Your Money's Worth

February 24, 2011
Posted by Jay Livingston

My grandfather was in the retail business – furniture. When he and my grandmother went shopping – for other things, not furniture – she was sometimes stunned by the prices. “What makes this so expensive?” she would ask. My grandfather, pretending a careful examination of the item, would nod his head thoughtfully and say, “Profit.”

I remembered Grandpa Jack when I saw this graph posted by Aaron Carroll at The Incidental Economist. It shows healthcare expenditures per capita plotted against GDP per capita.

As you would expect, the richer a nation is, the more it spends on healthcare, just as it spends more on food, entertainment, or anything else.

Carroll adds:

Notice two things however. The first is that Norway and Luxembourg (the two countries farthest to the right), fall below the line. This is because – presumably – at some point you can spend more money, but what’s the point? The drugs won’t work better,* the advice is still the same, and the doctors can’t do any more. At some point, spending more is just waste, because the outcomes don’t get any better.

    The second thing to notice is the US. You can’t miss it. It’s the big red dot that’s way at the top. We’ve chosen to ignore what I just said.

It may be “waste,” but that money has to be going somewhere.

* A while ago I posted (here) some charts comparing the US and several other countries on the costs of various aspects of healthcare – standard procedures, office visits, widely-used drugs. I included the line, “Since . . . you get what you pay for, our Lipitor must be four to ten times as good as the Lipitor that Canadians take.” It was my only post ever to get Boinged, and for a day the number of visits here climbed to about 2600, doing my heart much more good than would any prescription meds.

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