The big problem in US healthcare spending is that we don’t spend enough on social services and as social services can act as an upstream substitute of expensive medical services. This is a core assumption of the social determinants of health argument.
A new article in Health Affairs by Irene Papanicolas and others explodes this argument.
We found that US social spending (at 16.1 percent of gross domestic product [GDP] in 2015) is slightly below the average for Organization for Economic Cooperation and Development (OECD) countries (17.0 percent of GDP) and above that average when education spending is included (US: 19.7 percent of GDP; OECD: 17.7 percent of GDP). We found that countries that spent more on social services tended to spend more on health care. Adjusting for poverty and unemployment rates and the proportion of people older than age sixty-five did not meaningfully change these associations. In addition, when we examined changes over time, we found additional evidence for a positive relationship between social and health spending: Countries with the greatest increases in social spending also had larger increases in health care spending.
The US social spending exclusive of health care is not too unusual. US healthcare spending is the outlier. I’m dropping Exhibit 3 into the post here which plots healthcare expenditure as a function of GDP on the vertical axis and social spending exclusive of healthcare on the horizontal axis.
If we exclude the US from the analysis, social spending and healthcare spending seem to be complements instead of substitutes.
There is value in taking care of social determinants of health as things in and of themselves. If we can find ways to minimize asthma exacerbation or congestive heart failure crisis by improving local air quality or if we can find ways improve health by improving housing situations for people living without stable housing, those are good things in and of themselves. They may be cost effective solutions but they may or may not be cost saving solutions.
I want to see another confirming study, but this is moving my priors.
Amir Khalid
It seems to me that Americam social-spending priorities are skewed — to the detriment of Americans — by ideological considerations, in a way that doesn’t happen (or doesn’t happen nearly as much) in other countries.
scav
I’d need to know a lot more about how the money on health care is spent. A metric fuckton on a few wealthy individuals for end of life care, plus a trickle of expensive cutting edge whizbang procedures for the lucky few is not the equivalent of basic care for everybody. Social spending might very well be positively associated with the latter type and, within that context, bring down costs per individual and improving their health but not necessarily bringing down total costs as more people get the treatment they need.
JGabriel
Did the study take into account the effects of partisanship on soclia spending? In particular, I’m wondering if US social spending is less consistent than in other countries – for instance, does the amount spent on social services swings up and down more than it does in other countries depending on the party in power?
Also, does more social spending in the US get distributed to people who are already well-off than in other countries? In other words, do the broad income distribution inequities in the US extend to how our gov’t distributes social spending?
David Anderson
@JGabriel: Is there a serious racial and distributional weirdness in the US health and social spending distribution? I don’t know. I would not be surprised at all if there is a huge oddness in both aspects of the US spend compared to OECD averages but I don’t have the data.
dnfree
My husband is a lifelong social worker (mental health was his area). He learned this in graduate school and has seen it in action in the 40-plus years since then. Especially during the great recession, states ruthlessly cut social services (even supposedly Democratic states like Illinois), and funding has still not returned even to the previous inadequate levels. It can’t be emphasized enough that study after study shows this and yet action is not taken.
Another Scott
Thanks for this. The paper’s behind a paywall, so I can’t get answers to some of my (seemingly obvious, maybe naive) questions. So I went looking for her other papers.
JAMANetwork, from last year:
(Emphasis added.)
So, doesn’t that mean if the US is spending as much as a fraction of GDP as others, but our unit costs are higher (I assume they are, but they don’t say so here), then we’re getting less than they are for our social spending? Isn’t it an argument that we need to spend more on social spending (given the recognized benefits of social spending, especially on the left-half of the gaussian)?
tl;dr – if our healthcare costs are 2x the OECD average, shouldn’t our social spending be 2x the OECD average to have similar outcomes?
Cheers,
Scott.
jl
@ Dave: thanks for an interesting article. @Another Scott: and @scav: I agree. And note the authors’ statement on the limitations of their analysis:
” We were not able to draw any inferences about the causality of the relationship through this analysis. In particular, we could not determine whether greater social spending was a driver of greater health care spending or whether more spending on health led to greater spending on social programs. Critically, confounding factors could affect this relationship, so national income or even societal or political structures could be associated with both social spending and health care spending. ”
There is a posthumous book out by the late Use Reinhardt that looks very good and probably gives good evidence on the components of health related spending in the US (I’ve ordered the book but haven’t seen it yet). Tim Taylor has a review and some highlights:
Uwe Reinhardt on High US Health Care Costs
conversableeconomist.blogspot.com/2019/08/uwe-reinhardt-had-remarkable-skill-that.html
The authors also state that they could only very partially address cost associated with barriers to care, such as travel expenses. It would be interesting to try to find out how much social spending is ineffectively trying to compensate for the relatively high barriers to standard of care that exists in the US compared to other OECD countries.
White the US has much higher spending on health care, that is mostly due to high prices, many dimensions of the real good and services of health care delivered to the population are lower. While the authors’ of the article find that on average, across OECD countries, social service and health care spending look like complements, I think it is doubtful that for such a complex set of goods and services, that the whole of the spending in the two categories in any particular country can be viewed as complements or substitutes. Would be interesting to look at structure of complements versus substitutes issue in detail for the US.
Anyway, very interesting article.
JDM
@scav:
For one thing, because we run most of our healthcare spending through insurance companies and then don’t regulate them enough (unlike say, France or Switzerland) our administrative costs are somewhere between 20-30% of our spending, compared to under 10% for others. We’re essentially just taking 10-20% of our healthcare spending and lighting it on fire. Costs, over and above that, climb because we don’t regulate enough and it ends up being a “cost plus %” arrangement, and those contain an incentive to raise prices and a disincentive for insurance companies to negotiate lower prices.
jonas
The US spends insanely more than other countries on drugs, doctors, and hospitalization. All these things are price-controlled in one way or another in virtually every other developed country due to the size/negotiating power of the government health care system. If we were to ever implement M4A here, pharmaceutical companies, physicians, and hospital companies would be forced to take HUGE haircuts on their profits/income, which is why I’m not hopeful that that will ever come to fruition. A modified/better supported ACA with a public option or Medicare buy-in I think is much more doable, but we’ll still have higher costs than other countries that were able to build their healthcare systems around single-payer more or less from the ground up (i.e. after WWII).
Capri
Hopefully this study and others like it will put to rest the idea that the reason the US spends so much on health care is that we medicalize social issues. While we probably due this way to much, the fact is that our prices are too high.
Now if we can stop the meme that eating right and exercise will keep you healthy no matter what. It doesn’t
Ohio Mom
This discussion reminds me a little about issues surrounding education. We are told how far behind our kids are — look how much higher achievement scores are in Finland!
Findland’s secret is that only around 3% of their children live in poverty. In the good old USA, it’s almost a quarter of all our children.
If you look at the reading and math scores of our middle-class students, they are comparable to Findland’s. Our averages are pulled down by all the children we allow to be poor.
JGabriel
@David Anderson: Okay. Thanks for the response.