Government Health Care Expenditure: International Comparisons

To those following U.S political debate, healthcare reform is without doubt the most contentious issue, with the Administration lobbying for what is effectively the creation of a government run health care system. In this environment, enemies of the market have used the problems in the current healthcare system as an indication of market failure.

The U.S healthcare system has many, many, many flaws. But can it be accurately categorised as free market?  I decided to look into this to look at government expenditure on healthcare and compare it to other countries – a comparison I haven’t seen of in the media.

So, I went to the World Health Organisation Database and looked at the per capita breakdown of healthcare expenditure by governments in different developed countries. And the results suprised me. Quite a bit. Because it seems the U.S government spends more per person on healthcare than the government of any major developed country.

Health Expenditure (WHO)Looking at 2006, the most recent year for which statistics are available,  we can see that U.S government spends $3074 per capita on healthcare. This is the highest of any major developed country (by way of comparison combined Australian government (ie Federal/State/Local) expenditure is $2097). And this is without the additional expenditure that will occur if the proposed government healthcare plan is passed – with that it goes up to almost $4000 per person!

So effectivly the supposed ‘free market’ of U.S healthcare actually has more government involvement than pretty much anywhere else.

The U.S healthcare system is in need of reform. But I think that this graph effectivly demolishes the myth that the problems arose out of any form of market failure.

(A version of this was originally posted at Americans for Tax Reform)

50 thoughts on “Government Health Care Expenditure: International Comparisons

  1. Gee, Sean, you sound a teeny bit judgemental. So how come Eurotopians don’t look to you with envy in their eyes? Why is Europe held up as something to follow?

  2. Given that the countries with the lowest health care costs ( look at the graph) don’t have free market systems this is a very strange article for a Libertarian blog.

  3. The graph doesn’t say that at all charles.

    The graph measures Government expenditure, not private or public costs. Please learn the difference between costs and expenditure, and public and private.

  4. Seriously, if you’re sick there is no better place to be than in the US if you have health insurance.

    Want to by pass a GP? No problem book an appointment with a specialist of your choosing any time.

    They will book you in for all the requisite tests and prescribe the latest in-patent medications.

    Insurance covers everything if your employer is reasonably generous and msot are actually or at least were then.

    How much does insurance cost? I found out just before I was leaving the country when I took out cover on a monthly basis to insure the family while in transit. It was $15,000 pa payable in monthly installments.

    For all of the 16 years I lived there I had no idea or even cared how much our employer paid each year to cover my family.

    The pharmacy always gave you a choice of in or out patent medications and I would always choose the in-patent one which was of course 2 to 3 times more expensive. I thought the in-patent one was superior as it was newer. Who cared anyway, as insurance paid and I never came out of my pocket.

    An internist or whatever they called themselves always charged at the then rate of $260 bucks a visit which was higher than the $110 rate for a GP, so of course the Docs would call themselves internists or do some small study to get an upgrade if they weren’t specialists.

    I have never seen a bigger racket than the US medical system. But boy is it good and the Docs are also first class.

  5. Given that the countries with the lowest health care costs ( look at the graph) don’t have free market systems this is a very strange article for a Libertarian blog.

    Charles, do you understanding the point of the article. The US doesn’t have a market determined medical system.

    Your employment determines insurance and the insurance basically carries an enormous amount of state and federally sponsored mandates and requirements. You, individually don’t buy health insurance in the US. Your employer does for you.

    I know you find all this too hard to understand, but please try and give it a go.

  6. It sounds like the Chinese are rejecting it because it delivers unequal outcomes. Everyone should have the same crummy standard of service, everywhere! Equality in poverty!

  7. Pat – learn some background information about China before you start being a chucklehead.

    The article about China does not mean that privately provided healthcare has failed, it underlies a much more serious divide between the liberalised coast and still Maoist western/rural districts.

    The “research” seems confused – is Western China liberalised or not?

    The “problem” is that the Chinese Government faces unrest, because the rural West has not been allowed to have a mice catching rat, be it black or white.

    Quite frankly the New Scientist article is as much a joke as the Lancet article.

    The Western Chinese are angry. It isn’t because they have been impoverished by the market. It is because the coast has become liberalised and rich, and they are still Maoist and poor.

    If the Chinese Government spends more on densely populated urban centres which have liberalised, how on earth is this “market failure” you twit?

  8. Another great link:

    http://www.rushlimbaugh.com/home/daily/site_081209/content/01125108.guest.html

    This article is a summary of a more detailed article by John Lewis who did an in depth analysis of the proposed US health care bill.
    He demonstrates that Obama is simply being dishonest with his rhetoric.

    I think there’s a big problem with lefties being so mentally stunted that they don’t realise they are using straw man arguments. People seem to actually believe we live under “extreme capitalism” or that the US has free market medicine or that the banking system was deregulated when it’s clearly one of the most regulated industries worldwide.
    I don’t think many lefties could even define what capitalism means. Their only defense is that they hold views that are held by a majority. But this isn’t a logical defense and if this is truly their defense then these people are simply cowardly, brainless sheep.

  9. For many offering political commentary I think capitalism simply means anything which might benefit rich people. If the government instituted free beer for billionairs then even that would get called capitalism by some.

    In my book most on the left are most readily understood in terms of concerns about relative equality of outcome and the often non-linear relationship between personal effort and material reward. Personally I think libertarians should avoid outright dismissal of these concerns and spend time explaining the trade offs between different policy approaches. These emotive concerns of the left are not without basis even if in isolation they fail to point to useful solutions.

  10. Thanks for biting Mark ;)…loved being called a twit when I had only written “chuckle, chuckle” and posted a link. That’s gold!

    I understand the 12 health ministries in China and the regional control/funding for each. But if the central or local governments are not funding appropriately a level of coverage in the rural communities then wouldn’t if provide an opportunity for private health care providers? Where have they been? I guess no money no honey. Surely if the supply from the govt has decreased there is an opp for private enterprise (I don’t recall any laws restricting private health care in western China).

    A couple of quotes from a WHO report.

    http://www.wpro.who.int/NR/rdonlyres/B2E05D6E-1585-4301-94D0-7B110F30BEE0/0/tough_choice_en.pdf

    “After financing reforms in 1980, the Government’s contribution to the revenue of health institutions had fallen substantially – barely covering the salaries of health workers. The incentive to recuperate lost revenue led to overprovision of unnecessary services, and underprovision of socially desirable services. User fees further reduced the demand for preventive services. Weak enforcement of related government regulations further contributed to the changing behavior of health providers in China.”

    Tell me how is that a good outcome?

    And in reference to the 1978 healthcare funding reforms (i.e. more private funding):

    “The Chinese experience of financing reforms of public health services has generated important lessons for other nations. First, a decline in the role of government in financing public health services is likely to result in decreased overall efficiency of the health sector.”

    I’ll defer now to your obviously superior intellect

    double chuckle

  11. At 17. The concern that all should be equal implies collectivsm. ie: Collectivists hold the notion that some non-existent entity (eg/society) supercedes the sovereignty of the individuals (who in reality actually make up society), and that this entity possesses a higher authority independent of the desires and rights of individuals.
    In addition, egalitarianist ethics are evil IMO because of their blatant contradictions to the facts of reality and the incredible harm that necessarily results from attempted implementation.
    Of course many lefites have elements of subjectist epistemology and will dispute the very idea that reality can be known – except for knowing that they can’t know.

    Pat where does “supply from the govt” come from?
    From productive people. By its nature, government is not a producer. It has to take from producers first to do anything. Providing services is not a valid function and is always sub-optimal, just like when governments attempt to provide other essential products/services such as food.

    I am ignorant of the details of China’s health care experience but I cannot believe someone is using China as a supposed example of a failure of free markets. After years and years of the destructive force of socialist policies, limited free markets have clearly helped the Chinese even when the task of cleaning up the socialist and communist mess was huge. Imagine what actual free markets could do.

  12. “But if the central or local governments are not funding appropriately a level of coverage in the rural communities then wouldn’t if provide an opportunity for private health care providers?”

    Not if the Central Government decides they Western provinces must be run along Maoist lines, and the Government redistributes revenue to the rich urban centres, you twit.

    “The incentive to recuperate lost revenue led to overprovision of unnecessary services, and underprovision of socially desirable services.”

    Were they cross subsidising services? If so, this statement contradicts itself. If so, didn’t get enough “unecessary” services to fund the “desireable” services.

    If Australia has such a low spending on healthcare, please point out how we have underprovision of “desireable” services and overprovision of “undesireable” serives?

    As for beds, the public system is always short. A privatised health insurance system has strong incentives for preventative care, a public system which calls itself insurance but actually just subsidises losses (Medicare) combined with public hospitals have massive moral hazard problems.

    If you are going to talk about incentives, asserting what happens is insufficient, you need to say what the incentives actually are.

    ““The Chinese experience of financing reforms of public health services has generated important lessons for other nations. First, a decline in the role of government in financing public health services is likely to result in decreased overall efficiency of the health sector.””

    Piffle. The costs per patient in the private sector of Australia and the US are less than the public sector.

  13. Hey Tim, Read the article I posted (long winded I apologise for that) but I trust WHO more than some self styled commentators (no offence intended).

    Mark… I am a little sleepy so I will not respond in full but jeppers check this out: http://content.nejm.org/cgi/content/full/349/8/768

    I am not anti free market or anything like that (although I have a tendency to be when people call be a twit) nor am I socialist nor any other ist or ism. I prefer to call a spade a spade and take each argument on its merits. If you can’t make a “rational argument” without the need for name calling you should probably go back to the 3rd grade (BTW I stoppped reading after that point attack persoanlities not ideas.)

    tripple chuckle

    yours faithfully

    Twitter!

  14. Tim R – most ordinary lay people of what we might call left leaning orientation don’t think we should all be paid the same or that we should all have equal wealth. Most appreciate owning their own home and the concept of private ownership in that context. Most are not communists even if at the margin what they tend to advocate is much the same as sector specific communism. Many will advocate government run health care but will rightly baulk at any suggestion that farms should be government run or that we should all live in public housing. Whilst I don’t much like war metaphors one that is appropriate in this regard is “know thy enemy”. And that means knowing them as they really are not as your own propaganda would paint them.

  15. Pat your comments identify you as a pragmatist and personally I would much rather discuss this apporach to epistemology. I think the principles of individual sovereignty and property rights are fundamental to all facets of politics – ie: I’m not a pragmatist. I don’t think the rules change suddently when the debate enters health care. I don’t believe in the idea that some government regulation is OK and you just have to get the balance right.
    If you’re not interested in that type of discussion, that’s fine. There are others on this blog who you can chat to about the specifics of the state of Western Chinese health in 1980. In all seriousness, it might be quite interesting topic.

    Terje, my point is that ANY amount of collectivism or egalitarianism is bad and harmful ideology in my opinion.
    I never called anyone a communist. And I realise people are very mixed in their combinations of various ideas.

    In fact, I think that if someone did hold egalitarian or collectivist ideology 100%, then their lives would be in serious trouble very quickly. Many things we do are individualist eg/ eating.
    The same holds true for my distain of altruism. I think that a true altruist should rush down to his nearest blood donation centre, hook himself up and practise his morality until he’s dead. I’m well aware that this isn’t how people practise altruism though. If sacrifice to others for the sake of others is moral, then the more you do it the more moral you are. To be a 100% moral person you should sacrifice your life.

    In order to think about these topics the components must be identified for what they are. Humans think in concepts and we can only focus our attention on a limited number of things at any one time.

    Just because someone eats 90% nutritious food and 10% poison doesn’t mean the poison shouldn’t be identified for what it is.

  16. Tim R your comments “In fact, I think that if someone did hold egalitarian or collectivist ideology 100%, then their lives would be in serious trouble very quickly”

    Same argument could be made the other way could it not. If you were 100% individualist you (or at least those close to you) could be in just as much trouble. Aultrism begins in the family unit my friend. Let the family starve while I go to the pub 😉

  17. Wrong, Pat! Altruism is where you seek the care of others, usually above your own care. That is not what Jesus advised! “Do unto others as you would like them to do to you1”
    Instead of the family starving, you could all go down to the pub for dinner. And that family is probably from a wife with whom you made a marriage contract, thus voluntarily diluting your independence- in return for rights to sex, and children. A trade, not an act of altruism.

  18. This seems to have gone way off topic but so be it. Your assuming marriage is involved… this day and age it does not necessarily need be so. So no contract in many cases. But that kinda misses the point. I take your point there is a trade with a partner (although I kind of disagree with it as indentifies a relationship as a transaction which I am not comfortable with). But I would like to explore you ideas about how it is a trade with children and not aultrism? Perhaps this is an area for another post as I have said this has gone way off topic.

    Not particulary sure what Jesus has to do with all this. What does lucifier have to say on the topic ? (sorry I just couldn’t resist that)

  19. Because it’s physical immortality for your genes, being passed along. In the physical world, we’re just gene carriers- they are the immortal part.

  20. If you aren’t listening to jesus, then Lucifer may already be your best friend! Lucifer would tell you to do whatever felt good for the moment, and don’t worry about any consequences.

  21. “If anyone curses his father or mother, he must be put to death” Leviticus 20:9

    Maybe thats the answer.. owch

  22. Whilst some people do adopt, most want rheir own children. And I wonder how many children are adopted because they resemble the parents in some way? Don’t Caucasians adopt Caucasians, Asians adopt Asians?

  23. Brangalina, Madonna… freaks I know but still valid points. Doesn’t matter anyway there is no genetic material past on which was your suggestion as there not being aultrism but a trade.

    So off topic its not funny 😉

  24. How is it not in my interest to look after my family Pat?
    That is absurd!
    The whole reason for having a family is because it brings me great happiness and gives me incomparable fulfillment.

    If you think it is a sacrifice to have a family, then I certainly don’t want to imagine what your family is like.

  25. I did specify average people. And altruism implies some cost to your own welfare- giving up an arm so an armless man can have one arm himself.
    They might be following the golden rule of Jesus, by extending good luck to unlucky children, and hoping that good luck will come their way.

  26. Why is forgetting the long term context of your life and going to the pub selfish, considering this is damaging to yourself and your family (whom you value highly)?

    That is hendonism. Living for short term pleasure sensations.

    Or perhaps it could be altruism too. An altruist could leave his family and go to the pub every night in order to sacrifice himself for the benefit of the pub owner.

  27. Pat,

    You have been duped. It is good to see you are not simply regurgitating someone else’s ideas, but you have not interpreted the research properly – either you need to re read it or discover the differences between different costs (total, fixed [overhead], average, marginal) and why this matters.

    Administrative [overhead or fixed] costs are simply part of the total costs.

    The administrative costs in private care are higher. But the total costs are lower per patient.

    The costs are lower per patient because some of those high administrative costs involve better policing of fraud and so on.

    Please re read the article. It explicitly mentions overheads.

    Public health is more expensive. It is like you are looking at the fixed costs but not variable costs. These are rubbery figures you have been presented with. Would you trust an accountant who looked at fixed costs but not variable costs and told you that your business had nothing to worry about?

    The high admin. costs of the private sector ensure a variable and thus total, average cost and marginal per paitient.

    Average and marginal costs are of a higher order of importance than overheads or fixed cost.

  28. Tim, have you read Derek Parfit’s book ‘Reasons and Persons’ in relation to self-interest theory? I’m just curious (I haven’t myself).

  29. Tim R – comment 24 includes lots of sensible points. However I’d like to pick on the following for a moment.

    Just because someone eats 90% nutritious food and 10% poison doesn’t mean the poison shouldn’t be identified for what it is.

    Some things that are toxic in high dosages actually have beneficial effects in low dosages. I think this principle also applies to taxes, government, communalism and salt with food. Just because some people want to overdose on taxes, government, communalism or salt does not mean that we should deny that these things might have some medicinal benefits in low dosage.

  30. I agree in principle Terje. ie: Often finding the optimum for a certain situation is a middle, a “golden mean” or a balance. The examples you describe are good.
    Aristotle applied this idea to ethics. And this idea is still common. However I personally do not agree with this particular application. (even though I think Aristotle was a genius especially considering the time period) http://en.wikipedia.org/wiki/Golden_mean_(philosophy) or http://www.iep.utm.edu/aris-eth/#H2
    An eg/ Aristotle thought the ideal level of self confidence lay somewhere in the middle of a straight line continuum between hubris and self doubt (I forget his exact terminology). However I’d say that you can’t have too much genuine self confidence and that hubris or similiar personality traits such as arrogance, or narcissim are actually indicative of self doubt or at least a flawed assessment of reality.

    Sometimes the optimum is a 100% situation. A black and white, win/lose or on/off type system.

    In the case of government in the realm of products/services, I do not agree that a balance must be found for the amount of property rights a government violates for other “higher”, “collective” ends such as health care.
    In fact, unlike some US constitutional lawyers I just read about, I wouldn’t even call a partial right, a right. I’d call it a permission.
    Then I’d say permissions are improper because they disregard the fact that human survival and prosperity depends on the ability to think and then act. So as long as you are not inhibiting someone else’s action you should be totally free. This is why I think the “non-initiation of force” principle is such a fundamental one to politics – and that it should not be compromised.

    I also think contradictions indicate a false theory. Therefore if the government claims to simultaneously protect one’s right to property and also violate this right in order to provide say welfare – then this is a contradiction. And either rights theory is false, or the government is not optimal.

    Neither a typical right wing or left wing type would agree with the above ideas. So it’s not just lefties I disagree with.

  31. Wikipedia says that “Reasons and Persons” disputes ethical egoism on the basis of the prisoner’s dilemma.

    So I’ll quickly comment that there are many discussions in Objectivist circles on the problems of defining ethics using non real world life boat scenarios such as the prisoner’s dilemma.

    Clearly the police are acting unethically in this “dilemma”. At least one innocent man has had his freedom forcibly removed and morality is possibly not even possible in this situation because the prisoner’s genuine freedom and choice has been denied. ie: Is this even an ethical choice when they have been clearly forced into this situation by others acting unethically? eg/ Normally it would be unethical for me to kill someone, but not if they are about to kill me. My choice has been removed.

    The police are lying to the prisoners, appyling physical force and being unjust. Yet for some reason the prisoners are supposed to believe the police and for some reason this invented scenario is a valid way to derive ethical theories.

    Ethical or rational egoism is often attacked by those who invent unrealistic conditions designed to create a no win situation. Whenever you try to return the discussion to real world conditions, the inventor can simply tweak the situation set up so that someone has to die.
    Of course altruism on the other hand can actually be shown to be illogical – very easily. In addition applying altruism to life boat situations is far from satisfying. Should we throw out the most valuable person in the boat? Should they all jump out?

  32. The political distinction is not between “selfish” and “altruistic”, or “individual” and “collective”. I am selfish and altruistic and individualist and collective. So are all of you.

    The political distinction is between a voluntary collective of selfish & altruistic individuals… or a non-voluntary collective of selfish & altruistic individuals. I generally prefer voluntary.

    Please try to avoid name-calling.

  33. America spend the most because they have the most expensive doctors. Just look at their whole medical system. It doesn’t matter how many people are skilled enough to be a doctor, they only let so many thousand each year into the exclusive club, which drives the prices up. If they want real health care reform, they need to cheaper health care, and they need to do it by increasing the number of doctors and lowering their wages.

  34. Very high IQ is a scarce resource, MyForwik.

    The US could turn out a lot more doctors of course like they do in Cuba, but then you expect to receive oncology treatment for an ingrown toe nail.

  35. JC,

    Myforwik is right. The AMA do operate a cartel. The CATO Institute have done a lot of research on this.

    Myforwik is wrong as well. Increasing the number of doctors may not lead to a reduction of doctor’s wages.

    At least waiting times would be cut, as well as malpractice due to fatigue and also the costs of waiting (i.e not allowing cancer to metastasise).

  36. The US spends more per person because the US passes laws that push doctors prices up. Doctors get paid the most in US. The US lets in the least amount of doctors, further pushing prices up. The existing doctors get to decide how many new doctors come in each year, so they obviously set it as low as possible. The average wage of a doctor compared to normal person in the USA is way above any other country so its no wonder that their health care costs are the biggest. If they want health care re-form all they have to do is remove all these artifical barries to getting the right people in.

    Its amazing that in the USA they never look at or try to compare their costs anywhere else. Its trivial to look at USA’s health care costs and see that the labour components is where all the money is being spent. They need to drive the labour costs down, not tax there citizens even more!

  37. The argument that less skilled doctors would get in is absolute rubbish. They do not set a standard. They simply select a maximum number of the ‘best doctors’. One year they could have 50,000 people who are capable but only 6,000 will be selected each year. They need a universal standard, anyone who meets this standard is allowed in. Other counteries could even train people to meet this standard. But no, instead what happens is that they only let a set number of people in no matter how many qualified people there are.

  38. American medical professionals certainly are the highest earners in the USA, on the whole only surpassed by top tier executives like CEOs. While I like the idea of doctors being paid highly for their important services, and also being held to high standards, I find it hard to believe that their wages would not go down if the market in health care provision was further deregulated. Most importantly, I think the price to the consumer would certainly come down.

Comments are closed.