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January 16, 2012

Health Care Inequality

These days, everyone's discussing income inequality: the gap between high income and low income people. The debate is full of shocking fact bytes like, "1% of Americans control 25% of the wealth", as though there were some sort of common "wealth pool" and those dirty, rotten 1 percenters were hogging more than their fair share at the expense of the rest of us.

Another topic much discussed these days is health care spending: of particular interest are the assertions that America spends more on health care than other nations, or that we need to "reign in" spending (bring it into line with what other countries spend?), though I've never been sure what "what other countries spend" has to do with "what we ought to spend". Their priorities may not be ours, and vice versa.

Odd, then, that we rarely hear the rhetoric of equality applied to the health care spending debate:

When it comes to America's spiraling health care costs, the country's problems begin with the 5%. In 2008 and 2009, 5% of Americans were responsible for nearly half of the country's medical spending.

Of course, health care has its own 1% crisis. In 2009, the top 1% of patients accounted for 21.8% of expenditures.

The figures are from a new study by the Department of Health and Human Services, which examined how different U.S. demographics contributed to medical costs. It looked at the $1.26 trillion spent by civilian, non-institutionalized Americans each year on health care.

The top 5% of spenders paid an annual average of $35,829 in doctors' bills. By comparison, the bottom half paid an average $232 and made up about 3% of total costs.

Aside from the fact that such a tiny fraction of the country was responsible for so much of our expenses, it also found that high spenders often repeated from year to year. Those chronically ill patients skewed white and old and were twice as likely to be on public health care as the general population.

Isn't it odd that when it comes to the equitable distribution of income (which last time I checked is the fruit of productive labor engaged in by individuals) such disparities constitute a grave social injustice that must be remedied?

But when the discussion turns to health care benefits, which are increasingly paid through public tax revenues rather than private savings, all of a sudden no one seems particularly upset about inequality?

"1% of Americans control 25% of the wealth"? Big problem.

"...the top 1% of patients accounted for 21.8% of expenditures"? No problem.

Apparently, unequal distribution of resources (per se) isn't really unfair. Discuss amongst your ownselves.

*****************************

Update: In the comments section, spd points makes a critical observation:

Was anyone else as stunned as I to learn that people in poor health, the elderly, women (who make up nearly two-thirds of those over 65) consumed the lion's [share] of health dollars spent?

To which I would respond,

Is anyone else as stunned as I to learn that 85-95% of folks in the top income quintile are married couples?

One frequently overlooked dimension of the gap between the "rich" and the "poor" is how much it is affected by marital status. As Chart 10 shows, only about 30 percent of all persons in Census's bottom quintile live in married couple families; the rest either live in single-parent families or reside alone as single individuals. In the top quintile, the situation is reversed: Some 90 percent of persons live in married couple families. In this case, equalizing the numbers of persons within the quintiles makes little difference; even after each quintile is adjusted to contain the same number of persons, 85 percent of persons in the top quintile continue to live in married couple families compared with one-third in the bottom.

This observation lies at the root of the inequality debate. In the case of income inequality, the argument has gone roughly like this:

1. Income inequality has increased over time.
2. This inequality is "unfair" (i.e., the system is rigged and must be changed).

Guess what else has changed over time? The marriage rate. Who gets (and stays) married these days? Increasingly, the upper classes. So what's the [government] solution for that?

Here's another thing that has changed over time: the proportion of elderly/retired folks in the population, relative to wage earners and payers of income and social security taxes.

If you buy into the [simplistic] argument that inequality itself constitutes hoarding or social injustice without stopping to consider possible reasons for that inequality, you're going to come to a faulty conclusion as to how it happened and what - if anything - needs to be done about it.

Posted by Cassandra at January 16, 2012 09:28 AM

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Comments

...examined how different U.S. demographics contributed to medical costs.

Hmm.... Nothing cynically conflational in The Atlantic. Spending equals Costs, is it? While the study itself doesn't write this formula, I'd like to see Weissman's "logic" in this.

Certainly, spending does impact cost--strongly so in an inelastic market--so first, I'd like to see Weissman's breakout of how much spending is impacting cost in this market. Further, who's doing the spending? One source of spending which the HHS study, by design (and not necessarily nefariously so) elides is all the government spending that's done in this market that contributes to cost. Also, subsidies, including tax breaks/credits, drive up demand for the thing being subsidized regardless of the economic status of the buyer.

Government policies also contribute to costs--by reducing supply. Doctors and hospitals are quitting significant sectors of the health services market, if not quitting that market altogether. Shrinking supply also impacts costs. Where's Weissman's analysis of that aspect?

Etc.

Eric Hines

Posted by: E Hines at January 16, 2012 10:38 AM

I could go either way on this one.

Before you can decide how spending is related to cost, you have to define "cost to whom?".

If I spend $1800 a year on electricity, that's the cost of power to me, but not the cost to provide power to me (for Allegheny Power or my gas company).

I've gotten the impression that it's useful to throw these terms about loosely to disguise the underlying relationships.

Here's where I think progressives (and Romney) have a real point: when we're talking about health care services that - for whatever reason - are paid out of public monies, we have to view HC spending less as an individual decision than as a public cost.

I do believe that conservatives sometimes find it convenient to elide past that fact: we're not dealing with an either/or in which HC spending is *either* privately or publicly funded, but rather one in which catastrophic expenses are increasingly paid for from public funds (the whole safety net thing).

Posted by: Cass at January 16, 2012 11:01 AM

Nonetheless, I like your point. We hear a lot about the 'cost' of HC skyrocketing with little or no acknowledgment of the fact that what we're really talking about are spending decisions made by individuals.

My response the few times I do go to a doctor to the suggested course of treatment is usually a conservative one. For instance, they want to put me on an expensive daily medication and I say, "Let's try just treating the symptoms first". It's a matter of preventive plus palliative care vs. only palliative care (which costs money) supported by me making lifestyle changes.

Posted by: Cass at January 16, 2012 11:08 AM

I actually read the entire thing, but only because I wanted to make sure that this shocking bit of information contained in the summary was, in fact, borne out in the meaty details.
Relative to the overall population, those who remained in the top decile of spenders were more likely to be in fair or poor health, elderly, female, non-Hispanic whites and those with public-only coverage. Those who remained in the bottom half of spenders were more likely to be in excellent health, children and young adults, men, Hispanics, and the uninsured.

Was anyone else as stunned as I to learn that people in poor health, the elderly, women (who make up nearly two-thirds of those over 65) consumed the lion's of health dollars spent? Unbelievable! How about the fact that folks with "public-only" coverage were right up there with Grandma! Who could have possibly seen that coming? I think that the only way that we're going to be able to fix this appalling mess is to promote healthy, youthful, male, uninsured Hispanic lifestyles.
Sorry Grandma.

Posted by: spd rdr at January 16, 2012 11:59 AM

...catastrophic expenses are increasingly paid for from public funds....

And routine ones, also.

But sticking to health care for the nonce, I find little to no reason for government spending in this market at all. Personal responsibility matters. When my wife had her bilateral mastectomy, we were uninsured, by choice, and our income was about 25%-30% above the Federal Poverty Guideline for that year. We paid cash for both the initiating biopsy and for the mastectomy itself. It didn't break us. It didn't even hurt us much financially. We'd taken care of our money (without living like paupers or tightwads--we'd even bought a new pickup in those days--paying cash, again), rather than blowing it on the latest gee-gaw that everyone else was jumping on.

Certainly, the present situation can't be corrected overnight, as even (only?) Ron Paul recognizes. But the opiate supply chain can be taken away from the government, and all this stuff privatized, where it belongs (HSAs, for instance). Certainly, after personal, local community, charity support mechanisms have been exhausted for the truly needy (as opposed to the lazy), there will remain about 14 people in the US who will still need--now Federal--support. But that's a far smaller number than the present nearly half the population that have been--by Progressive policy over the last 80 years--reduced to dependents of government, rather than left as free men and women.

On this "Let's try just treating the symptoms first"., sometimes it's necessary to treat the cause, too. Even if it costs more.
Eric Hines

Posted by: E Hines at January 16, 2012 12:02 PM

spd:

Here's the problem: in a system where the sickest among us spend the most on health care (hardly surprising, as you observe) AND their HC spending is subsidized with public money, I think it's fair to say that once the number of elderly/retired folks outstrips the number of wage earners, we have a basic disconnect between revenue (tax dollars) and expenses (public money spent on health care).

At that point one of two things has to take place:

1. A sober determination of how much of the [exhorbitant] cost of any individual's end of life care should be borne by other citizens, or

2. What amounts to, "From each according to his ability, to each according to his need."

Emotional considerations aside, not a palatable choice.

Posted by: Cass at January 16, 2012 12:33 PM

I guess I'm old fashioned, but I always kind of thought that I was responsible for my own health care costs. I may (or may not) choose to purchase insurance, but I'm still the guy who needs to pay my bills. The whole government health care situation is beginning to sound like something out of "Atlas Shrugged."

Posted by: Pogue at January 16, 2012 12:55 PM

I couldn't agree more, Pogue.

Here's the problem: in most jurisdictions voters have decided for whatever reason that health care insurance is a public good.

I may disagree. You may disagree. But it's a fact. So we can't really treat the status quo as a binary choice between individuals bearing all the cost or government assuming the cost.

The reality is that people who choose not to pay their own costs can get other taxpayers to pay them. Where do we go from there?

Posted by: Cass at January 16, 2012 01:02 PM

Emotional considerations aside, not a palatable choice.
Considering how adept Americans are at disappearing behind emotional rhetoric when it comes to making any decision not guided by a panel of washed-up celebrities, I'd say we're doomed.

Posted by: spd rdr at January 16, 2012 01:06 PM

Considering how adept Americans are at disappearing behind emotional rhetoric when it comes to making any decision not guided by a panel of washed-up celebrities, I'd say we're doomed.

Fortunately, there seems to be no real limit on the number of times I can be kicked down the road :p

Posted by: The Proverbial Can at January 16, 2012 01:09 PM

Is anyone else as stunned as I to learn that 85-95% of folks in the top income quintile are married couples?, usw.

Now you sound like Santorum more than Romney. [g] One solution to that is for the bottom quintile/single parent/loners to get pets. And that's not as facetious as it might sound.

More on the Paul gradualism bit: Where do we go from there? and I'd say we're doomed. No, we're not. We took a major step in Nov 2010. We have an opportunity to take another step next November. And in the election after that, and after that, and.... We've sat on the sidelines bleating about Progressive policies for 80 years; see where that's got us. This isn't going to be a matter of throwing our shoes onto the court for a single game of b-ball, or to mix metaphors, looking for a home run, or even looking for the perfect candidate for President or nobody and we sit at home. This is going to be a generational struggle, and we can't shrink from it, no matter how bleak it seems.

Eric Hines

Posted by: E Hines at January 16, 2012 02:45 PM

"Who gets (and stays) married these days? Increasingly, the upper classes. So what's the [government] solution for that?"

The answer is obvious. We need redistribution of marital status, perhaps federal support in the form of guaranteed loans for lavish weddings.

Posted by: Texan99 at January 17, 2012 09:33 AM

We need redistribution of marital status, perhaps federal support in the form of guaranteed loans for lavish weddings.

Nah. Feminists of the world unite. Swap husbands/boy toys. Marry a poor man for the cause. Especially, the Feds should require that the rich woman of an age marry a poor man. Still gotta redistribute that ill-gotten wealth, after all.

If it's good for Mae West or Cher, it should be good for the rest.

Eric Hines

Posted by: E Hines at January 17, 2012 12:11 PM

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