Fact-Check: Big Government Health Care Spending

Recently on HBO's Real Time With Bill Maher, CNBC anchor Michelle Caruso-Cabrera and Rolling Stone columnist Matt Taibbi got in a tiff over the differences between health care spending in the U.S. versus Europe.

Taibbi's argument: Most European countries spend much less on health care than the U.S and arguably get a better outcome (higher life expectancy, lower infant mortality, etc.). Caruso-Cabrera's rebuttal: The U.S. spends more in total because of our private market, but European governments spend much more on health care than we do, and it's bankrupting them -- that's why we shouldn't follow their lead.

Here's a short transcript:

Taibbi: Health care as a percentage of per-capita income is much, much lower in those countries.

Caruso-Cabrera: But what about the budget? You keep talking about the per capita income. But when it comes to their budget, they're spending bigger percentages on health care.

Taibbi: I don't think that's true actually. I think we actually spend a much greater percentage ...

Caruso-Cabrera: Of our GDP, yes. Of our federal budget, no.

Actually, yes, the U.S. government spends a greater percentage of the budget on health care than almost any other European nation:

Country

Government Health Spending as % of Total Government Spending (2006)

Switzerland 19.6%
United States 19.1%
Norway 17.9%
Germany 17.6%
France 16.7%
United Kingdom 16.5%
Denmark 15.6%
Italy 14.2%
Sweden 13.4%
Finland 12.1%

Source: World Health Organization, OECD.

And in terms of total health care spending as a percentage of GDP, there's no comparison:

Country

Health Care as % of GDP (2008)

United States 16.0%
France 11.2%
Switzerland 10.7%
Germany 10.5%
Denmark 9.7%
Sweden 9.4%
Italy 9.1%
United Kingdom 8.7%
Norway 8.5%
Finland 8.4%

Source: OECD.

You can take this a step further and look at the dollar amount of government health spending per capita. Even here, the U.S. government spends more than most European nations:

Source: Congressional Research Service.

There's a view that European-style health care is "socialized medicine," compared to our private capital system. In some ways that's true. But any way you look at it, the U.S. government actually spends more on health care than most European nations. The real difference is who gets covered. Government health care in the U.S. is focused on the elderly (Medicare) and poor (Medicaid). In Europe, it's more universal coverage for everyone.

That bears repeating: The U.S. government provides health care for a minority of its population at a greater per-capita cost than most European countries cover their entire population. As Washington Post columnist Ezra Klein once said of that statistic: "This is serious pitchforks-and-torches stuff, if only people really understood it."

And private health insurance, contrary to widespread belief, isn't absent in most European countries. It's just significantly smaller and less profitable than in the United States. In the U.S., UnitedHealth (NYSE: UNH  ) , WellPoint (NYSE: WLP  ) , and Cigna (NYSE: CI  ) are massive organizations that collectively earn billions -- and charge premiums to back it up. In most other nations, private health insurance policies are smaller, bolt-on plans that supplement existing government-run policies. In France, for example, more than 90% of the population holds private health insurance that pays for benefits not provided by the government's basic coverage.

Health care may indeed be bankrupting European governments, but its effect on the U.S. budget is considerably worse. And in the U.S., medical bills are now the leading cause of personal bankruptcies, too.

In the end, though, the most important part of this debate is: Is the quality of the medical care in the U.S. worth the price? I'll leave that part to you. Share your thoughts in the comment section below. Pitchforks and torches welcome.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. UnitedHealth Group and WellPoint are Motley Fool Inside Value picks. UnitedHealth Group is a Motley Fool Stock Advisor recommendation. Motley Fool Options has recommended a diagonal call position on UnitedHealth Group. The Fool owns shares of UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (23) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 14, 2011, at 11:53 AM, AvianFlu wrote:

    To paraphrase Capt. Jack Sparrow:

    "Dead men tell no tales"

  • Report this Comment On March 14, 2011, at 5:24 PM, rleffler wrote:

    It is pretty difficult to compare the two. We have a system that covers the most costly segment of the country - the elderly and the poor. Both of these segments are very highly claims prone because of their age and their lifestyle.

    I would like to see the Govt.get out of the insurance

    business all together. The current system we have is breaking the country mainly because it is out of control and run over by greed and corruption. To big and to unaccountable.

  • Report this Comment On March 14, 2011, at 5:26 PM, TMFHousel wrote:

    "It is pretty difficult to compare the two. We have a system that covers the most costly segment of the country - the elderly and the poor. Both of these segments are very highly claims prone because of their age and their lifestyle."

    European nations cover their elderly and poor as well. They just also happen to cover everyone else.

  • Report this Comment On March 14, 2011, at 5:29 PM, CaptainWidget wrote:

    So the end take on this article is "America's socialized medicine is more expensive than Norway's socialized medicine"?

    How does this help me invest in stocks?

  • Report this Comment On March 14, 2011, at 5:33 PM, TMFHousel wrote:

    ^ This article doesn't have a direct investment takeaway. Sorry if that disappoints you. However, I hoped it'd shine light on one of the largest financial and economic issues of our day -- the cost of health care. How the health care funding debate works itself out will have massive influence on the economy over the next several decades.

  • Report this Comment On March 14, 2011, at 5:58 PM, Borbality wrote:

    This story really illustrates how we just totally suck ass at healthcare

    Pretty obvious that it is our next "crisis," not a current one since no one is willing to experience the political fallout involved with addressing medicare and medicaid.

    only good thing would be if the baby boomers aren't able to retire and just keep working until they die. people in my age bracket won't be having nearly so many children.

    then do all the hospitals go empty? they're all expanding like crazy, wallgreens and CVS on every corner. what happens when I'm old and only had one kid instead of 7?

  • Report this Comment On March 14, 2011, at 6:04 PM, CaptainWidget wrote:

    I wouldn't say we suck at healthcare, I would say we have a government sponsored pricing fixing scheme that's driven up the costs of healthcare in the US as compared to elsewhere in the world.

    Medicare sets relatively arbitrary prices for every procedure imaginable, and disallows doctors from changing or competing against each on those prices.

    Insurance companies charge based on medicare percentages, regardless of how much it actually costs to do the procedure. Then they proceed to deny your claim if the codes for the treatment and the illness don't match up in their database.

    Meanwhile patients and doctors, who deal with each other on a day to day basis, have no way to sit down and say "I'll give you X service for Y dollars". This is why costs are too high. The direct consumer has no knowledge of costs, doesn't shop around, and has no way to negotiate or pressure prices downward. The federal government sets prices, and denies doctors the ability to compete.

    It's a state ran healthcare system....the same as Norway or France. The parallels you draw between the two systems need to start from that point and move on to the differences.

  • Report this Comment On March 14, 2011, at 6:28 PM, Turfscape wrote:

    CaptainWidget wrote: "Meanwhile patients and doctors, who deal with each other on a day to day basis, have no way to sit down and say "I'll give you X service for Y dollars". This is why costs are too high. The direct consumer has no knowledge of costs, doesn't shop around, and has no way to negotiate or pressure prices downward."

    And that's why the British pay less? Because they negotiate directly with doctors?

    Medicine has been bungled in large part due to the complexity of the medical coverage process (both private and public insurance/coverage). The fact is that if I go in to see a doctor because of an allergic reaction to a bee sting, I don't get a bill...I get 7 separate bills from 7 disconnected medical facilities EVEN THOUGH I ONLY WENT TO ONE LOCATION. These 7 bills are argues back and forth between the provider and the insurance companies (yes, plural because I'm required to use both mine AND my spouses). All the while, I keep getting unpaid bill notices in the mail (that I shouldn't be seeing because I provided by health care credit card at the office to cover my deductible) that I have to then coordinate with my insurance carriers so that I don't wind up with a huge hit on my credit score due to delinquent medical bills.

    That system was not put in place by our government. It was put in place by the insurance companies who scammed my employer into signing them as our health plan provider.

  • Report this Comment On March 14, 2011, at 6:38 PM, devoish wrote:
  • Report this Comment On March 14, 2011, at 7:10 PM, CaptainWidget wrote:

    The British pay more because they ration care. When cost of a valuable commodity reduces to nothing, demand increases to infinite. The only rational way to balance the equation is to reduce supply. If the government suddenly decree that gold was free, you'd raise your hand for your fair share, right? When the consumer has no risk/reward analysis, then their consumption is obviously going to increase.

    You're deluding yourself if you think the government doesn't set prices, or you're just very misinformed.

    http://www.cms.gov/HCPCSReleaseCodeSets/ANHCPCS/list.asp

    There's the HCPCS fee schdules for the 10,000 different procedures the government regulates, and exactly what doctors have to charge for each one.

    That is the legacy our medicare system put into place. The government fixing prices, increasing red tape, and banning competition. So......our healthcare is more expensive.

  • Report this Comment On March 14, 2011, at 7:13 PM, TMFHousel wrote:

    "The British pay more because they ration care"

    The British pay less than we do.

  • Report this Comment On March 14, 2011, at 7:18 PM, CaptainWidget wrote:

    Yes, typo. They pass less because they ration care.

  • Report this Comment On March 14, 2011, at 7:48 PM, 42theflush wrote:

    Is the quality of the medical care in the U.S. worth the price?....

    I believe not.

  • Report this Comment On March 14, 2011, at 9:24 PM, TrumanTrout wrote:

    Morgan,

    Thank you for this article based on data rather than baseless opinion. This discussion is very helpful on an important problem. You're showing that the US puts more money into healthcare than other developed countries. So now the next question in my mind...

    I wonder if you can help us understand where all the extra spending goes in America. How much goes to the doctor, the nurse, the hospital / medical administration, the government agency administration, the pharmacist, the pharmaceutical manufacturers, and last and we all know certainly not least the private insurance company? I would like to see analysis of where the money ends up in various countries to better understand why the US is so inefficient.

    Thanks,

    TrumanTrout

  • Report this Comment On March 14, 2011, at 11:55 PM, Turfscape wrote:

    CaptianWidget wrote:"The British pay more [less] because they ration care."

    Well, thankfully no one rations care here in the U.S., denying people the vital health care they need...oh, wait, the insurance companies do.

  • Report this Comment On March 15, 2011, at 10:25 AM, Azfang wrote:

    This might be a nitpick, but does the first chart refer to total government spending, or just federal? I ask, because Ms. Caruso-Cabrera specifies federal budget in her comment.

  • Report this Comment On March 15, 2011, at 10:32 AM, lctycoon wrote:

    Every country in the world, including the United States, "rations care" in some way.

    There are several reasons why healthcare is cheaper in other countries:

    - Doctors get paid less in other countries.

    - There is substantially less litigation surrounding healthcare in other countries.

    - The USA subsidizes prescription drugs for every other country.

    - Other countries focus on evidence based medicine. The USA does not.

    - 1/3 of all healthcare spending in the United States is spent on terminally ill patients who have no chance of recovery. That is not true anywhere else in the world.

  • Report this Comment On March 15, 2011, at 10:35 AM, Turfscape wrote:

    lctycoon wrote: "1/3 of all healthcare spending in the United States is spent on terminally ill patients who have no chance of recovery. That is not true anywhere else in the world."

    Excellent observation. Also a political grenade. In the U.S., one is not allowed to talk about dying with dignity in polite company...just look at the "death panels" hoopla.

  • Report this Comment On March 15, 2011, at 12:25 PM, ChiefNoseeum wrote:

    Here is an example of goverment price fixing where a medicine went from $10-20 per dose to $1500 per dose with the FDA's blessing.

    Guess who gets to pay for this insanity? It will show up in your paycheck next year as an increased employee contribution for health care.

    Instead of encouraging this outrageous behavior, the government should establish a bounty system for this kind of thing.

    http://www.dailymail.co.uk/news/article-1364747/Preemie-outr...

  • Report this Comment On March 15, 2011, at 4:25 PM, tgreese wrote:

    Kudos to CaptainWidget for correctly and concisely fingering the third-party-payer system.

    Give the people the power and incentive to control costs, and the price of health care will come down. IMO, if we must subsidize individual's health care costs, vouchers are the most equitable and efficient approach. Using vouchers, we could guarantee everyone the means to buy catastrophic coverage, and let individuals determine the best insurance value for themselves.

    The market is a powerful and unbiased force for change ... the perils of removing market forces from health care cost equation should be especially clear to the market-savvy audience here at the Fool. Let's use the market to do good!

    Let Mr. Market weigh the merits and alternatives for various treatments. The incentive for individuals is supremely high to make good decisions about their own welfare ... people will make good choices if you give them the chance.

  • Report this Comment On March 18, 2011, at 1:24 PM, drborst wrote:

    Morgan,

    I know this article was focused on the specific exchange from Bill Maher's show, and I appreciate you getting the real data (and I really like to see Azfang "nitpick" answered),

    But I'm really interested in the comment Ictycoon wrote and turfscape picked up about 1/3 of our spending being on the terminally ill. This is something that might need some data. If its true, it puts spending per capita more on par with Switzerland and Norway (incorrectly assuming they spend a lot less on the terminally ill).

    Thanks for the article

  • Report this Comment On March 23, 2011, at 1:06 PM, varney wrote:

    Morgan,

    I may be too late to the party, but the statistics on life expectancy and infant mortality are somewhat misleading. Why, you ask?

    Because we have much higher rates of death due to drug overdose and murder than most European countries. Are these adverse social conditions? Yes. But they shouldn't be used to attack health care outcomes. When murder is stripped from the life expectancy numbers, the US has the highest life expectancy of any country. You can also look at cancer survival rates: for the two most prevalent forms of cancer (breast and prostate), survival rates in the US are significantly better than in Europe.

    As for infant mortality, again, we have a higher rate of teen pregnancy than these other countries, leading to a higher rate of low birth-weight babies (since the mother isn't fully mature). If you look at statistics on survival rate for low birth-weight babies, you will once again find that the US is at the top of the heap.

    The big problem with US healthcare isn't that we aren't socialist enough. It's that we got away from individual responsibility. Most people do not pay for their insurance (the employer-provided health insurance system was a result of government intervention), and we've expanded health insurance in a way that makes no sense (imagine using your auto insurance for an oil change).

  • Report this Comment On July 10, 2012, at 9:58 PM, NYCDOG wrote:

    It hardly needs mentioning that Housel "owns no share" of any health care company mentioned", To do so would mean participation in the the free market system for which Housel holds as large a contempt as his Obamessiah, I'm OUT,,no longer reading anything by this guy, his easily disproveable sources. Last time, the Rolling Stone as a source ("George Bush let the air out of my tires" still a valid reason for tardiness at that laughable slick), this time Bill Maher dialogue

    Motley Fool a putative source of investment discussion turns over this page to a collectivist who hasn't got a clue with no market content??His socialist acolytes with their obsequious cheerleading also never mention The Market..a free choice they have a deadly combination of ignorance of and hatred for. Quick question...any of your ilk in opposition to NYC Bloomberg's food gestapos telling people they're incapable of choosing the size sodas their kids slack their thirst with on a hot summer day? OF COURSE NOT..part of the fabric. Like 30% of the economy that health care represents.."let us decide..WE know best"

    If anyone is still listening..know it from the daily headlines: The much bashed greed for $$ pales to insignificance versus the greed for power to run peoples' lives

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