Real World Economics: U.S. is tops, except for health care

Perceptions often clash with reality and when it comes to decisions, perceptions often hold sway.

The Oct. 19 issue of The Economist, the world’s most influential news magazine, included a 16-page special report proclaiming the U.S. economy to be “The Envy Of The World” — performing head and shoulders above that of any other nation. Few economists would disagree.

Yet a large fraction of the electorate is voting for GOP nominee Donald Trump because they agree with his assertion that the U.S. economy is in its worst condition ever. This despite rising employment, wage and GDP growth data, and record-setting stock market indexes — a report card that Trump himself used when he was in the White House as a measure of his success. Reality, it seems, is subjective.

But U.S. the health care system is an outlier, and evokes similar conflicting views. Large numbers of us are dissatisfied with U.S. health care. Yet the view that U.S. medicine is the best in the world is widespread among us. Moreover, surveys show that few of us would trade U.S. health care for that of other country.

Also, in the 2024 presidential race, as in the two prior ones, restructuring or reforming health care financing is not even on voters’ radar screen. This despite top GOP comments of late that they would again try to reform or repeal Obamacare should they win the White House and Congress.

Like the problems ominously growing out of 23 years of borrow-and-spend fiscal policies, health care reform simply is not as contentious a political issue as it was two decades ago, before the Part D Medicare drug benefit and President Barack Obama’s Affordable Care Act improved access for a large fraction of the population.

Yet citizens and voters need to understand three things:

• We in the United States do not comprehend how much more costly our health care is relative to other countries.

• We do not understand how far we lag behind other countries in common, yet vitally important, measures of health outcomes.

• We do not understand that there are real costs to our health system that are not included in usual tabulations of health expenditures. These are costs largely not incurred in other industrialized nations.

Start by understanding differences between health care provision (diagnostics, procedures, therapies or medicines) and health financing and administration. In provision, U.S. health care often is superb compared to other industrialized nations. In financing and administration, we are dismal.

Start by comparing our costs with those of other nations.

These are usually made in terms of what percentage of Gross Domestic Product — the total output of goods and services across all sectors — that is used up in providing and administering health care. The higher this percentage, the fewer goods and services of other types get produced to meet different needs of households.

Different agencies tabulate these percentages for international comparisons. Those of the Organization for Economic Cooperation and Development, an international group comprising 38 of the wealthiest countries, are most commonly cited. The World Health Organization, a U.N. agency, is another with very similar numbers. Here in our country, a federal agency, the Centers for Medicare & Medicaid Services, maintains comprehensive National Health Expenditure Accounts (NHEA) going back to 1960.

All these show that more than 17% of everything we produce in the United States now goes to provide and administer health care. So, more than one dollar out of every six dollars in value produced goes for health.

The next most expensive country is Germany at a bit under 13%. Another 14 countries, including the United Kingdom, France, the Netherlands, Sweden, Australia, New Zealand, Japan and Canada, fall between 10% and 12%. Other wealthy nations including Norway, Israel and Ireland fall even lower.

Also understand that because GDP is higher in our nation than in these others, the differences in spending on health in absolute money terms are even greater than as fractions of output. However, one must realize these comparisons are tricky because they depend on exchange rates and whether these rates are adjusted for differences in living costs.

For example, data for 2022 show that the fraction of U.S. GDP going to health care, 17.3%, is over half-again as large as Canada’s 10.2%. NHEA data show per capita expenditures of U.S. $13,393 here. Canada’s government numbers are Canadian $8,540 per person. If we used today’s exchange rate of a Canadian dollar being worth U.S 74 cents, our neighbor’s outlays would be U.S.$6,315. U.S. health spending per person would be over twice as high as for our neighbors to the north. But the U.S. dollar is near its strongest levels in a quarter-century. If we took 10- or 20-year averages, the gap would not be as great.

Nevertheless, it is true that U.S. health spending is always higher than other rich nations relative to output and even higher in absolute money terms.

What do we get for such outlays?

International comparisons always evoke arguments alleging long waiting times for procedures or poorer access to cutting edge treatments in other countries. That may be true. But in basic indicators of a population’s health, the U.S. lags far behind many other countries, including much poorer ones.

Life expectancy at birth is a much misunderstood metric. It depends on death rates at each possible age in a given year. It is much more a measure of current collective health than a prediction of how long anyone will live. For 2024, life expectancy is estimated at 80.9 years in the U.S., versus 85.2 years in Japan, 84.2 in Canada and 82.2 in the United Kingdom. With our expected 80.9 years, we come in 49th out of some 229 nations, Discard tiny rich countries like Monaco and Liechtenstein, and we still are 30 places below the healthiest large industrialized countries by this metric.

Infantry mortality rates are another useful metric of how well health care services are distributed across the general population. Singapore, Iceland, Norway and Japan have 1.5 to 1.9 infant deaths per 1,000 live births. Most other industrialized countries have rates from 2.1 to 3.9. Canada has 4.3 deaths per thousand births. We are at 5.1.

Again, disregarding tiny nations brings us to about 30th place. Yet however one phrases it, we are the worst OECD country, the worst wealthy country, the worst industrialized country, in this metric that mostly reflects routine medical care for pregnant women from all social and economic classes.

So we do have shorter waiting times for knee replacements, and we can keep more tiny premature babies alive than many peer countries. But the overall health of our people is poorer than our key allies and key competitors.

Finally, there is the issue of costs not included in officially tabulated health outlays. Political ads will die away in a few days, but we of advanced age will continue to be deluged with mailings, calls, emails and on-line ads trying to get us to select some particular prescription drug plan or Medicare Advantage plan. This happens every year. Moreover, as happens every year, tens of thousands of working people must cope with changing providers because the plan offered by their employer cuts ties with one health system or another.

Retirees spend large amounts of time trying to match dizzying arrays of alternatives against their particular needs. Despite thousands of people making careers out of advising us, one can still get it wrong. Choose a drug plan with good coverage for what you need now and a stroke or kidney disease or other malady in February may leave one with crushingly expensive needed meds until the next year.

So one must add value of the time spent by U.S. households in managing their participation in the U.S. health system to dollar figures formally tabulated. And yes, there are some non-monetary benefits to the range of “choice” we may have relative to the Dutch, French or Australians. But on the whole, these non-monetary costs are higher for us than for citizens of other nations.

So, if the current situation is bad, how do we change? That may be much harder than we realize.

St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.