1, I can fit the US on a linear trend amongst high income countries.
2, there’s no necessary reason why increasing health share with rising real income is unsustainable. We can and have increased share spent on health while increasing real expenditures across the board.
3. I touch on some reasons why this may curve up and then eventually flatten out.
4. No, not everything fits on log-log slopes and us is very close to the trend.
2. Asymptotic growth towards 100% certainly sounds unsustainable.
3. You mention Baumol’s cost disease and the proportion of income spent on services, which is not so bad.
4. Log-log overfitting is a well-known phenomenon and a low deviation (particularly at the edge of the graph) doesn’t make it go away.
5. This claim, tucked between historical spending and nurse salaries, underpins much of the thesis, but is curiously unsubstantiated:
>Nor do we tend to find results consistent with this in wages, profits, and other proxies for (or presumed causes of) such issues in these sectors. On the contrary, the reliable statistics for healthcare (at least) shows prices have fallen relative to average nominal income and that most of the increase is therefore explained by rising real consumption (quantities per capita).
Healthcare prices are kind of the whole point here. The lower third of this country can’t afford essential care. Not only that, but we’ve seen the prices, and they’re ridiculous.
So if you have data about healthcare prices not being out of order, that seems a lot more relevant— and less cherry-picked — than the history of household spending on food consumption.
> 2. Asymptotic growth towards 100% certainly sounds unsustainable.
"Sounds" isn't an argument and I'm explicitly arguing the slope is likely to flatten, eventually. The point the income elasticity of health expenditure can be (is) well north of one and we can (and do) consume more of everything else at the same time.
That isn't a thing. You can argue this specification minimizes the residuals at the high end if you want, but it's very likely to the correct modeling decision, it's bog standard in economics, and the US residual ~= 0 (certainly not notably high). It's also pretty obvious health expenditures are increasing in % terms and that failing to log-transform results in particularly poor model performance with constant slope out of sample.
> The lower third of this country can’t afford essential care.
The lower third of the country consumes approximately the same amount of care as the rich, as in other high-income countries, and the socioeconomic gaps in other countries are likely comparable to even larger (depending on how measured).
To the extent there are real and ultimately consequential issues with affordability for some small segment of our population, these aren't likely to be explained by aggregate costs or prices so much as by narrow details that we can tweak, i.e., without requiring massive change, should the political desire exist to do so.
> seems a lot more relevant— and less cherry-picked — than the history of household spending on food consumption.
Pardon me, but I was engaging with someone that was arguing this expenditure growth implied starvation and you're making very similar (wrong) arguments. Whether you appreciate it or not, the role of general increases in productivity, the source of real income growth in the long run, and differences in the rate of productivity growth in different sectors, which we are clearly reflected in prices, is very much on point. Food production is simply a way to make this concrete for people that struggle with abstractions like price indexes and relative prices.
So I think it's interesting here that you make no mention of the explanation for HCE increases provided in the "consensus view" link.
>In health care research, the impact of medical technology on health care cost increases has always been a great unknown. Yet 81 percent of the leading health economists agreed with the statement, “The primary reason for the increase in the health sector’s share of GDP over the past 30 years is technological change in medicine”.1Growing attention to the role of technological change in driving growth in health spending, and to the costs and benefits associated with new medical innovation reflects an acknowledgement of the long-term dilemma posed by historically unsustainable rates of growth in medical costs, combined with an increasing consensus that technological advance is a major factor in driving this growth. The current acceleration in health spending growth - following the quiescent period accompanying the spread of managed care - brings troubling implications for the long-term viability of our current system of financing and provision of health services. Understanding the magnitude of technology’s historical contribution to growth in costs is vital to the analysis of the future path of medical spending. Of course, in most areas of the economy a rapid pace of technological advance is regarded as a good thing. That this is not the case for medical care reflects a second point of consensus. Throughout much of history, imperfections in medical care markets have failed to provide incentives for the cost-effective provision of medical services, encouraging the development and diffusion of innovations beyond the point that would prevail under competitive market conditions. Low out-of-pocket costs for medical care due to insurance coverage, combined with patients’ lack of full information on the services they consume encourage the provision of medical care to a point where the marginal benefit of treatment to the patient is small relative to its marginal cost.
You can hand-wave this as "increased consumption", if you want, but it is:
- recognized as an anomaly
- considered a point of concern
- likely to lead to cost reductions if fixed
In other words, this is precisely the sort of phenomenon you are arguing does not exist in US healthcare!
> Yet 81 percent of the leading health economists agreed with the statement, “The primary reason for the increase in the health sector’s share of GDP over the past 30 years is technological change in medicine"
I've highlighted the role of technological change on my blog before, but technological change is a major proximate cause. The root cause is income growth. Countries are chasing these technological advancements in direct proportion to their income and the degree to which they can afford them (as prices fall, countries with lower real incomes are more able to afford technologies the US and other rich countries had long before, but the frontier has long since moved on....). If you throw year fixed-effects or a time trend into analysis the coefficient on time (a proxy for tech chg) is very modest and the income effects are virtually identical.
2, there’s no necessary reason why increasing health share with rising real income is unsustainable. We can and have increased share spent on health while increasing real expenditures across the board.
3. I touch on some reasons why this may curve up and then eventually flatten out.
4. No, not everything fits on log-log slopes and us is very close to the trend.
https://randomcriticalanalysis.com/2019/12/03/no-means-no-th...