Andrew points to an article showing that 70,000 British people a year fly abroad to get basic life-saving procedures such as hip replacements, heart bypasses, and dentistry.
Ezra responds that 100,000 Americans go abroad for plastic surgery a year! And untold numbers more are going for non-cosmetic procedures. This would be a more devastating critique if
a) Britain were not one-fifth the size of America
b) we had hard figures on how many people in America were seeking procedures abroad that are normally provided in a timely manner by national health systems
Ezra also claims that Americans are creating the industry; Britons are just free riding. Beg pardon, but if Americans were going abroad en masse for dentistry, I'm pretty sure that Hungary wouldn't be their first destination.
But the weirdest thing is that he seems to think that low-cost free market care is an indictment of the free market. And yet, this subtly undercuts the argument that Ezra et al. consistently make: health care in Europe is cheaper than health care in America; health care in Europe is paid for by the government; ergo, if America had health care like Europe's, it would be cheaper.
Let me try my own version: privately provided health care in Bangkok is very, very cheap, much cheaper than publicly provided health care in Europe. Ergo, Europe should privatise health care.
The liberal instantly recognizes that this is ludicrous: cost structures in Europe are much different from cost structures in Bangkok. But the same is true of America and Europe.
Health care systems suffer from Baumol's cost disease: it's a labor-intensive service that doesn't offer huge scope for gains in labor productivity. The number of hours it takes to manufacture a car is consistently falling, but the number of hours it takes to perform doctor's visits is roughly the same as it has always been. As a society gets richer, in order to attract workers, the labor intensive service has to pay competitive wages with the sectors where productivity is rising rapidly; that means that costs for labor-intensive services rise faster than the general price level.
Bangkok's doctors are so cheap because a doctor making a modest wage by British standards can have an enormous house and a flock of servants to take care of him, putting him in the very top echelon of Thai earners. Nurses too, can make an American pittance and still live very well. As Bangkok gets richer, the servants and the gigantic house will not be so affordable--and neither will the health care.
Likewise, America is richer than Europe; it therefore has to pay its doctors, nurses, etc. more. (A doctor in France makes about what a moderately experienced RN makes here.) Also, health systems held down wages in previous periods, which is much easier to do than inducing everyone to take a 75% pay cut now. If we did slash wages by that much, workers would exit the public system in droves, immediately destroying it. We literally cannot get there from here.
Why should it matter that America is richer than Europe? The US doesn't just spend more than Europe, it spends a much greater portion of its GNP, right?
Without doing any more research than reading Ezra_Klein's post, I'm going to suggest that the Americans leaving the country for cosmetic surgery are an artifact of how certain breast implant materials are illegal in the States.
That's the Baumol's cost disease thing. Labor-intensive services will tend to rise as a percentage of GDP over time.
"Also, health systems held down wages in previous periods, which is much easier to do than inducing everyone to take a 75% pay cut now."
Thanks, Megan, for making that key point that somehow eludes liberals like Ezra. Another obstacle to a nationalized American system lowering costs to European levels is that our senior citizens: 1) get a high level of care now; 2) get a good deal on the care, with Medicare Parts A, B & D plus their private supplemental insurance; and, 3) aren't going to settle for a lower standard of care.
so what's the way forward, kid?
In my mind I distill farther down, and change industries to drive the point... Why are 80% of toys made in China? Well, it's cheaper to make them there, as every measure is lower. They don't need robotic lines, because that would be MORE expensive. While doc are not going to find much more maximization in their delivery, it is still cheaper there just to live, all other things being equal. It's that simple. It's NOT a bad thing as long as the delivered care is the same. Indications are that these countries are making it the same.
Essentially we are outsourcing. Given the shortage of nursing, and even in some doctor specialities, it's probably not going to effect Docs here, especially since many maladies are not transportable like that. In the end there will be corrections in healthcare just like anything, and some kind of hybrid is likely. As corporations just like the one I am working for take away choices because of their cost, the HMO's that provide that are going to see problems, and need to reduce cost, or lose everyone. The creative way of doing that will probably be to raise co-pay, but have a certain amount of free visits per year. That way people will stop going whenever they get a sniffle, but still go if they are really sick. In the meanwhile it'll be ugly while we change from an HMO/pay $10 to see the Doc system. A lot of people have gotten used to that. Ultimately it is unsupportable...
Actually, I would argue that a lot of medical work has seen efficiency improvements due to better training, materials, and equipment, particularly in surgeries. Notably, now-routine techniques like endoscopy and advanced tissue bonding substances make it possible to perform many basic procedures as outpatient, same-day, or overnight events -- when these would have been highly invasive procedures requiring a week's hospitalization as little as ten or twenty years ago.
On the other hand, people are living longer and demanding far more medical services in their elder years. Also, there are now a very wide range of tests and procedures that can be performed for routine ailments. Some of them do allow for early detection of disease, but the element of discretion has been all but wiped out of applying them by the continuous threat of malpractice suits conducted before gullibly generous juries. So time and resources are consumed in the applying seventeen tests to confirm that grandma's sinus infection really is a sinus infection, and not the onset of Booga Booga Disease.
Back when I was teaching ESL to a bunch of former Yugoslavians in Pittsburgh, I discovered that a number of them preferred to delay dental treatments so they could have the work done more cheaply during their visits to the old country, since American dentistry seemed outrageously expensive to them. I've heard of Americans going to Mexico for dental treatment, too.
Megan wrote: "Beg pardon, but if Americans were going abroad en masse for dentistry, I'm pretty sure that Hungary wouldn't be their first destination."
Well... they are. Ezra links to this report (http://abcnews.go.com/Business/IndustryInfo/story?id=2320839&page=1)
and says that 50,000 Americans go to Thailand every year for serious, non-cosmetic surgery.
Megan also wrote, "But the weirdest thing is that he seems to think that low-cost free market care is an indictment of the free market."
THATS BECAUSE ANDREW SUGGESTED THE ALTERNATIVE! Andrew suggested that 70,000 Britons leaving Britain for healthcare was an indictment of British healthcare. Ezra showed the same thing happens to America.
There is a huge difference between choosing to go elsewhere for surgery because it is cheaper and going elsewhere for surgery because it is available timely for a price as opposed to being unavailable timely for free.
There is no question that US citizens could get both cosmetic and non-cosmetic surgery done in the US timely for a price. In the British and Canadian systems, the "free" surgery may not be available, or at least not available timely.
Yes, I know, Americans do go abroad for healthcare. But they are clearly not the only nation driving demand for medical tourism, because there are entire areas in Eastern Europe which cater mostly to Europeans. Dentistry simply isn't costly enough to make for a viable medical tourism industry when plane tickets cost $800 or so.
Amy, as long as we're giving anecdotes -- I have an officemate from France who also would wait for dental work until she went home to see her family -- that is until one time last year she had to see a dentist immediately. Ever since then she goes to the dentist here since the care was so much better and as she said, "for the first time, my mouth wasn't in pain after the dentist"...
Of course that story really means nothing. She might have a crappy dentist in France, or a really good one here - who knows?
Still another point on the dental care anecdotes is that it's often more convenient to see the same dentist you've seen before. Otherwise you have to get your records transferred, and if that isn't feasible, then you have to start over with clean-slate paperwork, x-rays, etc. -- i.e. a non-trivial amount of money.
To respond to Amy P, San Diego alternative weeklies have many advertisements of Tijuana medical services (mostly dental).
Megan McArdle appears not to understand the laughable source Andrew Sullivan uses for his post. The Daily Telegraph article states:
Other than a few pathetic jibes about suberbug infections in NHS hospitals this article is really about a small number of patients responding to the high cost of private medical care in Britain.
I wonder, however, if these cheapskate patients have thought through what happens when the treatment in Mumbai goes wrong - and suddenly becomes a lot more expensive than originally thought. They will probably expect the British government to rescue them.
The sentence about dentists is a fairly typical Tory lie. There is a shortage of NHS dentists in Britain because many dentists refuse to treat patients under the NHS. These dentists will, of course, treat anyone for cash or a credit card - even those travelling to Hungary for treatment. Consequently, the patients fleeing to Hungary for dental treatment are responding to the high cost of private dental treatment in Britain.
NDM, I think you're missing the point: why are people paying a ton of money to get something that their government allegedly provides for free?
Megan McArdle chides me for missing the point that "people [are] paying a ton of money to get something that their government allegedly provides for free?" According to Wikipedia Americans spend $50-100B on bottled water.
A commentor on Matthew Yglesias’s blog links to the original source for the Daily Telegraph article. The survey was clearly intended as a marketing tool to encourage more British people to travel for healthcare because it was not a survey of patients but a survey of "132 clinics, hospitals and healthcare providers in 30 countries that promote their services to the UK market."
Of the 50,000 patients in the survey 40% travelled for dental treatment. British dentists have long been hostile to the NHS which has made it very difficult to find a dentist willing to perform procedures under the NHS. These patients were most likely not fleeing NHS treatment, which was probably not available at any price, but fleeing private dental treatment which they felt to be too expensive.
A further 30% of the healthcare tourists travelled for cosmetic surgery with "breast augmentation, tummy tuck, liposuction and facelifts" being popular choices. I doubt there are many Britons who think these are treatments that should be paid for by the NHS.
Consequently, 70% of the healthcare tourists in this article left the UK in search of treatments not covered, in practice, by the NHS. These healthcare tourists were not fleeing the UK because of the quality of the NHS they were fleeing because they didn’t want to pay western rates for healthcare.
"people [are] paying a ton of money to get something that their government allegedly provides for free?" According to Wikipedia Americans spend $50-100B on bottled water.
I am not aware of anyone, let alone the government, providing the water with quality comparable to decent bottled brands for free. What was the point?
Does medicine have to be so labor intensive? There are plenty of times I would just prefer to email my doctor. Cuts out the office visit, the receptionist, all the waiting around.
I'd email to ask about symptoms (typically: is this serious?) or to get a referral without having to spend an hour waiting around to see the doctor for 5 minutes.
Medical practices could also set up individualized websites for treatment programs, esp. complicated things like diabetes.
As far as I can see, the only reason we still wait around in doctor's offices is a) liability if the email is misinterpreted and b) the medical system (not the patients) is perfectly happy with the way things are.
Dishonest hackery, thy name is McArdle. By sheer misrepresentation, this, from the Telegraph:
Becomes this:
Leaving aside the Telegraph's premise that patients need cataracts (!), the article nowhere states that 70,000 Brits are going abroad for life saving procedures. The article doesn't state that all patients are going for life-saving procedures, or even specify what perecentage of the procedures are for life-saving treatment. It says 70,000 are going for "treatment abroad." Nothing more.
Only a willfully ignorant or lazy person could read the article as saying what McArdle claims.
(Nor does the article claim that anyone is going abroad for "life-saving dentistry," as opposed to cosmetic or routine dentistry.)
Didn't The Atlantic used to have standards -- "You must pass third grade to write for this magazine."
Our Hostess wrote:
Health care systems suffer from Baumol's cost disease
Many years ago, Daniel P. Moynihan predicted that there would be increasing pressure to saddle the government with all the jobs that suffered from Baumol's.
Michael wrote:
As far as I can see, the only reason we still wait around in doctor's offices is a) liability if the email is misinterpreted
As the son and spouse of physicians, I can attest that liability concerns factor in almost every decision a physician makes. When one missed diagnosis can ruin your life, you tend to be conservative.
I wrote: When one missed diagnosis can ruin your life, you tend to be conservative.
It can also ruin the life of the patient, of course.:-)
You're right, take out life saving, substitute "morbidity and mortality improving".
Which changes . . . what? Because just IMHO, keeping its citizens from being blind is one of those basic things that I'd expect a national health care system to do.
Dentistry simply isn't costly enough to make for a viable medical tourism industry when plane tickets cost $800 or so.
Plane tickets inside Europe can be had very cheaply on budget airlines, though -- much cheaper than in the US, at least as of several years ago.
The Baumol's issue is real, but anony-mouse is also right that many medical procedures have in fact seen large gains in efficiency, not to mention the revolution in care that has allowed many treatments that once required hospitalization to be handled on an outpatient basis. As for medical professionals' salaries, in a field where costs are rising significantly faster than inflation, it seems like it would be enough to argue that we ought to hold the line on salaries (much as the growth of HMOs in the '90s temporarily restrained the rise of health care costs). No one really thinks US health care costs will fall to the level of the UK's, but hopefully reform of the health care market could give more power to health care purchasers to constrain doctors' salaries from rising so fast, right? (An effect which one supposes is already being bolstered by the opportunity to fly to Bumrungrad for major procedures.)
No one really thinks US health care costs will fall to the level of the UK's, but hopefully reform of the health care market could give more power to health care purchasers to constrain doctors' salaries from rising so fast, right?
What kind of reform do you propose to reduce the rate of increase of doctors' salaries (and, presumably, salaries of nurses, pharmacists, lab technicians, etc.)?
Megan McArdle writes about an:
Following complaints that she misrepresented the article she rephrases to:
The reality us that 30% of the healthcare tourists travelled for cosmetic surgery such as "breast augmentation, tummy tuck, liposuction and facelifts." And there I never knew that a boob job was either "life saving" or "morbidity and mortality improving."
ndm-
No, but simple math tells you that 100-30=70
"That's the Baumol's cost disease thing. Labor-intensive services will tend to rise as a percentage of GDP over time."
I guess time = level of economic development.
So healthcare costs are a greater portion of GNP in the US because the US is a more advanced economy? That seems pretty dubious to me.
Well, at some level it's not dubious. Health care is to a great extent a service industry, and the richer a country is, the more of its economy is going to be in the service sector, as all the tasks of producing things become more and more efficient. But while this probably explains a lot of the difference between health expenditures in the US and China, I imagine you'd need more evidence to claim it explains much of the difference between the US and, say, France.
Looking at this again, Baumol's cost disease is independent of the salaries of the workers concerned, right? The fact that US doctors average 5 times the US's average wage, while French doctors average twice France's average wage, seems like it would make a much larger contribution. The fact that administrative costs in the US system are 20% or more of total costs, while they're in the single digits in France, also seems pretty powerful.
Oh -- one more thing which Megan might be interested in. In fact, Thailand has a universal health insurance system. It was introduced by Thaksin Shinawatra and is one of the main reasons for his still overwhelming popularity in the countryside. It didn't lead to the excellence of Thai health care -- rather, things went the other way around: once first-world-quality care was available to some, the political tensions created by the exclusion of the vast majority of the public from that care became untenable. And this is a very strong answer to the constant refrain "Why is health care different from any other kind of good?" It's different because it's different. Thais didn't demand that a political party give them all Gucci handbags, or food; they have enough food. But they will protest over inequitable access to health care. They demanded that if middle-class people in Bangkok could get broken arms set by a proper doctor, then regular people should be able to get that, too.
Thaksin's system is currently under tremendous stress, and a new financing deal will have to be arranged. But the Thai health industry is realizing that it has to come to an accommodation with popular political demands.
But the Thai health industry is realizing that it has to come to an accommodation with popular political demands.
Once again, the "whatever is, is right" argument makes an appearance. And once again, it fails to apply to the US for some reason.
The statement that health care isn't subject to productivity gains is ridiculous. We all know from experience that primary care doctors have sharply raised the number of patients they see a day by offloading tasks to nurses and minimizing face time with their patients. If productivity is measured as the number of patients a doc sees a day, it has clearly risen.
Moreover, further huge gains are certainly possible. Computerizing patient records, automating insurance payments with standardized forms (public or private) using e-mail and outsourcing radiology to doctors in India would all dramatically improve productivity. The problem is that payment systems seldom reward productivity gains, except in counter-productiver areas like primary care, where docs just offload more patients to specialists or emergency rooms.
No, Brooksfoe, Baumol's cost disease is a salary problem. The richer your country is, and the more productive comparable workers are, the more you have to pay the workers in the low-productivity industry in order to keep up demand.
Look at the salary options available to doctors in America if they enter another field, and compare them to France's. That's why doctors in America are paid so much.
Megan McArdle writes:
And there I always thought high physician salaries was a desired response to the deliberately high barrier to entry caused by the expense of a decade of college and several years of indentured servitude thereafter that.
Of course, if we got rid of some of the useless certification we might get more doctors who are paid less and do not have the bedside manner of a hungry rat.
Eh, it's a factor, but I'm not sure how big; it's not clear whether admitting more doctors pushes down prices, or whether they create their own demand.
oldLineYankee wrote:Computerizing patient records, automating insurance payments with standardized forms (public or private) using e-mail
There are major liability and reliability problems that have to be solved with totally computerized medical records. It will also cost a fortune to install. Who pays?
As for automated insurance payments with standardized forms - that's been standard with all the major payors for, oh, 10 years or so. In fact, if you file a Medicare claim on paper you don't get paid until after a several month delay, by regulation.
The richer your country is, and the more productive comparable workers are, the more you have to pay the workers in the low-productivity industry in order to keep up demand.
Megan, you misunderstand the point. The point is that Baumol's cost disease applies to any labor-intensive industries, whether those industries are high-salary industries or low-salary industries. In other words, if it applies to doctors in American hospitals, it also applies to janitors in American hospitals, and should also apply to American barbers, restaurant staff, and all other industries that do not realize large gains in efficiency from technological progress. This is precisely the point you have repeated above. The question becomes, are restaurant prices (waitstaff salaries), haircuts, and janitorial wages also rising much faster than inflation, as health care costs are? If not, why not? The availability of immigrant labor to fill barber jobs, but not doctor jobs, might be one answer.
The figure I provided on relative salaries of US and French doctors explicitly compares those salaries to the average wage in the respective countries, so your response is not useful. US docs make 5 times the average wage in the US; French docs make twice the average wage in France. This cannot be explained by the fact that doctoring is a labor-intensive profession, or that the US is perhaps 25% richer than France in PPP GNP per capita.
Once again, the "whatever is, is right" argument makes an appearance. And once again, it fails to apply to the US for some reason. -- Zrimsek
It does apply to the US! Medicaid and the emergency treatment mandate are versions of the same phenomenon. But in the US we're doing it in an incredibly inefficient way that hurts people's health care and costs too much.
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