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Home Publications Blogs Beat the Press The War on Social Security and the War on Excessive Health Care Costs

The War on Social Security and the War on Excessive Health Care Costs

Wednesday, 27 March 2013 04:12

Ezra Klein put up a blog post last night on the corruption of national politics and the media. It showed graphs from the International Federation of Health Care Plans that compared the cost of various medical procedures and products in the United States with the cost elsewhere in the world.

The graphs showed that the United States is a huge outlier, paying two or three times as much as other countries (sometimes more) for nearly every item on the list. The bottom line is that we spend 8.1 percentage points ($1.3 trillion a year) more of our GDP on health care than the average for other wealthy countries. We have nothing to show for this in terms of better health care outcomes. (The gap is actually larger, since average income in these countries is around 25 percent less than in the United States. We would expect to have better outcomes even if we spent the same share of our income on health care, just as we would expect better housing if we spent the same share of our larger income.)

The reason why Klein's charts reveal the corruption of politics and the media is that this information is news to anyone. The media and politicians harp endlessly on the cost of Social Security routinely yelling about how outrageously expensive it is. In fact, National Public Radio just did a major piece on the Social Security disability program and proclaimed to listeners that it was unaffordable. 

While the cost of the disability program has increased due to the economic collapse, once the economy recovers it is projected to cost less than 0.9 percent of GDP, a bit more than one tenth of the excess cost of our health care system. In fact the entire cost of the combined Social Security retirement and disability program are projected to peak at under 6.4 percent of GDP in the mid 2030s, less than 80 percent of the excess cost of the U.S. health care system. NPR has no problem pronouncing the cost of the disability program as unaffordable, implying to its listeners that it must be changed, but it doesn't make the same pronouncements about the U.S. health system.

The failure of the media and politicians to focus anywhere near as much attention on the excess cost of the health care system as they do on the cost of programs that benefit low and middle income people is especially striking since one of the obvious ways to reduce costs is to simply take advantage of the lower costs in other systems. (Yes, it would make more sense to fix our health care system, but trade is a hell of a lot simpler.)

Yet, the media and politicians, including those who talk about "free trade" as a god equivalent, never mention health care as an item that should be subject to trade. As Klein's charts show, there are enormous potential savings from allowing people to have major medical procedures in other countries, from allowing seniors to use Medicare to buy into other countries' health care systems and of course in bringing in much lower paid doctors from other countries.

But the media and politicians don't have these items on their agenda. Instead they produce lengthy pieces telling us that we can't afford to provide insurance to people with disabilities that keep them from working. Did I mention that rich and powerful interest groups make huge amounts of money from this waste?

Comments (23)Add Comment
written by pjm, March 27, 2013 5:54
They should get more organized heat for this type of reporting, especially around pledge time, if not before.
Why Media Paints Americans as Anti-Heroes Against Health Care Heroes
written by Last Mover, March 27, 2013 6:14
Even professional wrestling needs an evil opponent from the dark side to contrast against the square jawed Mitt Romney look alike types who take on evil as heroic saviors of mankind, not to mention women and children. Otherwise there's nothing to conquer, nothing to portray as "competition". What's a hero to do with no anti-hero around?

The reason mainstream media can't bring itself to report the real story of health care - out of control exploding costs in the absence of any competition whatsoever - is because the only anti-hero it can come up with against the heroic medical industrial complex it shoves into the face of America every day as free market heroes fighting socialism - are the American people themselves.

Since medical providers and insurance companies can't be painted as the economic charlatans of overwhelming market power they are, the only way to frame the issue is to cast consumers and patients as the evil counterpart, mooching away from the very hand that feeds them with life giving health care from the "good guys", the ones who are always having convenient "shortages" of their essential services that magic markets free of government control can't somehow correct.

Back in the day everyone knew what a consumer was. Everyone knew what a producer was. Everyone knew that competition under free markets weeded out the snake oil salesmen because producers competed among themselves to drive resources to their highest valued use for the benefit of consumers.

No more, at least for health care. Now middle class consumers in America are forced to compete directly with producers of health care with their entire economic livelihood to the point of bankruptcy, since producers no longer compete among themselves.

The chattering talking heads of sock puppet media can't - or won't - wrap their tiny minds around this. It's too over the top. How can something that's suppose to heal you kill you economically at the same time?

It has to be the moochers' fault. The government's fault. There's no other answer possible because it can't possibly be the fault of massive market failure covered up by mainstream media itself with years of propaganda instead of "news".
Republicans Can Have Their Cake and Eat It Too
written by Robert Salzberg, March 27, 2013 6:15
Republican Members of Congress, (and some Democrats), want to cut taxes, cut spending and lower the deficit. They're looking to repeal the 2.3% tax on medical devices, largely because of lobbying from medical device manufacturers like those who make hip prosthesis.

Taxpayers would save way more than 2.3% if we paid a reasonable price for hip prosthesis and other medical devices.

We could repeal the medical device tax, (cut taxes), cut the price we pay for prosthesis and similar medical devices in half, (cut spending), and pocket the difference, (cut the deficit).
Trade policy is easier?
written by Jennifer, March 27, 2013 7:35
Yes, it would make more sense to fix our health care system, but trade is a hell of a lot simpler.

No, especially if we are talking about access to primary care. If the issue is politics, the biggest problem is not the trade protectionists but the AMA. AMA will fight any and all moves they see as anti-MD, that is that might effect MD income. While there is no organized group anxious to import MDs there are many groups advocating for increased access to care via expanded roles-nurses, physical therapists, physician assistants, midwives. Contrary to what some have suggested, none of these groups expect to get paid like MDs and no insurance company will pay them like MDs either, so you'd have an immediate drop in costs. As for buying medical services in other countries that has been happening to a small extent, again there is not a tremendous will for it. I just don't buy that the politics of making health care affordable are so much more daunting then the forces against trade policy.
written by skeptonomist, March 27, 2013 8:29
I believe there was a distinct majority in the US in favor of a "public option" as the debate about ACA got underway, though I have not seen any recent polls. Extending Medicare would probably get a lot of support (why don't the media get more polls on these things?). I haven't seen a poll on importing doctors either, but I will predict that it would not be very popular. Hospitals and others who pay salaries to doctors actually push for this - and maybe actively import them - but besides them and Dean who is going to support importing docs?
another ignored corporate health care swindle
written by fogspider, March 27, 2013 8:44
saw this about gene patents in naked capitalism:



this issue never gets enough elite media attention.
written by L Bouton, March 27, 2013 9:09
While I have no doubt that medical costs are higher in the US than elsewhere in the world, shouldn't the charts, which compare US dollar costs, really be corrected for purchasing power parity exchange rates? Afterall, I'm sure a loaf of bread or a hair cut costs in the US than in those countries but we don't seem overly aggitated about our bakers and bakeries. Still, I'm sure that even after correcting for PPP exchange rates, the concern you express will still be valid... we pay disporprotionally more for medical care than elsewhere in the world.
written by liberal, March 27, 2013 12:57

One thing that really irks me about that is the whole issue of how can genes be patented anyway.

AFAICT, it's a long-standing principle in patent law that "products of nature" cannot be patented. Genes are clearly products of nature (unless we're talking about a novel gene created by man).

So, how do they get around this?

I'm pretty sure it works like this: these gene techniques involve the production of something called "cDNA", which doesn't occur in nature. So therefore you can patent.

Which is utterly absurd: you take a product of nature, and then make a cookbook transformation, and now you have something patentable. Which is nonsense, of course---the information content hasn't changed. (Which is distinct from the case of taking a bunch of iron ore and making a machine from it.)
Physician costs, poor nutrition
written by Nick Batzdorf, March 27, 2013 3:25
Two comments. First, those charts have physician and hospital fees linked together, leading one to conclude that it's doctor's salaries that are driving our healthcare costs. I'd like to know whether that's really the case (even though I do read this blog :) ) or whether this is just like combining the costs of construction labor and workers' underwear in one chart.

Second, it's important to remember an even bigger issue: poor health due to the crappy food we eat. 85% of the 650,000 food products in our markets are processed, and poor nutrition leads to obesity, diabetes, heart problems, hypertension, and some other really nasty things. That's also part of why our healthcare costs are so high.
MRI costs reported are ficticious...health care report totally bogus.
written by pete, March 27, 2013 5:06
I know. I have had 4 in the past 3 years. 3 times covered by insurance. One I paid cash. Here they report like over $1000???? The payment by me or the insurer was never over $300. I think they maybe are using the bogus "cost of procedure" which is some silly number. From this goofy number there are numerous deductions...finally an insurer number and a patient number. Absolutely nothing like the numbers reported. I suppose the rest are silly too. Awful analysis. Unless it costs a lot more in New York and Massachusettes than in cheap old Texas.
written by JP, March 27, 2013 7:22
While you cited a personal example, without more evidence I'm not ready to declare that the figures are bogus or goofy.
I would be, and am, suspect of the numbers because of their origin . Int'l Federation of Health Plans sounds like a trade organization and looking at their site, I see nothing to change that opinion. I was more concerned about the incompleteness of the various graphs. What seemed to be normal procedures, generally accepted worldwide, were not tracked consistently and not all nations measured appeared on each graph.

I would really have liked to see India and Cuba included if for nothing more than a comparison to their membership of Health Plan corporations.
written by liberal, March 28, 2013 7:27
Yes, if you look at the methodology the study claims to have used, IIRC they looked at actual claims data, not fake "sticker price."

Also, if you look at the chart, they provide "error bars," in the form of quantiles.

As for price variability, I thought it's likely that a lot of these prices vary across regions.
written by Kat, March 28, 2013 8:25
Second, it's important to remember an even bigger issue: poor health due to the crappy food we eat. 85% of the 650,000 food products in our markets are processed, and poor nutrition leads to obesity, diabetes, heart problems, hypertension, and some other really nasty things. That's also part of why our healthcare costs are so high.

Yes: Canada, Great Britain, and Australia have lower medical costs because their diet is so much more admirable. Please.
does anybody have a claim report with these huge MRI numbers?
written by pete, March 28, 2013 8:33
seems like you could fly folks to Texas for MRIs if they are $2000 in New York. Still come out a head. Mine are Blue Cross Blue Shield Texas numbers, and one private purchase. All tiny. I would not say Blue Cross is a small sample.
written by liberal, March 28, 2013 9:06
kat wrote,
Yes: Canada, Great Britain, and Australia have lower medical costs because their diet is so much more admirable. Please.

Perhaps, but it really is true that diet should be considered a public health problem. A lot of right-wingers out there want to keep evil guvmint away from the issue---"It's not a medical issue, it's a personal responsibility issue."
needless to say, health probably has a high income elasticity.
written by pete, March 28, 2013 9:24
Since U.S. has grown faster than Europe, health care consumption, (whether charlatan or real) has gone up as a percent of income. That seems quite natural.

Also look at health care costs where consumers pay all, like plastic surgery, lasik eye stuff, dental. Here I expect you will find much lower increases in costs over time.
written by Kat, March 28, 2013 9:31
Perhaps, but it really is true that diet should be considered a public health problem. A lot of right-wingers out there want to keep evil guvmint away from the issue---"It's not a medical issue, it's a personal responsibility issue."
Answer me this: whose interest is served by focusing on individual behavior as a driver of health care costs? Or, I could ask why are Accountable Care Organizations included and touted as a cost saving measure of ACA but a provision to allow Medicare negotiate drug prices was not included?
Self-interest of the medical lobby & their allies in media. Also a few pertinent facts
written by Rachel, March 28, 2013 10:04

Some facts are costly to get at, and need constant repetition. For example, in a few cases, malpractice costs can be very high, BUT the total additional cost is not so high, just a few percent of medical spending. The cost of MD education is too high, and we need to work on reducing it. There is something to be said for developing an MB degree, a Bachelor of Medicine, such as they offer in India, Hong Kong, etc. All the same, the cost of medical education only adds a few dollars to the cost of an office visit. So, to use the IFHP graphs, it's $30 for a routine visit in France, and might be $40 if their doctors had malpractice and education expenses equal to those in the US. $40 is a far cry from the $96 average in the US. (Of course in the San Francisco Bay Area, we need to add extra to cover the price of the nurses, elevated by the market power of a few big hospital chains.)

Thus malpractice and med school costs are only a small fraction of the reason that our health care system costs too much.

And the fact that we are in some respects sicker (more obesity, more diabetes, more heart disease) than many other developed nations: this is appalling, and we need to work harder on this. But again, it is not a big factor in why our health care costs too much. The main reasons are that we have too little transparency and too little competition. (Put together with a whole lot of greed, it goes without saying.) So everything costs too much.

But these facts are not very easy to get at, and this makes it hard for well-meaning people to refute the rent-seekers and the demogogues (i.e., medical lobby and their political and media allies).

We in the USA have worse health outcomes
written by Floccina, March 28, 2013 1:52
We in the USA spend much more on healthcare and have worse health outcomes than the other developed countries. They have medicine that is more socialized than ours in the other developed countries.

We in the USA spend much more on schooling and do worse on PISA than the other developed countries. We have as much or more socialized schooling than the other developed countries.

We in the USA spend much more on crime control and do worse on crime statistics than the other developed countries. We have as socialized schooling crime control as the other developed countries.
The thing about SS
written by Floccina, March 28, 2013 2:03
The thing about SS is that it could do more good at a substantially lower cost. That is it would be more helpful to the needy in everyone got $800/month from SS in retirement. So we should complain a lot more than we do about a program that gives more to the affluent elderly than to the needy elderly!

Social security as currently structured is not conservative or liberal, left wing or right wing, stingy or generous, it is just plain stupid.
written by coberly, March 28, 2013 3:51

calling something stupid because you don't know anything about it does not speak well for your intelligence.

Social Security is not welfare. It is "forced savings" and works more like insurance than anything else. It provides a modest but reliable return on your "savings" while insuring those savings against inflation, market losses, and personal disability or dying with dependents. It also ensures against 'failure to thrive', and because it is "forced," it also insures against lack of providence.

Your claim that "it could do more good at a substantially lower cost" is unsupported by any evidence or reasoning whatsoever. It is simply your gut feeling.

For a place to start actual thinking, ask yourself "lower cost for whom?" Your plan to turn it into welfare, would involve fairly high costs for higher earners who would get nothing back for their money. As currently designed, everyone gets their money back plus interest. So where is the "high cost"?

You might think you could get "more money" for your money if you invested it "on the market." Perhaps. But experience shows that most people don't. Even those who are sure they will, don't. for those who actually do, there is nothing stopping them from investing the rest of their money on the market. Meanwhile the "cost" of SS is merely the difference between the return they actually get, and the return they "might have gotten." Not so much as you think. And actually a pretty cheap price for the insurance value.
written by watermelonpunch, March 28, 2013 4:25
@ pete:

You seem to not be very aware about pricing & the plight of the uninsured.

The uninsured are charged loads more for things like MRIs. They don't have an insurance company (or the government) negotiating prices for them.

You have to also account for the fact that if you are uninsured, but have the time & ability to shop around for an MRI - you MIGHT find a better price...
But a lot of people have no easy way to do this while uninsured. They wind up at the ER when something's quite progressed, and pay, ER prices for things like MRIs when they're in a bind and can't shop around.
That alone could totally explain the upper averages IMHO.
written by liberal, March 28, 2013 6:15
Answer me this: whose interest is served by focusing on individual behavior as a driver of health care costs?

The people who sell junk food.

If it were considered a public health issue, disincentives for consuming junk food would be enacted, or regulations passed, etc etc.

Of course that doesn't mean it's the only or the most prominent driver of health care costs. In that sense, yes, it can be used as a ruse to pretend that we're not being screwed by insurance companies and providers.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.