. However, they also have a medical pricing board which apparently pretty much all Japanese doctors/hospitals follow in their pricing. Kind of like Medicare but without the gigantic opposing negotiator component.
Thus any real measurement of health care should be looking at:
1) How bills are paid
2) How health providers price
To these I would add:
3) Relative supply of health care provision capability - which the book does indirectly reference via wait times
4) Private vs. Public choice - which can be public only, public or private, private only
2) matters because I 100% believe that private health care practitioners will base their pricing relative to public health care costs, if such costs are transparently available - if for no other reason than their customers also will be aware of their options.
I've lived in the US, China, Australia, Singapore and Spain. I'm really surprised that the book didn't even consider Spain, which has a pretty cheap system, the world's highest life expectancy at birth and, by far, the best health system of all those I've had a first-hand experience with. No need to tell you much about the US, and Australa's system is, in my limited experience, marginally better. Singapore is hyper-expensive and hyper-effective and anyone who includes China in such a comparison must be doing it for the laughs. Very expensive and second-rate at best in big cities, third-worldist for hundreds of millions in the countryside.
I’m an American and lived in the Netherlands for several years (2012-2018). The Dutch and also the expats loved to complain about it, but I thought the Dutch system was pretty great. By far the best part of it was the transparency. My health insurance actually covered my needs- I never saw a bill. No copays, no surprise mystery bills of the kind I’ve always received in the US, even with “Cadillac” level insurance.
It’s hard to measure expenses and satisfaction across systems because you’re dealing with such different expectations. One common complaint by my fellow American expats was that doctors didn’t “do anything”. This is what the non-interventionist default of Dutch doctors feels like to an American.
But “go home, take some Tylenol and come back if you don’t feel better” is actually quite an effective strategy in this GP-as-gatekeeper model. Most of your patients feel better and don’t come back, as you couldn’t have done anything for them anyway. This keeps costs down and keeps the emergency room just for actual emergencies.
Dutch people’s complaints seemed largely rooted in the perception that Germany and France had better healthcare. I’ve never lived in either place, so I can’t say. But the handful of people I met in the Netherlands who had been seriously sick, e.g. childhood cancer or a major injury, had much nicer things to say.
See also: the guy I know in the Netherlands who was able to get his severely autistic son into a residential program for children where he could receive 24-hour care. Almost nothing like that exists anywhere else, and I believe it was covered at least partially by insurance. I wonder how many of the satisfaction survey participants even considered the existence of such programs as part of their healthcare system.
> In Germany, all the insurance companies get together and form a Drug Price Bargaining Group, which bargains with drug companies the same way a government would. Why don’t insurance companies do that in America?
Since the ACA, health insurers in America are limited to making 20% profit on insurance premiums. If they want to make more profits, the only way they can do this is by spending more on healthcare. Not sure why anyone thought this was a good idea. See the 80/20 rule here: https://www.healthcare.gov/health-care-law-protections/rate-review/
PBS did a great special called "Sick Around the World," that illustrated all of the same issues. Great mini-doc during the discussion of Obamacare.
https://www.pbs.org/wgbh/frontline/film/sickaroundtheworld/
No one has mentioned the regressive nature of US healthcare financing. Scott is right that what we call "premiums" are effectively just payroll taxes. For the typical American worker, healthcare-related premiums/taxes aren’t just “big.” They’re bigger than all non-healthcare-related income/payroll taxes combined. Healthcare is THE thing impacting take-home pay.
-- If we call employer-sponsored health insurance what it is - a tax - then about 70% of taxes taken from the paychecks of a typical American worker with family coverage go to healthcare. If the worker has individual coverage, that number is about 51%.
-- In hard dollars, the healthcare industry takes about $26,000 from the total compensation of a worker with family coverage whose salary is $50,000 (whose total compensation is actually about $70,000).
-- The structure and branding of healthcare financing (having the employer pay the bulk of it, and calling it a "premium" instead of a "tax”) leads the typical American to grossly underestimate 1) their healthcare costs and 2) their total taxes.
-- Because the US healthcare system is structured to overpay by 2x, this typical worker is overtaxed by about $13,000.
More details here: https://thebottomlineinhealthcare.substack.com/p/health-premiums-vs-incomepayroll
"Medicare For All asks that we go from one of the most privatized health systems in the world to one of the most socialized, leapfrogging over successful semiprivate ones like Germany and the Netherlands. This is especially odd since those systems seem to be some of the best performers. Why would this be tempting? Absent a theory of why Germany and the Netherlands work so much better than the US, I’m not sure."
Absent a theory of what's so great about the German and Dutch systems, you can't ask that the government to implement that theory. Probably the people calling for medicare for all don't actually know anything about the diversity of European systems. But what good would it do them to know which systems are best?
IMO, the most interesting model I've heard of is Israel's – consumers choose one of 4 non-profit HMO's to belong to, who are paid by the government per person who subscribes. HMO's offer much better incentive models for overall quality of care, and the competition keeps services consumer-oriented (compared to fully-socialized systems like the NHS).
Would love to see a look from you!
Great point on the pricing of this book Scott :)
So, I am curious about the percentage of uninsured people in each country and how this relates to overall health care costs and life expectancy? Also, what about Japan?
While reading the Amish healthcare link on SSC, I had an idea on how to keep costs down:
A members-only prepaid hospital. No obligation to treat any non-members. Accepts no insurance. Membership fees would cover the fixed costs of running the hospital plus help cover catastrophic things way below marginal cost. Everything else would be a fee-for-service near the marginal cost, prepaid by the patient with their payment-methods-on-file. Make all the members sign an arbitration clause forfeiting their right to lawsuits to the maximum extent allowable by law.
Then there is no need to ever pay:
* lawyers
* insurance overhead on either the hospital side or the insurance company side
* debt collectors
* people who process paperwork of newcomers. It'd all be done on a website before they ever visit the hospital.
* paying extra to compensate for those who who scam the hospital or can't afford to pay.
I'm not sure this would be entirely legal in the US, but it should be.
As a data point, here's my experience in Germany. I've been living in Berlin for 1.5 years.
As an employee, I pay 8% of my gross salary on health insurance. This is just 50% of the total cost, with my employer paying the other half. As long as you make less than 64.350 euros gross a year (and the threshold grows every year) you are compulsorily insured with public insurance. If you make more, you can switch to private. If you're young and fit, it will cost you much less than public insurance. But if you get in trouble and want to switch back to public, it can be very difficult. However, if your income falls back under the ever-growing threshold, you are forcibly switched back to public.
Even with public insurance, you must choose a provider, but like Scott said, they are all very similar, so the choice is easy. I chose my provider because they speak English. I can call them or write them at any time and they are very helpful.
I don't have health problems, but I've been doing a lot of medical exams. The system is smooth and efficient. I always come out very impressed. Like most people, I book my appointments on a popular online platform. I am not tied to a specific family doctor: I can go to anyone who has a free spot, so there's always a way to get an appointment within a few days. I can also directly book visits with specialists without going through a family doctor.
The clinics ooze a sense of wealth and high quality healthcare. Wait times are short and the doctors all speak English. Processes are streamlined as needed: in one case, a doctor wanted to send me to a specialist, so he just gave me a piece of paper and told me to see his friend downstairs. Ten minutes later I was done. In another case, a family doctor spared me a visit to a specialist and accelerated the waiting time for some physicals so I could get a vaccine sooner.
I am very prudent and careful about my health. I find that doctors here are understanding and willing to conduct exams. They have time to listen and engage and don't seem overworked.
There are almost no added costs. This includes dental work: I've had two or three cavities removed. Oh, and mental health: you can get at least 80 hours of therapy on the public scheme, with a therapist of your choice.
The drawbacks: the health scheme is extremely expensive, both for the individual and for the state. And the system was mostly designed with employees in mind, so it can be extremely burdensome for freelancers and the self-employed. As self-employed, you need to pay 14.6% of your gross income! And this on top of all the other taxes, which are very high in Germany!
As for Scott's questions:
"Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs?"
I don't know, but I assume it's because these industries are heavily regulated and don't have room for maneuver.
"Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?"
Again I don't know, but from the user's viewpoint, public insurance is a monolith. It doesn't matter which provider you have. When looking for doctors, you only have to check whether they accept public insurance (most do). I assume that providers are forbidden from not reaching agreements and imposing out-of-network costs.
Another idea: abolish the patentability of obvious me-too drugs. The patent application would have to prove the drug has a different mechanism of action than the prior drugs.
"People talk about how the US system is 'privatized' and the Canadian system 'socialized', but a lot of this comes down to whether your payments for the same basic package are marked 'paycheck deductions' vs. 'taxes'."
On average, these are the same. But if you make much less money than average, paying for health care via taxes is a much better deal than paying via paycheck deductions, and vice-versa if you make much more than average.
Also, you said that China and Taiwan are much poorer and less developed than the other countries on the list; this is definitely true of China, but in terms of PPP GDP per capita, Taiwan is on par with Germany and considerably wealthier than France or the UK. For some reason it looks much poorer in exchange-rate terms. Certainly it's much closer to Europe than to China.
I haven't been to Taiwan for several years, but last time I was there it didn't strike me as obviously less developed than Europe. It's getting hard to tell these days, though, with even poor countries having modern cities, and even rich countries having less-developed rural areas.
Honestly, I take someone saying the US as a "mostly private" system as agenda setting in the first place. As far as I can tell, slight majority of spending is private. But the most intensive care tends to be for older people and under single payer.
Having lived in both Germany and Switzerland, it is a red herring to put them into different categories, just because of the formal status of their insurance companies.
The main point is: In both systems, all insurance companies must offer exactly the same product, called basic insurance. It is not up to the company to decide which cases they cover or when they pay. This is regulated, and border case are resolved otherwise. (Some very minor variations are allowed in Germany, almost none in Switzerland). And they can't reject any costumer. In such a situation, the price will not depend on the type of company.
What actually makes a difference are very different things. In Germany, if I have disease X, then the doctor/hospital will be paid a fixed amount to treat X. But they have to treat it ("Behandlungspflicht"), they can't reject a difficult case, even though they lose money with it. In Switzerland, the doctor is paid proportional to the amount of time/effort treating X. In both cases, there are long and detailed price tables, all of which are independent of the insurance. I think this is the main reason why the Swiss system is more expensive than the German one. (It doesn't show in the table, but I suspect that it would show if you only consider basic insurance. Also, drugs are probably cheaper in Switzerland, relative to income.) For better or worse, Swiss doctors are not optimizing so hard for efficiency. I like the Swiss system better. Swiss doctors don't keep cutting me short. But it's expensive.
Of course, companies can offer things that go beyond basic insurance, but this is a completely different market, and probably much closer to US system. But those are luxuries, not necessities. For details on the two countries (I was referring to public insurances in Germany, which is only part of the system), there are excellent description of those systems by Lars (on Germany) and Er Matto (comparison between Germany and Switzerland) in the comments.
Well the author has found his balls and his sense of humour again. Glad to see it
As I understand the Swiss system, basic healthcare is mandatory, rates are more or less fixed by the government, and providers must accept any citizen who applies. This avoids any bias in who does or does not get insured. Insurers can offer extra products at their discretion on top of that, from rebates if you use a fitness app to private rooms in hospital if you pay more.
In Switzerland, you receive your income before both income tax and healthcare technically-not-a-tax, but you still have to pay both of them.
Two thoughts.
1. Cultural differences. Comparing health systems across cultures is like comparing education systems; it's often not the system that differs but what the participants bring from home as it were. For education, if all the kids show up with an strong expectation that their job is to learn, and that they will learn, it hardly matters what the teachers do as long as it is non-violent. In the US, we expect that we can live how we want, eat all we want, and if something goes wrong we'll get a pill to fix our discomfort. I have lived in a variety of cultures, poor and rich, and in comparison am still astonished by how little care so many Americans take of themselves. We also expect physicians to be superhuman and are willing to pay them accordingly, whereas most of their job - at least in primary care - could be done by a nurse or a pharmacist. I have lived in places where in fact the first place you went for care was the pharmacy, and the pharmacist asked you a few questions, sold you some pills, and you were set. We expect the latest to be the best, and are eager to pay 10x more for a pill that works .1% better. We have a whole range of cultural assumptions about medicine that will not change simply by changing the system, and as long as we have those assumptions, most systems will not work well.
2. Related to this, but tangential, is what problems we expect the health system to manage. Just as in the US we somehow expect police to solve domestic disputes between spouses, we expect our health system to manage all the problems incurred by our lack of a safety net. I did a very simple study once (https://qualitysafety.bmj.com/content/20/10/826) which found that government expenditures on the social safety net explained differences in health outcomes (things like infant and maternal mortality, etc) better than government expenditures on health care; basically, spending more on social services can prevent a lot of health problems down the road. Subsequent studies have found similar patterns globally and across US states & counties.
For both these reasons, I don't think it makes much sense to compare 'health systems' across countries in isolation.
I like the joke at the end about negotiating a price of the book at the end. It actually highlights the difference between how pricing works in different markets.
Many people think that prices for goods and services are defined by the market, hence they are “legitimate”, for the lack of better word. There is also an intuitive belief that price of something is connected to the value it provides. So when price of something is exposed as arbitrary it naturally begs the question why does market forces would not influence it.
The issue is quite simple, the market equilibrium (and “fair price”) is achieved _only_ when there is competition on both ends - the buyers and the sellers. If there’s one seller and many buyers — seller defines the price.
If there’s one buyer and many sellers - buyer defines the price. So when government negotiates with many insurance providers, government can influence the price.
But when you sell books, there are many readers and many publishers, so price is less arbitrary.
OT:
Kidneys From a Genetically Altered Pig Are Implanted in a Brain-Dead Patient
https://nyti.ms/3Ahk2wK
Now this is interesting from an ethical POV. Is it ethical to take more risks with a brain-dead patient? I think so.
I'm thinking the "pig" kidneys are more likely to help than hurt the patient, and considering the brain-dead state, extreme measures are warrented (despite the obvious inability to give consent).
I'm pretty sure drug prices outside the US are only low because Americans are effectively subsidizing drugs for the rest of the world. Regardless of how much a drug sells for, it still costs pharma companies $1-4 billion to create a new drug from ideation to market. But manufacturing costs, especially for most small molecules, is basically negligible in comparison. So as long as a pharma company can recoup its R&D investment, say by selling the drug for lots of money in the US, then it still makes economic sense to sell it for basically any price in other markets.
If the US set drug prices like other countries, probably Americans would pay less and everyone else would make up the difference. Or even worse, prices would stay low and pharma companies would stop all expensive drug R&D. But there's no healthcare policy that can change the fact that drug discovery is damn expensive. (Probably changing FDA rules could do this by making approval cheaper/more efficient, but that's a separate issue)
Our drug prices are both high and not-high due to the very successful Hatch–Waxman Act. This article does a good job of explaining it: https://www.cato.org/regulation/winter-2021/2022/why-are-some-us-drug-prices-so-high
Frankly, the rest of the world is free-riding off of US pharma spending. If I ran the zoo, I would say that drug companies must set prices in other countries as a ration of their per-capita GDP to America's.
So Switzerland would spend more per pill, but Peru quite a bit less. Only seems fair, right?
I feel like using life expectancy at birth is a very poor metric for judging healthcare systems. I lived in Japan for 15yrs and I'm pretty confident it's not the healthcare that gives them long lifespans. Genentics, diet, lifestyle would seem to me to have way more effect than healthcare.
My personal experience there is there are good doctor's but also many bad ones. By bad I mean they'd never have passed whatever tests are needed in the USA to practice medicine. Not going to laborate my bad experiences here but I did eventually fine doctors I liked..
On the other hand the government sets prices and you can basically visit any doctor you want anytime you want. Just show up and hand over your insurance card. I loved that part. That includes seeing many specialists. . Prices are very inexpensive compared to the USA.
This has probably already been said, but the requirement (in the US) for employers to provide health insurance for full time workers leads to hiring more part time workers. I know a few people working multiple customer service type jobs. It stinks, is how I view our healthcare.
Former Soviet Estonia pays about 2.5k per capita, life expectancy 78.5, infant mortality 1.9. I've heard we're one of the most 'effective' countries in underpaying our doctors : ) This creates the problem of some of them opting to work in neighbouring 2x richer Finland. Medics seem to be exceptionally duty-bound people though, are willing to do a lot of overtime, and mostly won't really leave for greener pastures.
We often have to do charity campaigns to raise money for rare cancers that aren't covered by our system. I gather oftentimes the pharma companies just aren't that interested in dealing with a folk of 1.3 million, among whom some rare cancer happens 10 times in 10 years. And we're also kind of too poor to pay 100k for a shot in the dark.
I see the common strategy of 'just try to be cheap more' emerging.
Dutchman here. It might be good to know that the *only* thing for which there is a meaningful market is additional insurance. The basic insurance is completely regulated, with premiums set annually by the government (and discussed in parliament) and regulated deductibles (basically around €350,- per year but you can get a slight discount on your premium if you max out at around 800).
Moreover, it is forbidden by law for healthcare insurers to make any profit. Any profit made has to be returned to the policy holders. It can also not be used to grant bonuses, buy back shares or any such shenanigans. The idea of the Liberal-Conservative (which is right-wing for Europe) government which abolished the Patient Fund (a government health insurance) was, originally, for profits to be introduced at a later point. But since the current system went into effect in 2006, this introduction has been postponed, and probably will be indefinitely, even though we've had several right-wing governments for the last decade. It's just kind of taken as a given by everyone that introducing profits for insurance companies would drive up cost and it's kind of gross to profit off of a basic human right.
Having said that, the only real bargaining power that insurance companies have, as far as I can see, is contracting hospitals to take their policy holders. There has been some push by both government and insurance companies to use this as a tool to force hospitals to specialize, but I'm not knowledgeable enough to know if this has helped any more than the regular tools of government funding and decision-making to achieve this goal.
The biggest problem Dutch people and doctors have with this system is that there is sometimes a bunch of unnecessary bureaucracy involved. For instance, some medications that are quite permanent (like type 1 diabetes medication) need to be re-approved every year by that patients insurance company, for which the doctor or their assistant needs to send a form. (As an aside: there is a campaign among medical staff to stamp these documents with a picture of a purple crocodile. Why a purple crocodile? Because a famous Dutch advertisement (ironically by an insurance company) features a purple crocodile lost by a little girl in the swimming pool, which an obstinate pool employee refuses to hand over even though it's right behind him, until the mother of the girl has filled out several forms in capitals. Eventually he tells her they can pick it up in the morning between 9 and 10. https://www.youtube.com/watch?v=mJipJwDPJ-g you can watch it here, it works quite well even if you don't understand Dutch.)
My take on the US and its drug care costs are two fold:
For drugs out of patent: ABSOLUTE INSANITY partially driven by FDA regulation making it quite difficult and expensive for generics to exist and it should be quite straightforward to improve the system.
For new drugs: US patients massively subsidize pharma research for the rest of the world, the system can probably be improved by lower/faster FDA regulatory costs but probably not by a whole lot.
Healthcare doesn't work like normal economics because people NEED it, it's not a good with a varying demand that can be terribly influenced by advertising. With or without healthcare or choices, if you break your arm, you almost certainly need to get seen by a doctor. So much of "traditional" and colloquial economics is built on a system that sidesteps necessity for consumerism. Markets can be used as a tool to make healthcare better, but that logic doesn't really apply to the thing itself.
Glad to see from the comments that not only can we not decide what sort of medical system works best, but we can't agree on whether the healthcare systems of individual countries are brilliant or terrible.
But I'm glad that options other than the status quo and the NHS are being moved towards the US overton window.
The business about health care being a bizarro world where normal economics rules don't apply is true, but it's true in that it's inherently broken. To have efficient markets you need good consumer information, the ability to easily comparison shop and change vendors, easy entry and exit of vendors from the market. If you wind up in a coma and are brought to an emergency room you can't open your eyes, discuss what the treatment will be and how much it's going to cost, do appropriate research and decide for yourself whether the doctors's recommendations for treatment are appropriate, decide that the amount being asked for is outrageous, find a potential competitor, have them open up a competing ER next door, and check in there. Every step of that can't happen. The seemingly weird and artificial things like government negotiated prices are compensating for the normal mechanisms of efficient markets not functioning. In the US I've had the experience of getting quoted a price for a drug at a pharmacy, commenting that it was completely outrageous, getting argued with that the insurance company was paying most of it, asking what it would be out of pocket, getting quoted a price lower than the copay, then glaring at the pharmacist who suggested swiping a magical card she had through the machine which got a price even lower. Under such circumstance the government putting their foot down and declaring that there can only be one price and they're negotiating it on behalf of consumers is completely reasonable.
One of the other major differences between the US healthcare system and the EU systems is that the European Commission does drug approvals for all of the EU (and there are other EU-wide paths to getting drugs approved, with approval by any regulatory body being sufficient for the drug to be approved); whereas, the FDA does approvals for just the US (and it doesn't compete with any other US regulators to do the approvals). This gives individual European countries much more leverage than the US would have for negotiating with drug manufacturers. Since most of the cost of drug manufacturing is the research, trials, and approval process, Norway (technically a non-EU member of the EEA, but they still accept approvals given by the European Commission) can offer drugmakers relatively low prices and still have them sell their drugs there because they're already going through the European Commission approval process to sell their drugs in the rest of Europe. If the USA starts setting drug prices particularly low, it will have a much bigger impact on the incentive to fund drug trials through the FDA approval process. This also changes the optics dramatically. There's not going to be a scandal over a drugmaker failing to push their drugs through the approval process the same way there would be over it refusing to sell drugs to a particular country where those drugs are approved. (And I think it's generally accepted that the FDA's process is slower, more stringent, and more expensive than Europe's.)
Relatedly, another thing that is always missing from discussions of healthcare spending is the extent to which Europe and Canada freeload on the rest of the world for medical research. Below are the total medical R&D expenses by country for years for which I could easily find data. The key takeaway is that even though US GDP is only 13x Canada's in 2018, US medical research spending was approximately 45x theirs. US GDP is only about 20% bigger than Europe's, but the US spent significantly more than 2x on medical research than they do; (and as far as I can tell from less complete data sources the disparity is growing).
United States (GDP $21T): 2007: $131B 2012: $119B 2013:$143B, 2014: $154B, 2015: $163B, 2016: $173B,2017: $182B, 2018: $194B
Japan (GDP $5T): 2007: $21B, 2012: $28B
All of Europe (GDP $17T): 2007: $56B, 2012: $54B
Canada (GDP $1.6T): $3B in 2009 and 2010, and $4B every other years since 2007 (rounded to the nearest billion) -- all of the other values are in USD; whereas the Canada numbers are in CAD.
I think the overall picture looks something like this:
The incremental cost of manufacturing a pill tends to be pretty cheap. A drug company has to make back its investment in R&D with returns to justify the investment somewhere (which is necessarily a high risk investment with a long time window between the investment and when it starts giving returns which standard economic theory says makes the required returns higher). But once it makes back its research investment anywhere, it has a pretty big incentive to just sell its drugs everywhere even if it is selling them heavily discounted in some markets relative to others. (The regulations around drugs are a particularly effective form of geofencing that eliminate the incentives that might otherwise exist to charge similar prices in different markets.) So we have a drug industry that basically works by researching drugs to sell them in the United States; but then also pushing the drugs through the relatively easier regulatory regimes in the rest of the world to also sell the drugs everywhere else possible where the only investment that those additional sells need to justify recouping is the cost of getting the approvals since all of the research is already done. And we end up with a system where drug development is worthwhile if and only if those drugs end up being sold in the United States, and where the FDA has the most stringent approval process, and nobody really has an incentive to change this. American regulators and politicians get disproportionately more power out of this arrangement. Drug companies make their profits. American insurers are able to pass along and distribute the costs across the population so they make their profits too. European countries get their drugs relatively inexpensively, and are existing in a legal context where that is their only real incentives since they really can't increase their ability to regulate drugs because the power that exists there is distributed throughout the EU rather than possessed by the governments of the member states. And the members of the EC probably are a bit unhappy and trying to increase their own ability to regulate things, but they're sufficiently disconnected from the powers of the member states that what they want doesn't really matter. (So Europe has somehow found a way to make the people who have the most incentive to increase the price of drug R&D there from having their voices heard.) And the American voters are the only people who really have an incentive to try to reduce those prices, but many of them are shareholders of the drug companies anyways, many of them aren't but see themselves as "temporarily embarrassed millionaires" who plan to own lots of stock someday, and all of them are participating in a political system where there is almost no ability to express your opinion on any given issue because that's how the American two party system works.
I'm very far from being an expert in health care systems, but I'd like to offer a bit of insight into the Brazilian system since Scott demanded to know what developing countries do and Brazil is my home country. Brazil is in a very curious position regarding health care, since the current Constitution established in 1988 provides that we will have universal health care provided by the State (Sistema Único de Saúde, or SUS to keep with the three letters) but at the same there is an abundant proliferation of private medicine practice - hospitals, clinics, insurance companies, doctors can work outside the universal public system in for profit systems and not get paid by the state. This basically means we have at the same time a system with a lot of state-run hospitals and clinics, as well as state-employed doctors, other facilities run by private operators but funded by the State (considered part of the universal system) and also 100% private enterprises. This creates a situation in which a very large portion of the middle, upper-middle and upper class all have private insurance - provided by their employers or paid by the user - and the poor have universal coverage under the public system. However, the universal public system ranges enormously in quality: for example, we have simultaneously one of the best vaccination systems in the world for free but months of waiting time to get a simple doctor's appointment or years of waiting to get a surgery. Some types of surgical procedures provided by the state are good and others are not, same with exams, and the state-run hospitals also vary enormously on quality. The users of most private insurance companies also have a lot of low quality services, albeit with shorter waiting times and more options. A few of the really expensive ones provide quality services for the richer individuals. Also it's worth noting that a lot of the best doctors don't accept insurance payment at all and charge a fee for each appointment.
So basically poor people get screwed regarding surgeries, appointments, laboratorial exams and so due to poor quality and waiting times but at least can count on some basic quality services for free such as vaccination, ambulances, and urgent first care. Middle class people fare slightly better with considerably shorter waiting times, marginally better services and can also use the public system in which it does well. And rich people get very good health care for a reasonably pricey amount.
Brazil also has a very commended drug price system involving patent breaking but I don't really know much about it, only that it really makes most drug prices really low.
The political side of things is also very complicated especially because the left-wing blocks any productive discussion on reform since it considers the public system untouchable and refuses to acknowledge its shortcomings most of the time - or blame them on underfunding and "neoliberal policies". A lot of upper class left-wing people haven't used the public system once in their life but still consider it perfect. Brazilian things.
You may like this. It has been a while since I read it but I remember it being enlightening.
https://amp.theatlantic.com/amp/article/307617/
My understanding of drug prices:
The US is the only country that pays "full price" for drugs. Others pay as little as they can get away with.
This means US consumers alone finance most medical drug development, and the rest of the world gets a free ride.
Many Americans want to pay the lower prices the rest of the world enjoys. That would be great in the short run, but in the not very long run, most drug development would disappear, since there isn't a sustainable way to finance most of it.
This is also why the FDA has such an oversized influence on the whole world. Other regulatory agencies don't really matter much in comparison.
This is a rather bleak way to look at things, so I'd love if someone could convince me this is wrong?
Part of the reason that drug negotiation prices work is that researching the efficacy of a drug is a fixed cost, and so if you find that your drug works in America, then it probably works in Europe too (As someone who works in pharma I can tell you that different countries/regions have different regulatory requirements and some countries want evidence that the drug works for the people who live in their country specifically, but these requirements are usually rolled into existing clincal trials, usually at a fairly low cost).
The argument is often made that if the US negotiated to lower their drug prices then drug companies would fund less research and there would be less drug innovation. I have no idea how true this is in practice.
I also have nothing to say about infinite loops.
> How does the US model (which doesn’t work) differ from the superficially-similar Swiss, German, and Dutch models (which do)?
Well... what is it about the US model that we're saying doesn't work? The table you feature shows that the US is an outlier in customer satisfaction. It does not appear to be exceptional in life expectancy (where it's on the low end of the table, which is bad), or in frequency of unreasonable waits for specialists (where it's on the low end, which is good), or in amount of money spent on health care (where it's the highest value, which has no particular moral valence, and where it's quite similar to Switzerland [and, to be fair, the two of them are substantially higher than most of the rest of the table, with an honorable mention going to Norway]).
It is an outlier again in terms of health spending as a share of GDP. This tells us that Switzerland is, per capita, much richer than the United States. (Which is true: IMF estimates for 2021, according to wikipedia, are US$93,500 per capita for Switzerland and US$69,400 per capita for the US.) Is the problem that our health care system doesn't work, or that we're poor?
Demography has a significant influence on GDP. And the US is, by that metric, seriously handicapped compared to Switzerland; we have a bunch of low-earning Hispanics dragging our GDP per capita down and our life expectancy... up. What lesson do we draw from that?
Do we have a problem with our health care system other than that people are unhappy with it? By the standard aphorism of "reality is that which, when you stop believing in it, doesn't go away"... is there a real problem here?
The US does a really poor job of keeping (advertised) drug prices low because we a) have like 1M different purchasers of drugs, and b) those purchasers use a variety of different middlemen to actually purchase the drugs. We pay the middlemen a percentage of the drug costs.
For clarity, the dollar value chain is like this: Purchaser -> Insurer -> PBM -> Pharmacy -> Wholesaler -> Manufacturer.
All of the steps other than Purchaser (and small pharmacies now) make more money the higher drug prices go. Insurers can keep 15-20% of total premiums for their internal administrative costs and their profit margin under the Affordable Care Act's "Medical Loss Ratio" rule. That means that the only way for Aetna's profits to increase from 2021 to 2022 is for total "medical losses" to increase. They can keep 20% of $70B in 2021, and 20% of $80B in 2022, implying that drug+hospital+doctor costs HAVE to increase by $8B during the year, or else premiums can't go up and Aetna can't make more money.
The PBM step generally keeps an administrative cost per prescription plus a % of the cost of branded drugs. These companies are: CVS/Caremark, Express Scripts, OptumRx, Prime Therapeutics and a lot of minors. They negotiate "rebates" with manufacturers. This basically works like this: Humalog and Novolog are effectively equivalent drugs. They cost ~$300/month without insurance. The PBM will say to Lilly "That's a nice humalog you've got there. I'm going to need $150/month as a check back to me or else every patient on my plan gets Novolog unless the doctor fills out 500 pages of paperwork to get Humalog AND the patients pay $200 of the cost." Lilly says "ok fine." According to the PBM lobbying organization, PCMA, most of the rebate money goes back to purchasers, but IMO that just makes the problem worse because it makes purchasers complicit in the game by sending them checks that they use to reduce their premiums instead of reducing the cost of drugs to their plan members.
Consider for a moment that CVS/Caremark by themselves is the PBM for ~112M people in the USA. That's more than the entire population of Germany. If you think that Germany pays less for drugs that CVS/Caremark.........
Pharmacies generally get paid ~1-2% of the cost of branded drugs as their total compensation. On generic drugs, a typical pharmacy will get ~$10 per prescription on average as their compensation (to pay staff and rent etc).
Wholesalers like Cardinal, McKesson and AmeriSource Bergen (together controlling 95% of drug distribution) generally make their money by marking up generic drugs to pharmacies, and by taking a ~2% cut of the price of branded drugs.
Manufacturers make money by selling drugs for more than it costs to make them, including paying off all of the folks in the middle out of their revenues.
The actual prices realized in the US for branded drugs ARE likely higher than in other countries, but the differential is almost certainly not as large as it appears. grosstonetbubble.com is a site that talks about the size of the wedge between prices paid to manufacturers by wholesalers for drugs, and prices actually realized by manufacturers after accounting for rebates and other discounts paid to the PBMs and insurers.
Also... consider for a moment that NET drug prices (after rebates and other discounts) have DECLINED in the US for the past 3 years. Anyone that talks about "skyrocketing drug prices" and doesn't pay attention to the middlemen is just lying.
I've actually had that idea before: why don't governments act as a sole source purchaser for foreign copyright media, especially since distribution is nearly costless. E.g. Sports broadcast rights only having one govt sponsored rights buyer who then has to resell at marginal cost to distributors.
Or just ban exclusivity deals. That might work too.
One huge difference between healthcare in the US and elsewhere is advertising. The US has a whole industry dedicated to marketing drugs and medical services directly to patients, which just doesn't exist in most other countries.
I think this explains a big part of the cost disease. Ads for drugs are particularly common on daytime TV or cable news, I guess because they're watched by elderly people who tend to be sick and have Medicare. Most pharmaceutical companies actually spend more on marketing than on r&d, so high drug prices aren't really subsidizing new meds. They're subsidizing Fox and CNN waging the culture war.
And it's not just drugs. The are law firms, insurance companies, even hospitals promoting their emergency rooms. The whole purpose of these ads is to increase demand for healthcare, so as well as pushing up costs directly they probably lead to a lot of unnecessary doctors' visits and prescriptions.
As somebody who has seen both ends of the spectrum (lived in both the UK and US), my opinion is that this kind of analysis is overly complicated and virtually irrelevant. The problem in both countries is really the same: patients are disempowered from acting in their own interest.
In the US, there is no way for patients to choose cheaper healthcare.
In the UK, there is no way for patients to choose higher quality healthcare.
The inevitable result is that US healthcare is unaffordably expensive and UK healthcare is unacceptably low quality. This is only indirectly related to how it is paid for.
Why would other countries get better results than the US, even though the systems share many features? Probably because patients generally have a louder voice. Whether this is legal or cultural matters little.
As an aside, the part about each country averaging the costs of a basket of countries is the known network problem of consensus dynamics [1].
In practice, countries will always converge to a price, they will not fluctuate indefinitely. If they form communities (e.g. if all Western countries look at each other, all Eastern look at each other, and so on) they will first converge to the average of their community.
If the communities are connected (e.g. at least one country in a community looks at a country in he other communities) then eventually the whole system will converge to the average.
I describe it in more details in the network science book that I wrote [2], Section 8.5.
[1] Morris H DeGroot. Reaching a consensus. Journal of the American Statistical Association, 69(345):118–121, 1974
[2] Michele Coscia, The Atlas for the Aspiring Network Scientist, ArXiv, https://www.networkatlas.eu/, 2021
As to the reason why Germany and Netherlands work relatively well:
1: Evolution. German health care system has been around since Bismark. Lots and lots of evolutionary tinkering, mostly by people who at least party knew what they were doing.
This essay makes an interesting argument that it's about cost effectiveness of spending (eg public health and preventative care vs expensive drugs and surgeries) https://www.newyorker.com/magazine/2021/08/30/costa-ricans-live-longer-than-we-do-whats-the-secret
I don't think this is not a simple question of who is paying and whether private not-for-profit, private for-profit, or public institutions do the work?
Drucker already stated that healthcare organizations were double-headed monsters! The fact is it there are way more than two heads. Many stakeholders are present in a healthcare system: general citizens and the politicians that represent them, healthcare managers (top level, intermediate level and local supervisors), physicians, nurses, nutritionists, healthcare technicians, psychologists, social care workers, drug and medical device makers, suppliers, professional schools and colleges selling healthcare degrees, etc.
In many countries, healthcare professions have bars that somehow may be protecting themselves more keenly than the patients they are supposed to serve. Inside those associations there are subgroups that are interested in keeping a low level deficit of resources in their specialty to keep a higher pay per service. Some of those groups may have considerable political and social power and have their interests be respected by politicians when healthcare decision making is made by ministries.
Regarding physicians:
- How are the labour relations between physicians and hospitals (public and private)? Is the work contract-based, physician groups-based, or physicians are working as independent contractors?
- Did physicians pay $200.000 for their college educations, or was it virtually free (as in some countries)? Will that cause escalating healthcare prices to pay college loans? Will physicians try their best to specialize in Urology or Plastic Surgery, instead of practicing General Medicine, just to have a higher pay and pay their debt?
- Is there uncertainty in continuity of practice (ie does the physician believe he may be prevented to practice in the near future because of failure to achieve a passing grade in the recertification exam, or he may be disbared because he commited a mistake while seeing his 56th patient that day)? What is the likelyhood of being sued (I am pretty sure there are way more healthcare related lawsuits in the USA comparing to Europe)? How much does he have to pay for professional insurance?
There are so many variables at stake I don't think anyone can fully explain why are some healthcare systems working better than others. Or, at least, there is no single reason for it. The USA may be a perfect storm of many bad decisions. And Denmark may have a great healthcare system because labour relations are more transparent and respectful than other countries. And that characteristic of the country is not specifically related to healthcare. Healthcare professionals burnout statistics may be very informative in this matter.
In 2010, Washington Post reporter T.R. Reid wrote "The Healing of America" on this topic (a comparative survey of developed countries' health care systems). While a dozen years out of date, it might still be more informative than Dr. Emmanuel's work.
Amazon link to $5 e-book: https://amazon.com/Healing-America-Global-Better-Cheaper-ebook/dp/B003XQEVMQ/
Why are monopolies bad in most markets but not bad in health care?
Also, health insurance =/= health care. Why do we/the media/politicians continually conflate the two.
I find I do not care about the best or worst national healthcare system.
I care about the best outcomes *for me in my current context* - I want the national system that provides that. If that system is more or less expensive for the nation, requires certain social setups or population types, involved oppression or celebrates specific kinds of humans or animals, melts the polar caps more or less... don't care. Best outcome for me, thanks.
I expect many people are this way once you remove the need to perform social caring or tribe affiliation or whatever.
This is why many arguments for or against system A or B tend to fail. Lots of arguments about what is good for the world, the nation, or the group.... and nobody cares. The 'best' national healthcare systems probably screw a lor of individuals in some way they would call screwed, and the worst probably take great care of some people.
The fundamental reason why the United States is so bad is because health care breaks the iron law of capitalism, which is that the person who uses a good or service should be the person who chooses it, and who pays the bill. Doctors & patients together choose a medical treatment, but insurance pays the bill. Individuals use insurance, but don't actually choose or pay for it; that's done by their employers, and the plans are so complicated that individual consumers can't make heads or tails of it anyway. Hospitals offer treatments, but just try asking a hospital how much it costs or shopping around; they flat out won't tell you. It truly is upside-down bizzarro world. Plus, the bureaucracy is impenetrable. Have you ever noticed how long it takes a pharmacist to fill a prescription? Taking the pills off the shelf takes 30 seconds. Calling the insurance company and waiting on hold -- that takes 15 minutes or more.
Wrt. to other countries, there's not a lot of difference between regulation and socialism. Sure, in Germany and the Netherlands insurance is provided by private companies (my wife is Dutch). But if all companies are required by law to charge the same rates, and offer the same coverage, then it doesn't really matter whether a private company or the government pays for it. A really easy way to lower costs in the U.S. would be to require all insurance companies to offer the same coverage and costs as Medicare. All hospitals would be forced to accept that, because otherwise they'd have no customers.
I lived in the UK for many years, and used the NHS. It was great. No paperwork, no insurance cards, and no weird bills for ludicrously high amounts when you leave. As a patient, I loved the simplicity of it. But there is a catch.
The NHS hospitals get a fixed amount of money per year, and they have to treat every patient that walks through their doors. Hospitals are non-profit, and success is measured by how many people they can treat given a limited budget, not by how much profit they can make by doing lots of expensive treatments. That's the main difference between "capitalism" and "socialism" in this case -- it's the metric you use to measure success. NHS hospitals do a cost/benefit analysis on every treatment, and focus their efforts on the low-cost, high-benefit treatments. If you want the hospital to do an MRI, or something fancy, then they will not agree unless your condition is life-threatening. But if you just want basic every-day care, they're pretty good at that. I think the life-expectancy numbers bear that out; high-cost low-efficacy treatments do not improve outcomes all that much at the aggregate level.
And the NHS is really good at pinching pennies in smart ways. When my wife needed to go to the hospital, I called the NHS hotline, and they asked if she was able to walk. Not far, but yes, she could. So they sent a taxi-cab to my door, who dropped us off at the hospital front entrance. It was totally free -- his fare was paid for by the NHS. In the United States, they'd send an ambulance, for 10X or 100X the price, then bill it to insurance, who would then send a co-pay to me for some hundreds of dollars. That doesn't help anybody.
In a way, the NHS actually satisfies the iron law of capitalism better than the US system does. It works because the hospitals/doctors both make the medical decisions, and they foot the bill.
Insurance companies negotiate lower prices collectively through Pharmacy Benefit Managers. If by market price for a drug you mean list price, almost no one actually pays the list price in the US system. I personally find that Zeke tends to handwave concerns about drug price controls and innovation a bit too much so he downplays the benefits of paying higher prices for medications.
Taiwan is a *very* measurable, and measured, health care environment. And yet many of the “key facts” published about the features of health care in TW don’t align with the ground truth.
This is a data point that raises doubts in my mind about the methodology and mindset of economists, public health researchers, and the other folks who try to collect good science on health care systems and economics.
Forgive me for not listing more than two examples, I’m writing with little time to spare.
- not correct: few or no private insurance providers in TW, few or no people in TW have private insurance
- also not correct: most patients in TW pay very little out of pocket for expensive tests or procedures
The patient experience in Taiwan for most health conditions is, on average, as quick and easy as anyone could hope for. And the citizens, government, and hospitals are proud of the NHI and the health care system. The VP is an epidemiologist, the mayor of the capital is a surgeon. Access is granted freely to researchers who want to study public health in Taiwan (I’ve done lung cancer treatment clinical trials in TW hospitals, measuring among other things the performance of oncologists). There is plenty of high-quality hard science done in Taiwan in clinical research, pharma, bioscience, and a solid pharma and medical device industry.
And yet despite all this happy openness…the conventional wisdom on the “health care system in Taiwan” is not aligned with the key and complex reality of the features of health care in TW.
Aside: yep, the doctors in TW see way more patients each day than in the States. The base pay is barely more than resident pay in the US. But there are plenty of career physicians who are wealthy enough to afford an above-average home in the large cities in Taiwan ($1m-$3m is the average price for an apartment) and a Tesla.
Thanks for this very interesting review. I suspect I'll get more from this than reading the book.
As an NHS (UK) doctor, it's always interesting to find people who can cut though our blinkered propaganda about having the "best" medical system in the world. Clearly the UK has one of the best compromises - and there is other data to suggest that we do well on value-for-money, but that our main problem is access. The pandemic has undermined what was already quite precarious and the UK is very likely to fall down the rankings. We shall see.
The single biggest omission from this book would appear to be the exclusion of Singapore (or did I miss that). They have consistently the best outcomes for the smallest %age of GDP (about 5% compared to nearly 20% in the US)
https://www.commonwealthfund.org/international-health-policy-center/countries/singapore
see also:
https://www.commonwealthfund.org/international-health-policy-center/countries/singapore
And - at the risk of shameless self-promotion - there's a paper here about how we might use the Singaporean system as a model for the UK.
https://www.southampton.ac.uk/assets/centresresearch/documents/wphs/DJBGive%20the%20patients%20the%20money.pdf
Thanks again for the review.
DJ
Taiwan also only gives out the exact amount of drugs, you're supposed to have for a treatment course. The patient is not left with a bunch of surplus drugs, because there's only two package sizes available. And you get your drugs from the doctor, instead of being sent on an errand to present a written paper to a specialized shop called "pharmacy".
At least, that was my experience when I got treated there.
I have no idea if handing out fewer pills/tablets/capsules actually saves costs meaningfully, though. For all I know the actual production cost per unit of the drug is not a relevant factor, if the actual cost is dominated by R&D and negotiation is done via bureaucracy magic, anyway.
Was nice to see, anyway. There's something very pleasant to that alien Taiwanese aesthetic of "don't get handed crap, you won't need".
Hi Dr. Scott,
The drug pricing, from what I know of, is through negotiation between big drug corps and US government and insurance company(not exactly sure but through negotiation).
And there are different types of drugs. For example, drugs including over-the-counter(generic) drugs. Usually even with the same chemical formula, the same drugs from different manufacturers will be priced very differently. For example, Vitamin12 from China is around 0.001cent/tablet but manufactured in US probably cost around $0.01/tablet(numbers are forged here just to give one example).
I think some other types of drugs are usually patented in US, which lacks of direct competitor in the market and also the R&D costs are high (1 billion dollar for one small molecule anti-cancer drug). This contributes the drug price as well. US indeed has very large pharmaceutical industry (EU has second largest I assume) and many drugs are only available in US. The drug prices in other countries are more affordable and people complain less about the price may also partly because --- they don't even have that option. These novel drugs are not allowed in imported/circulated in the country. Both India and China are famous for sham drugs as they usually have to wait for 20 years after the US patents are over and they can start manufacturing that drugs. China/India may be the driving force to pull down the manufacturing cost for any chemical drugs.
Third, from what I have known of -- US has many more patented, advanced medical devices. They all contribute to the cost of the healthcare. US healthcare is expensive but the quality, once you get to see the specialist, is usually good. US is probably good at high end medicare and difficult diseases but China/India is better at general medicare (home treatment) as they are fast and more economical.
Drug pricing has many models behind and indeed is a very intriguing question.
Afaik a properly functioning Obamacare would look basically the same as the German system. The American version is just too complex and the courts + Republicans have made it much worse, but the basic thrust is the same.
I’m very ignorant, though, so feel free to correct me, but I’m still surprised Scott (or the book) did not mention the implications of Obamacare.
Going by the descriptions of the categories, Germany is actually a mix of 3 and 4:
"Single payer channeled through private insurance with substantial (different kind of) private insurance".
Lars elsewhere in the comments explains characteristics of the German healthcare system far better than I could and in far more detail than I would have, but let me just say that this bit from the description of Australia in category 3 applies to Germany almosy exactly if you just read "government" as "regular insurers" and "private" as "different kind of private insurers" (and some minor changes in parentheses):
"For example, in [Germany] sometimes the private insurance has shorter waiting times, or can get you nicer rooms in more luxurious hospitals. Often (mostly) the same doctors and hospitals treat the government and private patients, but give the private patients more time and resources, which leads to resentment and scandals (don't remember any scandals, but plenty of resentment). On the other hand, the private patients sometimes (very often) subsidize the public ones - ie a hospital charges extra for private patients and uses that to make up a funding shortfall if the government doesn’t pay them enough."
I've had the enormous privilege of having good private health insurance in Germany my entire life so far, and I have virtually no (personal) complaints about the healthcare (and pricing) available to me, it's really really good (for my own personal experience).
>This part confused me, because it seems to be both a government decision and a negotiation. The government sets a price based on some method. Then the drug companies - well, as far as I can tell, they accept. This article makes me think that in theory drug companies have the right to refuse an unfairly low price, but that in practice neither side wants the PR hit of a country going without a drug, both sides try pretty hard for an agreement, and it’s very rare for the process to fail.
>But this made it hard for me to understand this section of the book, which praised countries who managed to keep drug prices low. “Keeping drug prices low” mostly seems to involve having a process that reliably generates low numbers for the government’s offers.
The power in that negotiation rests almost entirely with the government, not the pharmaceutical company. This is what happens if the pharma company plays hardball:
Government: Sell your drug at price X.
Pharma company: No, we want price Y (Y > X).
Government: Fine, your patent's revoked. Now you have to compete with generics and will get Z (X > Z ~= cost of production).
The only real thing the pharma company can say then is "then we'll bribe the US government to be nastier to you in trade talks", which may or may not work.
I haven't read the original book but curious how it compares to this paper https://www.manhattan-institute.org/using-lessons-from-international-health-care-medicare-for-all
The real question here is, what is the kabbalistic significance of being named "Ezekiel Emanuel"? That definitely seems like a name with a lot of... something.
> Taiwan works its doctors incredibly hard - they see about 2-3x as many patients per day as in other countries, for less money, and I’m not sure why they stay in medicine or how they stay sane.
The joke-but-also-true answer is that working over-long hours for unclear reasons is part of Taiwanese culture.
>Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply. If you have the courage to say loudly and firmly “we refuse to pay a high price for this”, then providers have to give you a low price, and your health care system will be great and affordable.
My guess for this is that basically, there is a gap between 'A: The amount it would cost for it to be worth our time and effort to provide good health care' and 'B: The amount we're able to charge for healthcare in a supply/demand economy given that people don't have much choice not to buy, generally only have one or a few providers in their area to choose between, don't really understand what they're buying or have the knowledge or time to comparison shop, have principle/agent problems with their insurance discouraging them from saving money, we're ea prestigious profession that people expect to be expensive and they tend to trust when we tell them what things cost, and also we have IP laws giving us monopolies on most of what we do anyway'.
My guess is that B is larger than A, and that in fact B is SO MUCH larger than A that any sane-sounding effort to cut B - like B-10, or .8B, or whatever - still ends up being far larger than A, and so it's still worth everyone's time and effort to keep providing the same good healthcare at that cost.
idk if anyone will see this but re: the drug-pricing section: is it possible that the US is basically subsidizing everyone else by paying so much for drugs?
The book leaves out Japan. Having lived here for over 20 years and in the uSA for 45 years, I would say the system in Japan is better in many ways. The doctors are very good, the hospitals better in terms of after care and nursing, the after insurance costs are unbelievably low compared to the US. Universal coverage from day 1 with private insurance available for upgraded rooms and special treatments. As an older person, no way would I endure the system in the US.
Zooming in on pharmaceutical costs (which are a fraction of the total dollar spent on healthcare) while ignoring very high physician incomes, a broken medical educational system, the huge amount of wasted money spent on salaries and bonuses for healthcare, insurance and middlemen (PBM) executives...High pharmaceutical costs spur innovation and actually help frive down ancillary hospitalization costs. But Ezekiel is an MD, so bringing up physician renumeration (4x times that in the rest of the world) will never be a problem for him.
I have an idea for reforming our health insurance system in the United States, which I have never seen advocated for elsewhere. You all are way smarter than me, so thought I would throw it out to see whether this has any merit. Maybe nobody is pushing this idea because it is too dumb to work, or maybe it just hasn't occurred to anyone else yet, so here goes.
First off, we institute a nationwide, federal government provided, catastrophic health plan that covers every American person regardless of age, employment status, pre-existing condition, or any other disqualifiers. The annual deductible is $30,000 for single and $40,000 for a family. Funding could be through a surcharge on all citizens payable with their annual income tax filing, payroll deduction, or some other similar mechanism. Monthly cost for a $13,700 deductible plan in my area is $1,184/mo so increasing the deductible by more than 100% has to cut the cost appreciably. Also, this catastrophic plan covers absolutely nothing until you have spent through the deductible. Current plans have a rabbit warren of services that are not paid out of pocket, like annual physicals and bloodwork, which increase the cost of all these plans. Shifting responsibility for those services to the end user should result in more incentive for price discovery. On average 20% of people spend enough to satisfy their deductible each year. That would be much lower at this higher deductible and focus the care on the truly extreme cases where there is often little choice in the matter.
By implementing a catastrophic health plan for all, no more families need to file bankruptcy due to a child's cancer diagnosis, being involved in a car crash, or contracting a rare debilitating disease. Those major medical events get paid for now in an extremely inefficient and often soul crushing way. If you have good coverage, the insurance company pays for it and raises premiums on everyone else to compensate. If you don’t have insurance, the hospital charges you, you file bankruptcy, costing ridiculous amounts of time and legal expense, not to mention ruining your financial life for a decade. The hospital doesn't get paid, so raises its rates for those who do pay to compensate. In between those options are numerous iterations of varying soul-crushiness and taxpayer subsidy. Spreading the catastrophic situations more broadly and paying for it in a consistent way will reduce waste and inefficiency.
What about the $0-$30,000? That is where the free market would be let loose to do it's thing. Private insurance policies covering that amount should be cheap and easy to obtain. With an upper limit on annual cost, companies wouldn't have to worry about insuring someone taking a drug that costs $350,000 a month. For the young and healthy, risk tolerant, or those unable to afford private insurance, they would take the risk of needing health care that costs up to $30,000. Not an insubstantial sum, but certainly more manageable than $1 million or more for a brain tumor resection and several rounds of chemo.
With a large chunk of annual health spending required to be out of pocket, price discovery would actually take place. Attempts have been made to lift the veil on this, but until the end user has real incentive to find out whether that hip replacement is $4,800 or $9,200, true change won't happen.
All of the above has been tried in some form or another, and is not revolutionary. The unique part of my idea might solve the last part of this problem.
For all the $0-$30,000 spending that is not covered by a private insurance plan, or if those private insurance plans do not come into being, hospitals could be stuck with large outstanding bills to people unable to pay, much like they are now with uninsured patients. We solve this problem by requiring hospitals to offer payment plans at a reasonable rate of interest, say 1% over the Fed Funds target rate. Payment amounts are capped at 5% of Adjusted Gross Income, so the repayment term could be as short as 1 year or as long as 15 years, but be manageable for the vast majority of people. For example, $30,000 AGI would result in $125/mo available to pay toward healthcare costs, so a $5,000 bill takes 3.5 years to pay off at the minimum. Discounts for early payoff would incentivize full payment whenever possible.
That stream of income would be an attractive investment for the bond market. Hospitals could sell that pool of medical debt, much like banks sell secondary market mortgage loans, significantly improving their cash flow. The debt can then be packaged together in the same way Mortgage Backed Securities are today. We could set up an agency similar to Fannie Mae, I would call it the Healthcare Underwriting and Repayment Trust (HURT).
An industry with the technical expertise to service this medical debt already exists for servicing home mortgages. A 25bp packaging fee for HURT would provide the income necessary to maintain infrastructure and guaranty repayment on the bonds. Another 25bp servicing fee would be paid to the servicers for collecting and distributing payments to investors. Yield hungry institutional investors are clamoring for options, and a safe asset offering a variable yield of 50bp over the Fed Funds rate would be vastly oversubscribed in a world with 30 day T-bills yielding 5bp.
In the interest of relative brevity, I’ll leave it at that, and see what others think of the idea.
2 things-
1. Worse lifestyle.
2. The companies that make the drugs are mostly in the US, and can lobby the US directly. Those companies also pay taxes to the US. This creates a different situation when it comes to the US negotiating prices then other countries are in, for the most part.
A simple change the US ought to make is "single price". No provider should be allowed to charge different prices to different payers (although different providers could charge different prices from each other). We could write into the next Medicare contract with providers- you are not allowed to charge any customer more than you charge Medicare. This would immediately eliminate the out of network problem, the uninsured retail cost problem, and the cross-subsidy problem. It would eliminate the expensive process of providers negotiating a price with each insurer. It would achieve the supposed monopsony power of single payer without the bureaucracy of single payer.
I am coming to this really late. While the talk here is of how the cost of treatment in the US is higher than in other parts of the world, my colleague Akshay and I did an analysis of cost of treatment compared to income last year, when there was irrational use of tests and medicines in India.
While individual drugs may be cheaper in India compared to higher income countries, when many of them are used irrationally, the cost becomes significant. Add the cost of a CT scan and blood tests and a person with asymptomatic to mildly symptomatic Covid spends something like 120 USD for no reason at all, which is close to the average monthly income of an Indian, but in reality, far more than what 90% of Indians earn.
There is no safety net in India. 80% of patients from all strata of society pay upfront for their tests and treatment and even though there are Govt schemes and insurance, there is significant copay involved.
Point being that even in a poor country with apparently low costs, the costs are not really low when compared to what people earn.
Here is the link to that article. https://www.atmasvasth.com/covid03/
Finally getting around to reading this (really enjoyed it).
As a strong proponent of my own UK system, without getting too post-structuralist, the definition of ‘better’ does a lot of heavy lifting here. Patient choice and waiting times are interesting metrics, but in my ‘socialist’ heart of hearts, I can’t weight them as heavily or even in the same category as health outcomes such as mortality statistics and life expectancy (particularly via measures such as QALYs). Do I want a health system that makes me happy, or that saves the maximum lives per dollar?
Subjective micro-oriented measurements, like patient satisfaction, risk missing the point that we’re all a bunch of self-important, entitled, demanding a**holes whenever we experience even the slightest bit of pain. The lawyer’s knee replacement on a six month waiting list begins to look much less pressing when compared to the office cleaner with life-threatening pneumonia, but the lawyer doesn’t have that context and only one of them is going to answer a phone survey or fill out a grumpy patient satisfaction questionnaire on discharge. The Rawlsian and the utilitarian ethicist in me are pretty united however in terms of which patient should be prioritised.
On this basis, the UK or ‘socialist’ model has several major advantages:
1.) It gives excellent value in terms of £/$/€ per extra year of satisfactory life expectancy
2.) It generates monopsony power for health buyers that effectively balances monopoly pharmaceutical power, helping to mitigate a system that relies partly on high R&D spending / IP rights
3.) While still only partially realised, the improved ability of a more integrated system to drive effective medical practice / epidemiology / pharmacology through data analysis has been very significant in UK health policy and academia during the COVID-19 epidemic; this also has spillover benefits for other health systems
I’m not saying that our current health system is optimal - like the author I’m intrigued to learn from the German / Canadian / Scandinavian models and would be very prepared to accept that other systems are ‘better’. However, I’d like to be very sure of my definition of ‘better’ before undertaking any radical steps towards reform…
If you look at the number of insurance policies offered in The Netherlands, you might think there are dozens. However, many insurances are brands or daughter companies of bigger groups. In effect, four big companies rule the market with around 85% market share in 2021. They are Zilveren Kruis (Achmea), VGZ, CZ and Menzis. https://www.zorgwijzer.nl/faq/welke-zorgverzekeraars-zijn-er
Since the minimum standard for the 'basic insurance' is set by law and the insurance companies are obliged to accept everyone, they mostly compete on price, brand and additional insurances (e.g. dental, physiotherapy when it's not medically urgent).
> Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs? I thought I understood the reasons why US health care doesn’t work, but Germany and the Netherlands seem to replicate its apparent disadvantages without running into the same problems. Why?
It does happen that health care providers are unable to reach an agreement with an insurance company. If you are a small practice (GP, physiotherapy, independent psychologist) it's basically impossible to NOT enter into contract with one of the 'big four', since 20% of your patients will get upset that they have to pay premiums.
Hospitals face a similar issue, but since they are much larger they have more bargaining power. An insurer would definitely lose face and it would make them seem like money grubbers if they are not able to reach agreement with a mayor hospital. It does happen from time to time.
In short - though I'm not knowledgeable on the topic - it seems that insurance companies in NL DO have market power over health providers.
Health costs have risen enormously over the last years and spending as % of GDP is up. However, most experts seem to agree it could have been much worse. Due to the increasing average age, there is an issue for the future when it comes to the ability to pay for health care as a community and find enough employees willing to work in health care.