Wednesday, November 20, 2013

The Sensei Schools Ezra Klein on Healthcare Prices and Opportunity Cost

Doctor John Goodman: Does no one at The Washington Post understand the concept of opportunity cost? 

Americans spend 17.7 percent of GDP on health care. No one else spends even 12 percent. Let’s make that more concrete: If Americans only spent 12 percent of GDP on health care we would have saved $893 billion in 2012.

The reason isn’t that Americans get more health care than anyone else. We have more uninsured than anyone else. We have fewer physicians per capita than anyone but the Japanese. We go to the doctor less often than anyone but the Swiss. We don’t have more hospital beds than other developed countries, and when we do go to the hospital, we don’t stay longer.

But we do pay more for the privilege. The average hospital stay costs more than $21,000 in the U.S. It costs only $8,363 in France. (See “Why an MRI costs $1,080 in America and $280 in France“.) Administrative costs in the U.S. are more than three times higher than in most nations with universal health-care systems.

Earth to Ezra: if we have fewer doctors, fewer hospital beds, etc., then we are not spending more than other countries. We are spending less. Remember: health care prices mean nothing. We have so suppressed the market in health care that no one ever faces a real price for anything. So the only way to know what countries are really spending on health care is to look at real resource. With fewer real resources, we are getting results as good or better that the average developed country. That’s not bad.