Tuesday, June 30, 2009

There's a difference between health and health care

Brad DeLong had this to say about Mankiw and Becker (Lucas and Barro, too), specifically about their thoughts on health care reform:

To me, the thing to note about the economists--the Mankiws, the Lucases, the Beckers, the Barros, and all the rest--who have pledged allegiance to the Republican Party this year is how much they hagve [sic] stopped thinking like economists. When an economist thinks about American health care, he or she begins with what we give up and what we get: we give up $1 trillion dollars in real resources a year relative to other countries, and we get... what?... not much. But this is not how Mankiw or Becker approach it. [...]
Contrary to what DeLong's strongly-worded rant suggests, economists do not think in such simplistic terms. Yes, economists like to compare what we give up to what we get, but good economists compare the additional costs we pay to the additional benefits we get. That's called thinking on the margin, or marginal analysis. And, it is precisely what Becker and Mankiw do in their original posts on health care.

Let's examine the post that started the Krugman-based DeLong rant against Mankiw and Becker. Here's the quote that sums up Mankiw's point beautifully:

There is another, flawed argument floating around that also needs debunking--that Americans pay more for healthcare but don't get anything for it, as measured by, for example, life expectancy. The problem with such international comparisons is that there are a lot of differences among nations beyond their health systems. To make comparisons in health outcomes, you need to control for other variables. Without such controls, the simple correlations have little meaning.

He's right. Life expectancy is a terrible measure of how American health care is doing if we Americans have a strong propensity to destroy our health by eating cheeseburgers. We can be less healthy, but receive better health care. Maybe if it weren't for our superior health care, Americans would die much earlier.

Is there a way to obtain a better comparison than life expectancy? If so, how does the American health care system fare? Here's Becker, as quoted by Mankiw:

[...] the US fares poorly on many life style indicators, such as incidence of overweight and obese men, women, and teenagers. To get around such problems, some analysts compare not life expectancies but survival rates from different diseases. The US health system tends to look pretty good on these comparisons.

Now, that's clever. We Americans might be unhealthy because we make really bad health decisions, but that does not imply that our health care system is worse. As Becker points out, if you compare similar procedures in America and Europe, the US option "looks good." In other words, the health care system does a better job with the same problem. Isn't that the right comparison to make?

Maybe the American system is not much better; it probably isn't. Maybe the additional expenditures are not worth it; they're probably not. Maybe there's a better way to organize health care provision; there probably is. But, a good economist compares the marginal benefit to the marginal cost.

Making this comparison takes work, but it is precisely what Becker and Mankiw are telling us to do. That's what I like to call thinking like an economist. It's unfair to label such careful thinking as politically-biased. Yes, they took their side in these particular posts, but they used sound economic reasoning to reach their conclusion.

Moreover, both Becker and Mankiw make a very specific point: In America, we spend more and get more from our health care. Mind you: Their conclusion is not that "everything is wonderful with American healthcare." You can also debate about how much more we get from our additional expenditures. But, at least, there's a debate to be had. There's also a lesson in their logic: don't use life expectancy comparisons to make the case for health care reform. Maybe some people have thought about this, but it's worth a reminder if others have forgotten.

No comments:

Post a Comment

Please feel free to share your ideas about this post in the open forum. Be mindful that comments in this blog are moderated. Please keep your comments respectful and on point.