23 April 2013

The scale of America's public health woes

A letter to the Economist, published 4 April 2013:

Sir - Your special report on America’s competitiveness (March 16th) ably addressed the country’s immense strengths but overlooked the elephant in the room: the health-care system.  This accounts for 18% of GDP, which is eight percentage points above the OECD average.  Yet our system delivers worse outcomes than nearly all advanced countries, notably much lower average life expectancy and higher child and maternal mortality.

If the cost of health care could be reduced to European levels, and the resources redeployed proportionately to the production of domestic and traded goods, the current-account deficit would vanish, and American living standards would improve by about 5%.  Dedicating less than a quarter of these gains to social programmes and tax benefits for the disadvantaged would wipe out the country’s poverty rate, which afflicts 15% of the population.

Before you know it, China might be complaining about the undervalued dollar.  Now, that’s competitiveness.

Uri Dadush
Director of international economics
Carnegie Endowment for International Peace
Washington DC

[Comment: World Bank statistics show that in 2011 the US has the highest per capita percentage rate of spending on health care of any developed nation - 17.9 percent of GDP. The next highest rates are seen in the Netherlands (12.0%) and France (11.6%). Yet the US's performance in public health is comparatively poor, as discussed by Dadush's letter. New Zealand's health spending rate is fairly static at around 10.1%.]  
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