Opinion: Daily Journal

Overstating Health Care Gaps

If I stipulate right off the bat that the American health care system is overly expensive, needlessly bureaucratic, and doesn’t consistently generate outcomes for patients that justify its costs, will you keep an open mind about why these conditions exist?

Liberals typically cite differences between the U.S. and other countries in health spending and outcomes as evidence for the proposition that we should adopt government-run health insurance. But these statistical differences are frequently overstated, misstated, and misunderstood.

They are overstated in the sense that America doesn’t really have a free-market system for financing health care, and most European countries don’t have a government-monopoly system. About half of all medical spending in the U.S. is accounted for by Medicare, Medicaid, and other government programs. In Europe and the Pacific Rim, the proportion is typically between 70 percent to 80 percent, depending on the country. Even the Canadian system, supposedly “single-payer,” finances only about 70 percent of medical bills through the government health plan.

Obviously, taking government’s percentage from 50 percent to 70 percent would be a significant change – and Obamacare, if implemented in its original form, would move American in that direction. But we’re not talking about a categorical shift.

Moreover, just because the government monopolizes the health-insurance business – or heavily regulates private health insurance, as is the case in many European countries – doesn’t mean that patients pay nothing when they go to the hospital, doctor, or pharmacy. In fact, American patients pay for less than 12 percent of their medical bills out-of-pocket, compared to an average of 20 percent in the developed world as a whole. The question of how health insurers are organized and managed is different from the question of how the costs of medical services are distributed between patients and third-party payers, whether public or private.

On the other side of the ledger, international comparisons of health-care outcomes are fraught with misstatements and misunderstandings. In America, for example, hospitals tend to go to heroic efforts to save the lives of babies born prematurely or with serious complications. Some of those babies die, anyway. They show up in such statistics as infant mortality and life expectancy from birth, which are then frequently used to “prove” that the American health care system doesn’t generate sufficient gains in health outcomes to justify its cost.

In many other countries, these infants are classified as stillbirths or even as aborted fetuses. They aren’t captured in the data reported to the Organization for Economic Cooperation and Development. Nor are differences in lifestyle – in the teenage birth rate, for instance, or rates of addiction and obesity – adequately accounted for in the statistics. As three health-care scholars just observed in a new analysis for the American Enterprise Institute:

Unfortunately, major problems in OECD’s analysis render their conclusions—especially the country-specific conclusions—unreliable. Many external factors that influence health outcomes are either omitted or poorly measured. The net effect is to underweight the role that non-health care factors play in determining health. And since the United States scores relatively poorly on most of these external measures, omitting them or not adequately controlling for them increases the apparent relative inefficiency of the US health care system and probably biases the estimated productivity of health care as well.

Again, none of this is offered to suggest that the American health care system is not in need of fundamental reform. Because of the inefficiencies built into our system, we waste a tremendous amount of time and money on medical interventions with little prospect of improving the length and quality of our lives. Patients and providers should have stronger financial incentives to pursue only services with a high probability of benefit. But when it comes to treating many forms of cancer and heart disease, the American system really does have better outcomes than in Europe, albeit at higher cost.

When the legislative monstrosity of Obamacare is repealed – yes, I know I said “when” – lawmakers will have another chance to get reform right. They should start with a better understanding of the comparative data.

Hood is president of the John Locke Foundation and author of Our Best Foot Forward: An Investment Plan for North Carolina’s Economic Recovery.