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Last weekend, my best friend, an aid worker in Sierra Leone, was in a motorcycle crash. Injuries were serious but not life threatening. The worst of it were three breaks in his leg: Two clean, one less so. After a couple days in a Sierra Leone emergency room, his evacuation insurance kicked in and he was flown to a small town in Germany (no one quite knows why) to receive treatment. My friend does not speak German. He does not know anyone in Germany. He wants to come home and receive his care in the states. He wants a doctor he can communicate with and nurses who can understand his requests and friends who can speak to him and calls that aren't subject to international fees. But his insurance is refusing the request. Medical treatment, they're arguing, is simply too expensive in America.As a matter of economics, they're not wrong. In their seminal paper, "It's the Prices, Stupid," Uwe Reinhardt and Gerard Anderson marshal an impressive array of evidence to prove that the cost problem afflicting American health care is a per unit problem: It's not that we use more care, or use more technologically advanced care, but that we pay much more money for any given unit of care. They write:
A study by the McKinsey Global Institute followed that more in-depth approach. The research team, which was advised by a number of prominent health economists, based its analysis on four tracer diseases: diabetes, cholelithiasis (gall stones), breast cancer, and lung cancer. Using PPP-adjusted U.S. dollars as the common yardstick, the McKinsey researchers found that in the study year of 1990 Americans spent about $1,000 (66 percent) more per capita on health care than Germans did. The researchers estimated that Americans paid 40 percent more per capita than Germans did but received 15 percent fewer real health care resources. A similar comparison revealed that the U.S. system used about 30 percent more inputs per capita than was used in the British system and spent about 75 percent more per capita on higher prices.My friend's insurers are not lying to him. They are not making a capricious decision. They simply have no wish to pay American prices when care can be obtained at German rates. And so my friend and his family must now focus their days and nights worrying over what to do, and how much to spend. As for the rest of us in America, we pay these prices anyway, and never realize how terribly we're being ripped off.
