Health care costs in US vs Europe

I'm here with dr. Lawrence Baker from Stanford Medical School and we're going to talk about health care costs or healthcare economics which you're at you're an expert in I like to spend a lot of time to try it out like an advocate like that so so all of these charts which all seem to have a a similar shape here these are essentially measures of how much we're spending on on health care so this first one right here was this total health spending 1960 to 2009 and this is the United States this is the United States this is data that's compiled by the federal government every year since well 1960 in this figure this is this adjusted this isn't adjusted for inflation that's not adjusted for anything that's the total dollar value that the folks in the federal government like to calculate this number have come up with for the amount we spend on health care in a year okay so someone looking just at this data point might say okay maybe it's not inflation adjusted maybe the inflation curve is also growing up growing at some rate here but the absolute numbers do seem to be large you're saying by by 2000 by 2019 I guess it's already old 2009 were already several years past past that we're two and a half trillion dollars just to get me net people clear what we're talking about this isn't billions this is 2486 billion so that that's that's two point four trillion dollars and then that's predicted to almost almost double by 2019 wrong you know and our GDP is on the order of 15 trillion dollars so it's a significant chunk of everything that we produce that's a big chunk of everything we produce yeah and going up going up rapidly you know hard to predict a little bit but all the trends are up and so we're worried about this this is on a per capita basis so I guess there's there's two ways to think about why costs are going up one is is that maybe maybe you just have a lot more people right and there or that on a per person basis you are spending more right and this chart seems to imply the latter this says on a per person basis we're spending more still not inflation adjusted in this still iteration of gelada going from $100 or so in 1960 to $8,000 in the last couple of years and you know you can see the trend since say 2005 in there it's up and it's up pretty steeply right just in the last a little bit right for maybe thirteen or fourteen thousand fourteen thousand that's a nice subcompact car one good one by ya not to not to say what's more important and then this is so this next try right over here is actually that calculation as a percentage of GDP and to me this is maybe one of the most relevant things because that that that adjusts it for things not it doesn't directly adjust for inflation but it says look of as a percentage of all of the goods and services as an economy that we're doing this is a percentage right this is this is an interesting run right here so in 1960 roughly 5% of everything that all the America all the goods and services that Americans produce one in 20 of that of our energies was spent towards health care right and now it's looking like it's closely it in the next few years it's going to it's going to be approaching 20% it's already in the upper teens so yes well it's past 15% 16% and we're headed up you know the last year so maybe it was a little slow growth but you can see the trend over the last decade or two decades it's up up and up so you're right as we as when health economists when people in who think about this more deeply want to think about health care spending two-and-a-half trillions and interesting number eight thousands in a driver but this one captures population growth to a large extent captures inflation and the fact that we're spending a dollar 1/7 roughly of our productive capacity on healthcare is interesting and closely approaching one actually is already 1/6 and approaching 1/5 yeah of everything that we do is about health care yeah and and I guess I mean there's a couple of things there maybe maybe we're getting healthier I guess is one possibility or maybe we aren't and then with this something's weird well that's the really interesting question you know where think about why this is going up but at the end of the day you're happy if it's if we're spending this much and we're spending more than other countries we're spending more than we did last year if we're getting healthier because of it or if we're getting happier interesting question if we want to count happiness right right as healthy but if we're getting something we value and we're getting worried and we get worried if we are better the happiness that did not make you healthy I think that's right though this is not the end of the day this is maybe our biggest question some will directed directly against your health but but uh and and that goes that goes that goes straight into this chart what you're talking about is like well you know maybe we should or maybe we shouldn't compare ourselves to other countries and and this is comparing ourselves to other countries so this chart right over here this is the blue graph so we are this light bluh I'll do that same so this is us this is the United States right over here yep that is us the United States and if we compare to other developed countries with I guess not too different too demographics in terms over all developed countries industrialized countries countries where the standard of living is in pretty good shape right right and they have they have abroad you know it's not a homogeneous not entirely homogeneous some people will argue will say the u.s. is more diverse than right you know quite is quite pretty diverse countries generally you know it has certainly countries with immigration issues at the u.s. countries with lower income and hiring compilations at the USA so they're pretty diverse right and so the I mean when you look at this is actually maybe this is the real chart to look at because this is because you as percentage of GDP but also puts it in context of other countries and that's where they're all kind of bundled around in this you know I don't know the low-end it was actually the UK I didn't realize is actually at the low end as a percentage of GDP all the way at France is at the high end of GDP and you yeah so I've done a little picking and choosing of the European countries here there are some that are a little higher but nobody comes close to the US right these are the big ones UK is the lowest in the world really of the developed countries the European countries and and France and Germany Canada common comparators to the u.s. at ten or eleven percent so we're 50 percent higher 60 percent higher than then those double with what's going on in the UK and do we know what why we're doing this or you know are we getting I guess where's that going where where are we spending money that these other countries aren't right so two places ultimately the economics of it would say if you're spending more than somebody else here it's about how much stuff you're buying what kind of things you're buying and then the price that you're paying right for things so we're talking either about prices or quantities right right right q so it's a little bit of both if you compare us across countries we spend we buy more of some kinds of services there are other countries by there's um some interesting comparison or something like we get we certainly do get more MRIs per person it's kind of interesting it's not that we have more doctors per capita say or more hospital beds per capita it's not that we get more primary care visits in the u.s. it's actually true that in many European countries you get more primary care visits more time with your primary care doctor than we get in the US but it's a if you're if you're picking a poster child it might be the MRI or something more sophisticated some of the more expensive specialist visits lots of tests and things like that that we buy in the United States that you don't buy in Europe and that drives up our healthcare cost so we definitely are buying more and and it's costing us more per and the price is also different in the United States and this is there's some people who've done studies of this and there's always a little bits of debate about how you define these prices exactly but you know we pay doctors and if you're finding doctors annual incomes they're going to be higher in the United States subject to say we're paying some sense a higher price for a year of work from a doctor than they pay in Europe paying a higher price for our hospital administration for our staff and the hospitals things we tend to pay more so we pay we buy more things we tend to buy more of the more expensive things right and we tend to pay a higher price you know roughly how much of the healthcare dollar goes towards salaries versus drugs versus things like MRIs and the kind of fixed costs like like MRIs in hospital and beds and things like that yeah so some of this you can figure out we can almost put another slide up there and the figure there and the kind of screen there and the u.s. Health accounts will tell you something's like doctors and hospitals and drugs drugs you know 10 or 15 percent a little less than that ok I'd have to go back and look at the data on the physicians but you know physicians you know let's say that hospitals and physicians are 20 or 30 per I was like actually hesitate to give you ok number it's not 90 percent not 90 percent we say hospitals if this is that so that includes outpatient and inpatient yeah you know there's so there's lots of the ways that these health accounts get broken up or you know physicians hospitals emergency departments different kinds of equipment and things that get purchased and there's research and there's buildings and all that kind so it's just physician pay one see none of these things do make up the bulk of it and we had a video about drug pricing but drug pricing by itself is not the reason why we're out here and physician pay by itself it's not the reason why we're out there or even having more it all of these are contributing it seems like all of these were getting more of and we're paying for it Sammy I'm at the end of the day it's going to be a bunch of things like this all thrown together we buy more stuff we tend to buy more expensive stuff we buy it from people who we pay a lot to we buy more specialist visits for example in the US we pay specialist a higher annual salary than we pay generalists and that comes out in the prices I don't do that in Europe Europe does pay more but everybody's shifted down all the versions and are so shift down I think the specialists are probably shifted down more in Europe then the generalists are we pay more for our prescription drugs here we pay more what are we getting it in in terms of other than you know more more CDs in the doctors parking lot I'm kidding I'm kidding no no that's all though you just see a lot of them yeah it seems to be the car of choice when I visit the doctor but but what what is and I'm not saying that my wife is a physician and obviously we all work with many so and they've worked very hard so I'm not going to I'm not going to say that there make any statement about they're underpaid overpay and SP especially relative to some people on you in the finance world I would say that they're definitely underpaid possibly yes yes this there above Mercedes oh but but and so are we getting anything in exchange for this are we getting less wait times are we getting a better access to our doctors what are we getting or what do we know about that well so this is the debate this isn't in maybe a microcosm one of the big debates we're having in the US right now we're spending more every year we're spending more than other countries if we was clear we were twice as well off twice as after two and we're growing faster and we're growing yes it depends on how you look at the time but we're showing a little faster in some years yeah um you know our health care costs go up 10% if we're if we knew we were 10% happier this year with our health care system we'd be happy and and that's the big debate there are some cases somewhere the u.s. you can there are things you can point to we have fewer waiting lines for some services and some of the countries that keep the cost down have more lines you know it's not it's also not the case that they have waiting lines for everything and they're really serious stuff doesn't end Longway nice we get we get easier access to some of the high-tech stuff which we like and so that drives up our spending but maybe makes us happy it may it may or may not lead to better access happy that we feel like we're getting better customer service instead of waiting three weeks instead waiting three months for procedure we're getting in three weeks which would make me happier I mean objectively I was much happier about that okay but what what happens when we look at the overall outcomes you know life expectancy and and people dying from heart disease or you know whatever this is kind of a mixed bag there are some of the the most commonly cited figures are cases where the US doesn't do as well as some European countries we and usually it's you know we spend a lot more we don't do better on life expectancy we don't do better on infant mortality there are some cases where the u.s. does does really well especially things where access to the high-end stuff can make a difference and so there are some situations where it looks like we buy the kinds of things that are really going to make us healthier but it's not across the board and some of the really interesting ones are in cases where there's fairly inexpensive stuff that looks like it would work well and improve outcomes and sometimes we're not doing the inexpensive stuff that other countries are doing and it's coming out to maybe hurt us in our first oh there's a you know we wouldn't be having the debate if it were clearly if we were clearly better off but it's really the case that in only some of the measures do we end up better off we don't always vaccinate our kids more we don't always get people screened more for cancers and things like that but um you know sometimes we do so there are cases there are success stories here the one thing that comes that's interesting about looking at this chart a little bit deeper is that it doesn't look like this is something that you know since the American Revolution that we've been spending double as a percentage of GDP relative to everyone else I mean if I just look at this chart right here it seems like US and Canada we were right along very similar to each other to about the early 70s and then but we're still in kind of that pact with the Germany and France I guess too for the relative to the UK we actually always been have been higher but then right around I mean right around this time period there I don't late 70s early 80s that's where we really started to break off what I mean was there some policy shift there or so there's not a tangible specific policy shift what starts happening in the u.s. there as we start adopting and we start shifting toward the higher and stuff more and that's the pies that's what the technology started to really get I think that's mainly this story you know we started to really the research and things the development that went on in the in the world really from nineteen forty fifty sixty started to produce the capacity to do new and expensive things and the u.s. grabbed those and other countries in the world were less quick to grab them maybe say more careful maybe say too careful right slow but the US as the agency there really quickly started to put up specialized hospitals started to buy the fancy equipment and you know you can see what kind of came out of it cool it some of you probably the whole world benefited from that because you're you are going back to the drug pricing or the you know the V MRI manufacturer is able to get those returns and hopefully much of that they're able to reinvest and not spend too much on other things but yeah it is it is fueling yeah some of the innovation if you know there's always these kinds of questions that swirl around your if the US pays a lot of money and that comes back into innovation that everybody benefits from including us maybe it's okay um you know I think there are people who debate whether we got enough innovation right enough benefits that's tangibly related to our spending to make our spending worth it but there are some cases where that probably happened and so you know there's some subtlety to the question but you know I always say if you're the Yankees and you're going to pay the huge amount for the for the big payroll and the big stars people expect you to win every time and that's the kind of USS challenge we're going to pay the big bucks research so you really feel like we want to show results every time and you know sometimes we do get the results but it's not all that a big ewis it's not ambiguous we're not winning the championship every every day we're very interesting