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Fact-Check: Big Government Health Care Spending

By Morgan Housel – Updated Apr 6, 2017 at 10:57PM

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Us versus them.

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:


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:


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. 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.

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