Thursday, September 09, 2004
Are we paying too much for health care?
[Arnold Kling, "Hating the Producers," Tech Central Station, 9 September 2004.]
Arnold Kling continues his analysis of the U.S. health care system, this time tackling the perception that Americans are overcharged for their health care:
In this essay, I look at another complaint about U.S. health care, which is that we pay too much for the services that we get. Princeton economist Uwe Reinhardt[...]is a prominent advocate of the thesis that suppliers are overpaid. His views on the nature of the health care problem influenced the infamous Hillarycare plan, and his work continues to be the basis for Democratic Party health care policy proposals.
Reinhardt and his colleagues arrive at a striking conclusion: none of the higher spending in the United States reflects more services! The basis of this claim is somewhat weak, however. In health care, it is difficult to measure output. In theory, you want to measure the impact that health care has on people's lives, but in practice this is difficult to quantify. The things that are quantifiable -- such as the number of x-rays taken, the number of prescriptions written, or the number of surgeries performed -- are only weak approximations of the "true" output of the health care industry.
Diagnosing high prices as the cause of high spending on the basis of imperfect measures of the quantity of services is an example of indirect inference. Such an inference is quite tenuous. In this context, it might be considered statistical malpractice.
[I]f a problem does not exist in the first place, then a "solution" is going to make things worse. And the evidence for price gouging by health care producers is not compelling. Hating the producers will not solve the health care problem.
[Arnold Kling, "Hating the Producers," Tech Central Station, 9 September 2004.]
Arnold Kling continues his analysis of the U.S. health care system, this time tackling the perception that Americans are overcharged for their health care:
In this essay, I look at another complaint about U.S. health care, which is that we pay too much for the services that we get. Princeton economist Uwe Reinhardt[...]is a prominent advocate of the thesis that suppliers are overpaid. His views on the nature of the health care problem influenced the infamous Hillarycare plan, and his work continues to be the basis for Democratic Party health care policy proposals.
Reinhardt and his colleagues arrive at a striking conclusion: none of the higher spending in the United States reflects more services! The basis of this claim is somewhat weak, however. In health care, it is difficult to measure output. In theory, you want to measure the impact that health care has on people's lives, but in practice this is difficult to quantify. The things that are quantifiable -- such as the number of x-rays taken, the number of prescriptions written, or the number of surgeries performed -- are only weak approximations of the "true" output of the health care industry.
Diagnosing high prices as the cause of high spending on the basis of imperfect measures of the quantity of services is an example of indirect inference. Such an inference is quite tenuous. In this context, it might be considered statistical malpractice.
[I]f a problem does not exist in the first place, then a "solution" is going to make things worse. And the evidence for price gouging by health care producers is not compelling. Hating the producers will not solve the health care problem.
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