Health Care

I recently read William W. Lewis's The Power of Productivity: Wealth, Poverty, and the Threat to Global Stability. A fascinating book by a long-time McKinsey consultant and the founder of the McKinsey Global Institute, who has also served in the World Bank and the Department of Energy. This part interested me, because it so contradicts the received wisdom:

The crudest measure of health care performance suggests the United States is not getting its money's worth. Average life expectancy in the United States is below that of many advanced countries, most notably Japan. However, life expectancy depends not only on the interventions of the health care system but also on the shape of the population it has to work on. Lifestyles in Japan are healthier than in the United States. The proper way to measure the performance of health care is to measure the difference it makes in the quality of life of people who come for help. We simply do not know how to do this. No government agency, university, or hospital systematically measures the results of health care. Thus, we have no nationwide accounting for the products and services delivered by health care. We can't tell by how much those products and services grow each year nor can we tell how the total compares with other countries. All we know is how much we spend. What we need to know is whether the higher level of spending means the United States is much less productive in health care than other countries.

In an attempt to test the limits of knowledge here, we studied the treatment of four diseases -- diabetes, cholelithiasis (gallstones), breast cancer, and lung cancer -- in three countries: Germany, the United Kingdom, and the United States. These three countries were the only countries for which comparable data existed for these diseases, either nationwide or for large regions. Even then we could not get data for diabetes in Germany. For the cancer cases we used an output measure of life expectancy after treatment. For diabetes and cholelithiasis, which have low mortality rates, we used a complex index developed by others to measure the quality of life after treatment. None of these measures of the products and services of health care are very good. However, they are a lot better than nothing, and good enough to tell us whether the United States is much less productive in these diseases than other countries. For the resources used in health care, we counted the "real" operational resources devoted to disease treatment. We counted such things as doctor and nurse hours, pharmaceutical consumption, hospital capital costs, etc.

The results were counterintuitive. The United States is more productive in all these diseases except for diabetes in the United Kingdom. The reasons for this result can be traced directly to the huge differences in the way the health care sector is organized and governed across these three countries. The UK health care system is almost entirely government owned and run. The government has maintained very tight budget control of the system, and doctors are mostly government employees on the salaries. The result has been that the United Kingdom has not invested as quickly in technologies that have dramatically improved the diagnostic capabilities of medicine and significantly reduced recovery time. For instance, the United Kingdom was slower than the United States in adopting laparoscopic surgery. (Laparoscopic surgery is done with tiny surgical instruments and a tiny flexible scope with a light, all inserted through a small incision to minimize tissue damage.) As a result, the United Kingdom had to keep cholelithiasis patients in the hospital considerably longer than the United States. The United Kingdom did not invest as much in CT scanning of lung cancer patients. * * *

The study goes on to state that administrative costs here are indeed about a third higher, but that the main difference is that the United States "pays its doctors twice as much as Germany and the United Kingdom."