A Lesson From Europe on Health By DAVID LEONHARDT Published: October 18,

Hernia Operation – US Shortly before he moved to Greece last year, an American named John Econopouly received the unpleasant news that he needed a hernia operation. He had the surgery done in Northern California, and it didn’t go so well. After spending less than a day in the hospital as an outpatient, Mr. Econopouly went to a friend’s house to sleep off the surgery and found that his wound had reopened. “I woke up in a pool of blood and didn’t know what to do,” he remembered. “Basically, I didn’t feel cared for.” For this, he paid more than $2,000 over and above the thousands of dollars that his insurance policy paid.

Follow-up – Greece A few months later, once he had moved to Greece, he found out that he needed a separate operation for another hernia, giving him a chance, unwanted as it may have been, to do his own little comparative study of American and European medicine. The Greek hospital was much dirtier than the one in California, he said, and he was put in a room with a handful of other patients. The stench was brutal. When Mr. Econopouly, a 41-year-old computer programmer for Wall Street, asked for more privacy and said he would be happy to pay extra, the staff laughed at him. But the care itself was another story. It seemed much more thorough than it had been in the United States. He spent the day before the operation undergoing tests, including one that discovered a heart murmur, and the day after the operation in the hospital being observed. Although he didn’t have Greek health insurance, his final bill was only $700.

Administrative Costs The most obvious difference between their health care systems and ours — that their governments provide universal insurance — certainly plays a big role in the cost differences. Look behind the receptionist at your doctor’s office, and you will very likely see a staff of people filing claims to different insurance companies. The insurance companies, meanwhile, employ a small army charged with figuring out how to avoid covering the unhealthy. The administrative costs of our patchwork bureaucracy eat up about 25 percent of health spending, which is why would-be reformers have long focused on these costs. But they aren’t the main story. Even in Europe’s single- payer systems, administrative costs account for about 15 percent of health spending, once everything is included, according to the Lewin Group, a consulting firm.

Economics – Administrative Costs If demand is price- inelastic, lower administrative costs ↓ the supply curve, and … Reduces expenditures Q $ D S S'

Understanding One good way to understand the problem is to look at the share of health spending that the elderly account for in different countries. In the United States, people 65 and older have Medicare, which has administrative costs roughly as low as those of other countries’ universal plans. Younger Americans, by contrast, have private insurance, with all its inefficiencies. Yet elderly Americans’ share of national health spending is similar to that of the elderly in other countries, as Arnold Kling, an economist, has noted.

More than Administrative Costs So something beside administrative costs is at work here, and it involves a basic cultural difference. Americans seem to be less willing to take no for an answer and more willing to try almost anything, no matter how expensive or how slim the odds, to prolong life. (The United States is also a fatter, more diverse country with wider income disparity, which gives our medical system a harder task.) There are enormous benefits to the American refusal to go gently into that good night. It has made us obsessed with medical advances and turned this country into the world’s research laboratory. If you followed this year’s Nobel Prize announcements, you may have noticed that every scientific prize went to an American. Some of our spending, in short, goes to support medical care in other countries. But much of it is simply wasteful. Expensive procedures — like some Alzheimer’s treatments, some knee surgeries and many body scans — are often no more effective than basic ones, according to research. Yet doctors can keep on getting reimbursed for the expensive ones. “Basically, anything that doesn’t kill patients is paid for by Medicare and insurance companies,” said Jonathan Skinner, a health care researcher at Dartmouth College. [AG: Maybe].

If so … If so, what we’re seeing is ↑ demand!  Higher expenditures! Q $ D S S' D'