A tale of two covariates: Why OWID and company are wrong about US healthcare

https://randomcriticalanalysis.com/2019/11/07/a-tale-of-two-covariates-why-owid-and-company-are-wrong-about-us-healthcare/

by jedharris • 7 years ago

72 73 7 years ago

randomcriticalanalysis.com

jedharris2• 7 years ago

Very long and well argued review of sources of excess mortality in developed countries. Bottom line: Obesity! and other non-medical factors like automobiles. Big implications about how we should spend money to increase life expectancy.

hdlothia6• 7 years ago

Can you explain the conclusion of this article to me? I don't fully understand what he is trying to say.what are the implications? That the only improvement we can make on the american healthcare system is to fight obesity better?

whatshisface• 7 years ago

By far the biggest health improvements that could be made in America would be reductions in obesity and reductions in vehicle fatalities. Whether that's the best area of focus depends on the relative difficulty of the improvements - if one second and one penny could save one person, that would be a higher priority than spending a million dollars and one year to save a thousand (even though both would be on the list for doing some time.)

rayiner• 7 years ago

There are two points to the article.

1) Healthcare spending has rapidly diminishing returns, not only comparing the US to Europe, but comparing countries within Europe (such as the Netherlands versus Spain).

2) The lower life expectancy in the US can be explained mostly by higher obesity. US states with similar obesity to European countries have similar life expectancy.

hackeraccount2• 7 years ago

So I just skimmed but I think the point he's making is that Public Health and Healthcare are 2 different things. Public Health is - get some exercise. Don't drink. Keep a reasonable weight. Don't do drugs. Avoid getting shot. Get vaccinated. Don't drive a lot.

Almost all of these things aren't really "Healthcare". I don't need to go to a Dr. to know I should lose 10 lbs. Maybe - maybe, maybe - a Dr. can help me quit heroin (frankly I doubt it) and certainly a Dr. can give me a flu shot.

Most of "healthcare" money has nothing to do with longevity. If my buddy had a heart attach you can spend $500,000 on treatment. Heck, you can give him a new heart. It's all great. Who would say no? Not me. (He's my buddy after all).

At population scale though that does nothing for longevity. At population scale you'd be better off setting the speed limit to 40mph. Taxing alcohol to high heaven. Playing tons of old Erol Flynn movies (To encourage people to get into sword fights instead of gun fights.)

None of that stuff is sexy though. Even the non-crazy version of that list is un-sexy. It probably doesn't cost a lot of money but it royally pisses off people. People also vote. They don't like it if you try to run their lives for them - even if you would technically do a better job then those idiots do. Except for me. And I'm going to lose that 10 lbs. really soon.

analog31• 7 years ago

I'm not sure the article addressed it, but it appears that we could improve the US healthcare system by making it cheaper without losing quality, simply by letting another country run it for us. If there's no gain from spending more, then there should be no loss from spending less, assuming that we get to restructure the system accordingly.

jorblumesea3• 7 years ago

Obesity! and other non-medical factors like automobiles

Socialized medicine and other forms of "planned state healthcare" seem to do a better job promoting lifestyle changes and preventative medicine, which reduces the costs of these externalities.

jedharris2• 7 years ago

Makes sense to me, but I would like to have specific data that would help me understand: - How much money work needs to be invested for what incremental effect? - What kinds of investments are most effective? - How much does effectiveness depend on specific cultural factors, vs. being culture independent?

And many more similar questions.

virmundi2• 7 years ago

Could it be that the socialized medical systems of which you speak are Western? Many of the European systems exist within a realm where people ate and continue to eat relatively healthy food due to historical circumstances. Further, they had and continue to have economies based around the idea of walkable cities. These two factors reduce the chances of obesity and the risk of death due to cars. The only way for America to approach either of these is to have everyone one to move into planned mega-cities.

xyzzyz• 7 years ago

The socialized medicine in my home country does pretty much nothing to promote healthy lifestyle. People generally are healthy and not obese, but socialized medicine have nothing to do with it, it’s rather the culture at large that’s responsible.

nradov4• 7 years ago

Yes we are well into diminishing returns for medical interventions. Many of us are digging our graves with our teeth. While the USA seems particularly bad in that regard other wealthy, industrialized countries are on the same general trend line and will eventually face similar problems.

Ididntdothis2• 7 years ago

This starts with saying that there is a popular telling that the more money a country spends the better life expectancy will be. Especially looking at the US I thought most people know that US doesn't get much value compared to the money spent.

Was that really controversial?

rcafdm16• 7 years ago

My point is that there's very little to suggest US healthcare is uniquely ineffective. There rapidly diminishing returns to health spending and US outcomes are badly handicapped by factors like obesity and homicide.

Maybe try actually reading it though?

oezi• 7 years ago

(I think you get downvoted here, because it is a long read and while extremely well argued on data, it could benefit from more of a narrative at times. I often felt a tad lost even though it was a great read)

The question that arises for me from the article is: what should society shift spending towards/away from healthcare to receive the most life expectancy gains? Fight obesity, transport safety, drugs? Is any areas of those amicable to be solved by spending?

shkkmo• 7 years ago

I followedany of your arguments, but I definitely started skimming at times to gather the main points. It would have been nice to have you main points with the most informative charts that illustrate your conclusions in the article, with links to sub-articles on each particular step of your argument that contain the additional analysis to support your conclusions.

Donu you also suggest that high levels of health care spending are more effective than we might expect since the wealth that allows more spending also come with higher obesity and larger overdose risks?

Is there one of your charts that indicates which countries have seen the best returns from higher levels of health care spending?

Ididntdothis2• 7 years ago

"Maybe try actually reading it though?"

Your first sentence is "In the popular telling, there is a strong and reasonably constant relationship between health spending and life expectancy.". My comment was that I am not aware of this being the popular telling. But instead from what I can tell most people agree that the US doesn't deliver better results despite much higher spending.

Otherwise I think you have dug up a good and useful amount of data although I think some of your conclusions are debatable. This is probably to be expected if you analyze such a complex system.

s1artibartfast7• 7 years ago

I think the controversial idea is that the USA healthcare system is operating on the same efficiency curve as other developed nations.

That is to say, a socialized healthcare system with the same spending is unlikely to provide any improvements in life expectancy.

jorblumesea3• 7 years ago

socialized healthcare system with the same spending is unlikely to provide any improvements in life expectancy.

That's probably not true, because as the author pointed out, Obesity is considered an "external factor" but many countries with socialized medicine have programs to tackle these issues. Americans lack "preventive maintenance" programs that are a given in Europe. I think we all agree throwing money at the problem will not lead to enhanced outcomes, but to extrapolate that to mean that socialized medicine won't lead to a different outcome is not correct.

A classic example is physical rehab. In the US, getting insurers to pay for physical therapy is difficult and often capped. This in turn reduces long term mobility and leads to issues down the road. In Europe, it's far easier to get physical therapy leading to better long term quality of life.

himinlomax• 7 years ago

I think you're drawing a slightly wrong conclusion. The point is not that the US system is actually nearly as good as others, the point is that other factors make it look much worse than it is (as far as the metric of life expectancy is concerned).

If those other factors were corrected, the comparison could be made fairly. Maybe it would turn out to be good enough, and maybe it would not.

That is to say, a socialized healthcare system with the same spending is unlikely to provide any improvements in life expectancy.

Few countries actually have a wholly socialized healthcare _system._ The UK and Canada do, but it's a completely different stories in other developed countries. In France the health insurance system is mostly socialized, while delivery (doctors, pharmacies, hospitals ...) is mostly though not entirely private. In Switzerland and Germany, if I remember correctly, insurers are private but operating similarly to utilities in the US, i.e. within strict government guidelines.

hdlothia6• 7 years ago

Australia has similar rates of obesity and better health outcomes don't they?.

rcafdm16• 7 years ago

No, but this is addressed in my post. Australia's obesity rate is substantially lower, plus they suffer from lower homicide, drug abuse, and the like. More generally, the diminishing returns to health spending imply there's very little to believe the higher expenditure the US makes is likely to purchase appreciably better outcomes (even with different healthcare regimes).

hdlothia6• 7 years ago

34% to 28% is substantially lower?

hdlothia6• 7 years ago

Are you the original author? Have you done an evaluation on the financial consequences of both healthcare systems as well? Do people suffer medical bankruptcies at similar levels in our peer nations?

xixixao• 7 years ago

I feel like this is a great article, but is very hard to digest for someone without statistical background and working knowledge of its jargon. Pretty sure it could be amended only slightly, using common language terms, for larger audience to appreciate it.

maxerickson• 7 years ago

Does the article address quality of life?

No one particularly thinks that artificial knees are life extending.

atomic_rabbit• 7 years ago

The blog Random Critical Analysis has made a good argument that Americans spend so much on healthcare simply because Americans spend so much on everything. Healthcare isn't exceptional in this regard. If you replace the usual GDP per capita measure of income by a measure of actual individual consumption, the US lies right on the trend line, just with higher healthcare spending and higher overall consumption than everyone else.

https://randomcriticalanalysis.com/2018/11/19/why-everything...

jk27277• 7 years ago

You can't spend more on everything, not on a percent of GDP basis. This is a stupid idea since every GDP is limited to 100%. If you spend more you have to take debt and spend future GDP

rcafdm16• 7 years ago

You absolutely can in real terms.

https://randomcriticalanalysis.com/2019/12/03/no-means-no-th...

Also while I agree that 100% of a GDP is a reasonable approximation of an upper limit in practice, that's not necessarily strictly true either. GDP measures domestic production, not the income available to residents. The income available to residents can certainly be much less than GDP (e.g., Ireland, Luxembourg, etc), so the reverse can be true in principle too.

rgbrenner• 7 years ago

The US healthcare system is not a free market. The pricing system--critical to any free market--is broken when it comes to healthcare. Customers are unable to shop on price (even for non-emergency care).. but also the AMA limits the number of doctors; and hospitals require a certificate of need (giving competitors a veto over new businesses), for example.

It isn't just that we spend more... if that was the only issue, then everything would be fine because we would be obtaining what we paid for.

But since it's not an efficient free market... the fact that we spend more only increases the urgency that we reform the system... since those inefficiencies become so huge in a system that accounts for such a big portion of GDP.

So while RCA's analysis might be perfectly correct... unless he also proves that the healthcare market is at least as efficient as a free market system... then we still need to reform it.

nradov4• 7 years ago

Please stop posting misinformation about the AMA. It does not limit the number of doctors. The actual bottleneck is in residency slots, and the AMA is actually advocating to increase funding there.

https://www.ama-assn.org/press-center/press-releases/ama-fun...

Most patients are able to shop on price. The majority of insurers now provide web sites where their members can obtain estimates of out-of-pocket expenses for common treatments at network providers. There are still some gaps and room for improvement but most people are able to do price comparisons for non-emergency care if they want to.

yellowstuff• 7 years ago

A post from RCA's blog a year ago addresses that more directly:

https://randomcriticalanalysis.com/2018/11/19/why-everything...

He argues very convincingly that high income leads to high health care spending very directly. Not only is the US not an outlier in terms of inefficiency, but he can't find any compelling examples of countries significantly improving on health care spending predicted by actual household income. (Other countries have better health outcomes, but not significantly less spending relative to income.) So while common sense indicates that there's lots of room to reform the system, analysis of data from around the world indicates that no one's been able to do much to avoid spending roughly a fixed percent of actual income on health care.

The most successful cost containment regime in the OECD was probably the UK (NHS), which was perhaps an accident of history. They rationed particularly aggressively and managed to hold costs substantially below what we would expect for a country of its wealth for a few more years than usual.
However, people (voters) ultimately wouldn’t stand for it, so this rationing effort was radically reduced (budgets expanded). Today they are much closer to expected spending levels.

IAmEveryone• 7 years ago

Your argument is circular: You are assuming a "free-market system" to be better than the US health care system. Then, you use this assumption to "prove" that US health care is suboptimal. Which in turn you're using to argue for a "free market" system.

They are making an empirical argument that pricing in the US is not actually out of line when compared to the correct base. This would imply that the US system is about as efficient as all others. And considering the differences between vastly different systems are almost negligible, it is also an argument that these systems are rather efficient. Because if there were easy wins with any specific measures, you would expect some systems to improve relative to others with skill or just luck.

scythe3• 7 years ago

I think he hasn’t sufficiently explained the curvature in this graph:

https://i2.wp.com/randomcriticalanalysis.com/wp-content/uplo...

Drawing that curved line is crucial for making the US appear to be on-trend. If you simply use a linear correlation — which seems more reasonable from first principles — you reproduce the US as an outlier, albeit with a slightly smaller z-score. We do see a good fit on the log-log plot (but anything fits a log-log plot) but there remains at least the open question of why the proportion of healthcare expenditures should increase with absolute household disposable income. Even if this is a global trend, it is still clearly not a sustainable one.

rcafdm16• 7 years ago

1, I can fit the US on a linear trend amongst high income countries.

2, there’s no necessary reason why increasing health share with rising real income is unsustainable. We can and have increased share spent on health while increasing real expenditures across the board.

3. I touch on some reasons why this may curve up and then eventually flatten out.

4. No, not everything fits on log-log slopes and us is very close to the trend.

https://randomcriticalanalysis.com/2019/12/03/no-means-no-th...

alexlikeits1999• 7 years ago

The best thing I've read about cross-country longevity, and I don't even care about its main point (ie USA healthcare spending). If you have a Patreon account or something similar please post it. I want more of this.

rcafdm16• 7 years ago

Thanks. I haven't seriously considered that before, but I may put one up!

pjc50• 7 years ago

The problem is GDP is not even particularly a good proxy for the income of households (individuals). GDP is designed to measure how much value add is produced within domestic (territorial) boundaries. It usually does a fairly decent job of this, but it does not directly tell us about the household perspective, as in, the average level of real incomes or real consumption enjoyed residents of a country (a.k.a. “material living conditions“). Most importantly, it is an increasingly unreliable proxy for this concept.

Would someone care to explain how this works? What's the factor causing divergence between the two? Is it the proportion of GDP being returned to overseas investors? Or a mis-counting which includes GDP of US multinationals produced by workers overseas?

PunchTornado2• 7 years ago

one example that I often heard being made is that natural disasters have a positive outcome to the GDP. Houses and communities get destroyed, people are objectively much worse off, but due to the money pumped in reconstruction the GDP grows more than if no disaster had happened.

rcafdm16• 7 years ago

I (RCA) have been meaning to dedicate a blog post to this topic exclusively and quantify the root causes in considerable detail.

In short, yes, I believe globalization and, specifically, multinational corporations (affiliates of foreign owned corporations) are the primary cause. However, in regression terms, this has less to do with net income flows into the US than net income flows out of several small high GDP/person countries. The US is a very large, very rich country whereas many of these countries are much smaller so it doesn't take much to have outsize affects on them. Even if 100% of this ultimately accrues to the benefit of US households, (which I don't think is quite accurate) the effect in % terms is vastly different.

Although some of this can be directly observed as primary income flows in the current year national accounts (dividends, rent, etc), some of it shows up as gross savings or disposable income in the foreign affliates, i.e., it's equivalent to retained earnings. Over the past decade or two non-financial corporate savings have increased massively and these savings are largely uncorrelated with domestic (capital) investment, i.e., it's almost entirely financial and it's largely leaving these countries in the form of net lending. These things also influence the calculation of (GDP) PPPs and cause other headaches.

Of course, there are also other reasons why GDP misleads. For example, Luxembourg has a very large non-resident workforce. Something like 50% of their workers live in neighboring countries (varies year to year), meaning ~50% of aggregate employee compensation goes home (cross border) to Germany and the like. Then there are petro-states like Norway whose income flows are inherently temporary (finite amount of natural resources to extract) and highly volatile, meaning they can't consume out of their measured GDP like most other countries. They need to practice massive consumption smoothing if they don't want their standard of living to crash in the not too distant future.

Long story short, GDP was never intended to be an indicator of material wellbeing and the household perspective (consumption, disposable income) are better measured and more reliable. One might try to throw a bunch of variables in to counteract the many issues imposed by GDP as a proxy for the household perspective, but why bother?

~ RCA (sorry for typos, grammatical errors, etc... limited time to comment and would rather focus more effort on blog)

A tale of two covariates: Why OWID and company are wrong about US healthcare

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