Health Care

Want to Improve Health Care? Spend Less on It


Want to Improve Health Care? Spend Less on It

Photograph by Gallery Stock

According to a new study of Medicaid recipients in Oregon, increased health-care spending has only a limited impact on improving people’s health. This points to an underlying reality: Hospitals and doctors’ surgeries may account for a considerable majority of health-care expenditures, but they aren’t the main factors in health outcomes. That’s true not only in the U.S. but around the world.

The Oregon study suggested that expanding Medicaid had considerable benefits: Recipients got more health care and didn’t suffer the impact of catastrophic health costs. Depression rates fell by 30 percent. But after two years, blood pressure and cholesterol levels of participants hadn’t shifted, and while more people were on medicine to control diabetes, the relevant tests suggest the treatments were having limited impact. Better health coverage for particularly vulnerable groups does save lives, but previous analyses have also suggested that a general expansion in insurance coverage doesn’t necessarily do a huge amount for health outcomes.

Americans get terrible value for money from their health spending. According to data from the World Bank, the U.S. spends $8,608 per person per year on health care. But the country has a lower average life expectancy than Chile, where health expenditure is $1,292 per year, or Israel, where expenditure is $2,172 per year. U.S. life expectancy is nearly four years shorter than it is in Spain, yet Spain’s annual health expenditure per person is about one-third of the U.S. level.

One reason for that weak link is the obscene prices charged by U.S. health providers. American hospitals as a whole often charge two to four times as much for a procedure than the cost of flying overseas and then paying full price for the same treatment somewhere else. But in partial defense of U.S. health care, the link between health expenditure and health outcomes is weak worldwide. The relationship between the number of doctors or hospitals in a country and mortality rates is even weaker. That’s because the measures that are most effective in raising a population’s life expectancy don’t require complex medical techniques and don’t cost that much.

The cheap interventions include vaccines that can be had for cents a shot. They can pretty much wipe out the risk of dying from a range of communicable diseases. Measles is one example: Thanks to more widespread vaccine coverage, the number of kids dying each year from the disease has fallen from 2.6 million in 1980 to 139,000 in 2010. Add a few more simple things—such as sugar-salt solutions to treat diarrhea, antibiotics to fight a range of infections, and better health practices such as washing with soap—and you massively reduce mortality rates, especially among young people.  That’s how Vietnam can spend 63¢ a day per person on health care and get a life expectancy of 75 years—only marginally behind the U.S. expectancy of 79 years.

At the same time, as people get richer, they spend more money on health care but also more money on a range of things that make them sick—such things as fats, cigarettes, sugar, and alcohol. About a third of the world’s adult population now smokes, and cigarettes kill five million people a year. Over the past 30 years, global obesity rates have approximately doubled, and obesity takes away 36 million years of healthy life pdf) from the world’s population every year.

That’s why health can sometimes improve when people have less money to spend. Cuba’s economy nosedived in the 1990s after the Soviet Union’s support ended. A recent study in the British Medical Journal reports that between 1980 and 1997, the average Cuban lost more than 5 kg in weight, obesity rates plummeted, and cigarette consumption per person fell by half. Deaths due to diabetes also halved between 1996 and 2002, and deaths from coronary heart disease fell more than a third. As Cuba’s economy recovered, deaths due to diabetes returned to precrisis levels.

Back in the U.S., obesity rates have declined slightly since 2009—falling from 26.5 percent of the population to 26.2 percent. Smoking rates also fell.  Perhaps part of that is a very small silver lining to the recession. Overall, improving diet and exercise habits, combined with weaning a fifth of the population off nicotine, would do more to improve health than throwing yet more money at a dysfunctional health-care system.

With lower violent crime and safer driving as well, the U.S. might even surpass Spanish levels of life expectancy, for a fraction of what Americans spend on health care today. Doctors and hospitals can do some things to ameliorate the results of our addictions to fat, sugar, nicotine, guns and automobiles –but it would be far better for America’s health to fix the addictions themselves.

It’s shocking that, in one of the richest countries in the world, millions are still denied access to health care—and especially preventative services—because they can’t afford coverage. And the pain and disruption associated with paying medical bills is immense. The U.S.’s move toward universal health coverage is a step in the right direction. But the U.S. also needs to get more serious about keeping people out of doctors’ offices and hospitals in the first place.  That’s the most effective –and by far the cheapest— path to longer, healthier lives.

Kenny is a senior fellow at the Center for Global Development and author of The Upside of Down: Why the Rise of the Rest is Great for the West.

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