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Health-Care Spending Growth Around the World

Observers don't get very excited about the fact that China's economic growth is frequently three or four times what America enjoys. It doesn't mean that China's economy is three or four times better, or its model is somehow desirable. Rather, it's in large part the function of having a low denominator. China's economy is much smaller than ours, which means it has a lot more room to grow, and each dollar of expansion is larger in percent terms than it would be in the American economy.

So too with this Business Week graph showing health-care cost growth around the world. The author is quite surprised that the U.K.'s spending growth outpaces ours. But of course it does. The U.K. spends $2,992 per person. The U.S. spends $7,290 per person. To put this in real terms, the U.S.'s 5.8 percent growth works out to a $422 increase per person. The U.K.'s 6.9 percent growth is a $206 increase per person. Which would you prefer? Moreover, the U.K.'s system is underfunded, and in recent years, the British government has been trying to increase spending. That's not true with the American system, which is overfunded (although in recent years, the government has also been increasing spending).

What actually surprised me about the graph is that France and Canada and Germany and Sweden have significantly slower spending growth than we do, even as they spend much less than we do -- in some cases, less than half as much per person. That suggests their systems are both less costly and much more resistant to cost inflation. Long-term, they'll have problems if growth doesn't slow, but their long-term is much, much, further out than our long-term.

By Ezra Klein  |  September 15, 2009; 11:02 AM ET
Categories:  Health of Nations  
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Comments

Good bit of analysis. The British have indeed been deliberately increasing health spending. Whatever's going on in Sweden (also a remarkably cheap system) has got to be interesting. Too bad Sweden is labeled as a socialist/secular nightmare by many Americans. On the other hand, Ikea has done well in the American South. Good cultural outreach?

Posted by: DaveoftheCoonties | September 15, 2009 11:20 AM | Report abuse

I was told today that I should travel to Europe to learn about health care. It puzzles me how anyone could think simply traveling to Europe would change my mind about health care reform in any way. I mean it's not like people are pushing carts collecting the dead in Europe are they?

Posted by: AScharf | September 15, 2009 1:02 PM | Report abuse

Nice graph. Health spending however must be rather non-linear in the sense that there are phases in people's lives where they spend a lot and phases were they spend little.

How much of this higher growth represents say differences in either birth rates or immigration differences with countries that are doing better.

Germany has a lower birth rate than we do as well as lower immigration rates.

For I do know that as an emergency physician, I frequently care for the elderly parents of recent immigrants who visit their children on tourist Visas but end up staying quite a bit longer than they originally stated on their tourist papers.

To the extent other countries are not similarly effected with issues like this- and I am not saying they are not, I am just asking as I really don't know- it could make America look like it is doing a poor job when it is more the effect of demographics.

Do you know how much this explain this difference between us and them?

Posted by: mcgreivy | September 15, 2009 1:08 PM | Report abuse

Note that these growth rates are calculated in terms of Purchasing Power Parity.

Consequently you can not tell if the growth stems from changes in the domestic currency or changes in the exchange rate.

A country could have a 10% increase in domestic medical spending and no change in the exchange rate. Or the country could have zero change in domestic medical spending and a 10% change in the exchange rate.

As a consequence these growth rate comparisons are meaningless.

If you want to use PPP to compare the level of spending in one country to the level of spending in another country it may be a meaningful exercise.

But the growth rates calculated in this manner are meaningless.

Posted by: seerrees | September 15, 2009 2:19 PM | Report abuse

Note that these growth rates are calculated in terms of Purchasing Power Parity.

Consequently you can not tell if the growth stems from changes in the domestic currency or changes in the exchange rate.

A country could have a 10% increase in domestic medical spending and no change in the exchange rate. Or the country could have zero change in domestic medical spending and a 10% change in the exchange rate.

As a consequence these growth rate comparisons are meaningless.

If you want to use PPP to compare the level of spending in one country to the level of spending in another country it may be a meaningful exercise.

But the growth rates calculated in this manner are meaningless.

Posted by: seerrees | September 15, 2009 2:22 PM | Report abuse

"But of course it does. The U.K. spends $2,992 per person. The U.S. spends $7,290 per person. To put this in real terms, the U.S.'s 5.8 percent growth works out to a $422 increase per person. The U.K.'s 6.9 percent growth is a $206 increase per person. Which would you prefer?"

You're going to make the same point when comparing Medicare vs. insurance company growth rates, right? Just want to make sure we have some methodological integrity when we're doing comparative systems analysis...

Posted by: wisewon | September 15, 2009 4:00 PM | Report abuse

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