Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Wednesday, May 11, 2005

So Much for Two-Tiered Health Care

One of the big arguments against allowing private health care in Canada is that doing so would create a two-tiered health care system, with the poor receiving less-than-adequate care while the rich get everything. People making this argument often point to the U.S.

But it turns out that in the U.S., per capita spending on health for the poor exceeds per capita spending health for everyone in Canada [link via Newmark's Door]
The government's Medical Expenditure Panel Survey (MEPS) tabulates health care spending for a sample of over 35,000 Americans. One of the variables included in the survey is household income relative to the poverty line.

When the data for 2002 (the latest survey year available) are extrapolated to the full noninstitutional population, one obtains these results for persons below the poverty line:

Number of Persons: 35.6 million

Total Spending: $106.3 billion

Per Capita Spending: $2,986

Next, look at data on per capita spending on health care in various countries, as compiled by the OECD. In 2002, per capita spending in Canada was $2,931, in France it was $2,736, in Germany it was $2,817, and in the United Kingdom it was $2,160. The United States spends more on the average poor person than those countries spend on the average person.
Arnold Kling, who wrote the article from which the above quotation was taken, concludes

I suspect that severe substance abuse plays a big role in poverty, poor health, and mortality. My guess is that if substance abusers were excluded from the international statistics on health outcomes, the standing of the United States would improve considerably. If this is true, it still begs the question of whether our public health policies are inferior to those of other countries in the area of substance abuse.

I think it would be foolish to conclude that the United States does as well or better than other countries in providing health care to the poor. What the data do suggest, however, is that poor people in America do not suffer from a lack of total health care resources.
Let us hope that policy-makers in Canada pay attention to these data. A multi-tiered system, by attracting more resources, can easily end up providing more health care in total. Health care is not a fixed pie to be divided and prioritized; that model exists, though, in the minds of too many health planners who do not understand economics.
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