The American Healthcare System is the Least Efficient By Far
by Benjamin Studebaker
During the 2nd presidential debate, Donald Trump accused Hillary Clinton of wanting single payer:
She wants to go to a single-payer plan, which would be a disaster. Somewhat similar to Canada. And if you ever noticed the Canadians–when they need a big operation when something happens, they come into the United States in many cases because their system is so slow, it’s catastrophic in certain ways. But, she wants to go to single payer which means the government basically rules everything.
As a matter of fact this is not Clinton’s position–she has advocated for a public option but not a wholesale replacement of the private sector healthcare system. During the primary she attacked Bernie Sanders’ single payer plan as politically unfeasible:
People who have health emergencies can’t wait for us to have a theoretical debate about some better idea that will never, ever come to pass.
Amusingly, Donald Trump has expressed support for single payer in the past:
The Canadian plan also helps Canadians live longer and healthier than America. … We need, as a nation, to reexamine the single-payer plan, as many individual states are doing.
So today I thought it would be fun to take a closer look at the numbers on healthcare than I’ve done before and look at whether our system is any good at helping people live longer for less money.
For this project, I used three data series from the World Bank on total healthcare spending as a % of GDP, total public spending as a % of GDP, and life expectancy, all from 2014. I used these three data series to create two more:
- Healthcare Efficiency Rating (HER), which is the life expectancy figure divided by the total healthcare spending as a % of GDP figure.
- The Public/Private Ratio (PPR), which is the public spending as a % of GDP figure divided by the total spending as a % of GDP figure.
So a country with a high HER gets more life expectancy out of its healthcare system for the money, while a country with a low HER wastes a lot of money. A country with a high PPR has a large amount of state control over the healthcare sector, while a country with a low PPR is more market-oriented. For this work I used data from 21 rich countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the UK, and the USA. It would not be fair to include much poorer countries, as they simply do not have the resources to provide a similar standard of care without spending a ridiculously high percentage of GDP on healthcare.
It very quickly became clear that the United States was going to perform badly on HER. It spends over 17% of GDP on healthcare, which is the largest number by more than 5 points, and it has the lowest life expectancy in the group at 79, two years lower than the next lowest country. Its HER is just over half the group average:
But we can have a lot more fun with this. I separated the non-US rich countries into two groups–the single payer countries (Canada, Finland, Iceland, Italy, Japan, Norway, Portugal, Spain, Sweden, UK) and the countries that have achieved universal coverage through a hybrid system using two tier or an individual mandate (Australia, Austria, Belgium, Denmark, France, Germany, Greece, Netherlands, New Zealand, Switzerland). The single payer countries have the highest average HER:
The single payer systems are the most state dominated, but not by much–many of the hybrid systems still give the public sector a large role to play:
But in a stunning testament to their efficiency, single payer systems nonetheless have slightly lower public spending on healthcare as a percentage of GDP than even the United States:
Counter-intuitively for those accustomed to assuming that market-oriented systems are necessarily more efficient, the state-dominated single payer systems tend to do much better at providing high quality healthcare at an affordable cost. They have a huge advantage over the American system in HER and marginal advantages over hybrid systems.
Now some might argue back that it might be good to spend more on healthcare to fund medical research. But there’s nothing to prevent governments with single payer systems from choosing to make that investment, and it’s not as if the American healthcare system is producing equal results at greater expense–again, life expectancy in America is a full two years behind the next lowest rich country.
I’ll close with a list of all 21 countries’ HER figures, for those who are curious. The single payer systems are in green, the hybrid systems are blue, and the USA is red: