Sunday, June 21, 2009

Life Expectancy & Health Care Costs

Greg Mankiw recently correctly observed (as did Gary Becker) that it is highly misleading to use life expectancy as a gauge of health care quality. While higher health care quality should ceteris paribus increase life expectancy, life expectancy depends on other factors, such as life style choices. This has caused various leftists (like this one)to criticize Mankiw and Becker.

And America's life expectancy is clearly depressed by the life style choices of its citizens, most notably the fact that Americans on average are fatter than any other people.

There are, as I pointed out in a previous post where I discussed the subject at greater length, several specific examples of how these other factors affect life expectancy. For example, Sweden and Denmark have basically the same health care system, yet Sweden is number 10 in the life expectancy ranking while Denmark is 47th. The reason for this is differences in life styles, with for example alcohol and tobacco consumption being a lot higher in Denmark than in Sweden. Similarly, Singapore and Hong Kong have health care systems that are at least as market based as America's, yet they come in at 4th and 6th place. Incidentally, health care spending (at 4% and 5% of GDP) is far lower than not just in America but also Europe and Canada.

A more rational way of estimating health care quality would then be to see how healthy people are given a certain level of initial medical problems (whether caused by genetics, life style choices or other factors). That way you directly control for other factors affecting outcomes. And in this category, America is number one, with for example cancer survival rates being higher than in Europe or Canada and the World Health Organization ranking America number one in the category of responsiveness to health problems.

It should further be noted that these other factors do not simply lower life expectancy, they also increase health care costs. If a lot of people suffer from cancer or are obese, then some of them will die prematurely and so lower statistical life expectancy. At the same time, both these people and those that survive will often require medical attention and so increase health care costs. So, life style choices and the other factors lowering America's life expectancy are at the same time a partial explanation for the high cost level. For that reason, the attempt made by leftists to use life expectancy in relation to health care costs is even more misleading than Mankiw and Becker argued they were.


Blogger happyjuggler0 said...

Thanks for the WHO link. I will be posting it elsewhere in the future where appropriate.

I saw it was alphabetical, so I immediately went to the USA row. I noticed that the US was number 1 in two categories, namely "responsiveness level" and "Health expenditure per capita in international dollars".

They are the third (numbered) columns from both left and right, so I started eyeballing those two columns for all of the countries, and the correlation seems quite robust at the top, bottom, and middle of spending and responsiveness level! Of course this was just eyeballing it, but the US is 1 and 1, Switzerland is 2 and 2, Denmark is 4 and 8 (respectively), Eritrea is 186 and 187, Finland is 19 and 18, Germany is 5 and 3, Nauru is 42 and 42. Perhaps someone could graph it, it would be an eye opener for many people who claim that spending is uncorrelated to health care outcomes.

Not all countries have such close correlations though, Mongolia is 46 and 145. Or perhaps that is a typo?

9:10 PM  

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