How “easy” is health-care policy?

Despite the legislative failure of the new US health-care plan last week, President Trump announced today  “I know that we’re all going to make a deal on health care. And that’s such an easy one.”

Health care is very important, due to its positive externalities, effects on the quality of life, and, ultimately its effect on real GDP growth rates (through the human capital and productivity impacts). But we have learned that it is very difficult to devise a system that is both efficient and equitable. This is true in all economies, less-developed and more-developed, due to a) the difficulties of estimating correctly the social costs and benefits for each type of treatment (especially when the outcomes are uncertain);  and to b) the decisions as to how it should be funded, whether by the public sector or the private sector. The difficulties become compounded as (i) populations age (as in Japan); and (ii) better, but much more expensive, treatments are discovered for illnesses such as cancer.

Looking around the world, every economy seems to have developed a different system of health care. And there is not a clear correlation between the amount of health expenditure and the health outcomes. Some economies pay half what others do for healthcare and yet get the same or better outcomes. Clearly there are less efficient and more efficient sysetms.

So I looked at this article –

The writer considered many complex factors that are necessary for efficiency and identified certain countries (Israel, Hong Kong, Italy, Denmark, Norway, Singapore, Spain and New Zealand) as being more efficient. But he also praised Japan for devising a method of looking after the elderly so that they are less likely to be hospitalised or need very expensive health care. Starting in the year 2000,  a 1%-2% income tax levy was placed on the over-40s. The extra tax pays for the national aged care service that funds home, community and residential care for all citizens on a means-tested basis. It was a costly decision in the short run, but in the long term seems to be working well.

Certainly, there is a lot more to learn about health-care economics than we have time to study in the IB course. Maybe some of you will opt for such a course in university. It would be very useful if you could advise economists, health-care professionals (doctors and nurses etc), and policy-makers, including presidents and other government leaders.


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