A Lesson From Europe on Health

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A Lesson From Europe on Health

• By DAVID LEONHARDTPublished October 18, 2006

http//www.nytimes.com/2006/10/18/business/18leonh
ardt.html
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Hernia Operation US

• Shortly before he moved to Greece last year, an
  American named John Econopouly received the
  unpleasant news that he needed a hernia
  operation. He had the surgery done in Northern
  California, and it didnt go so well.
• After spending less than a day in the hospital as
  an outpatient, Mr. Econopouly went to a friends
  house to sleep off the surgery and found that his
  wound had reopened. I woke up in a pool of blood
  and didnt know what to do, he remembered.
  Basically, I didnt feel cared for.
• For this, he paid more than 2,000 over and above
  the thousands of dollars that his insurance
  policy paid.

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Follow-up Greece

• A few months later, once he had moved to Greece,
  he found out that he needed a separate operation
  for another hernia, giving him a chance, unwanted
  as it may have been, to do his own little
  comparative study of American and European
  medicine.
• The Greek hospital was much dirtier than the one
  in California, he said, and he was put in a room
  with a handful of other patients. The stench was
  brutal. When Mr. Econopouly, a 41-year-old
  computer programmer for Wall Street, asked for
  more privacy and said he would be happy to pay
  extra, the staff laughed at him.
• But the care itself was another story. It seemed
  much more thorough than it had been in the United
  States. He spent the day before the operation
  undergoing tests, including one that discovered a
  heart murmur, and the day after the operation in
  the hospital being observed. Although he didnt
  have Greek health insurance, his final bill was
  only 700.

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Administrative Costs

• The most obvious difference between their health
  care systems and ours that their governments
  provide universal insurance certainly plays a
  big role in the cost differences. Look behind the
  receptionist at your doctors office, and you
  will very likely see a staff of people filing
  claims to different insurance companies. The
  insurance companies, meanwhile, employ a small
  army charged with figuring out how to avoid
  covering the unhealthy.
• The administrative costs of our patchwork
  bureaucracy eat up about 25 percent of health
  spending, which is why would-be reformers have
  long focused on these costs. But they arent the
  main story. Even in Europes single-payer
  systems, administrative costs account for about
  15 percent of health spending, once everything is
  included, according to the Lewin Group, a
  consulting firm.

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Economics Administrative Costs

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• If demand is price-inelastic, lower
  administrative costs ? the supply curve, and
• Reduces expenditures

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Understanding

• One good way to understand the problem is to look
  at the share of health spending that the elderly
  account for in different countries. In the United
  States, people 65 and older have Medicare, which
  has administrative costs roughly as low as those
  of other countries universal plans.
• Younger Americans, by contrast, have private
  insurance, with all its inefficiencies. Yet
  elderly Americans share of national health
  spending is similar to that of the elderly in
  other countries, as Arnold Kling, an economist,
  has noted.

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More than Administrative Costs

• So something beside administrative costs is at
  work here, and it involves a basic cultural
  difference. Americans seem to be less willing to
  take no for an answer and more willing to try
  almost anything, no matter how expensive or how
  slim the odds, to prolong life. (The United
  States is also a fatter, more diverse country
  with wider income disparity, which gives our
  medical system a harder task.)
• There are enormous benefits to the American
  refusal to go gently into that good night. It has
  made us obsessed with medical advances and turned
  this country into the worlds research
  laboratory. If you followed this years Nobel
  Prize announcements, you may have noticed that
  every scientific prize went to an American. Some
  of our spending, in short, goes to support
  medical care in other countries.
• But much of it is simply wasteful. Expensive
  procedures like some Alzheimers treatments,
  some knee surgeries and many body scans are
  often no more effective than basic ones,
  according to research. Yet doctors can keep on
  getting reimbursed for the expensive ones.
  Basically, anything that doesnt kill patients
  is paid for by Medicare and insurance companies,
  said Jonathan Skinner, a health care researcher
  at Dartmouth College. AG Maybe.

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If so

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• If so, what were seeing is ? demand!
• ? Higher expenditures!

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