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wundayatta's avatar

Is a dollar spent on health care as productive as a dollar spent on, say, home building?

Asked by wundayatta (58377 points ) January 19th, 2011

I’m wondering if there is a difference in productivity between the different sectors of the economy. Suppose we could make health services so much more efficient that we could cut health spending by 25% and give better service.

How different would that be than if we could cut manufacturing costs by 25% and provide better products more cheaply?

Obviously, if you get more efficient in health care, hospitals will close and people will lose jobs. Is that good or bad? Do we need make work for doctors programs? Or, if smart people start working in other sectors of the economy, will productivity be enhanced even more and we’ll all be better off?

If you don’t get what I’m asking, please ask more questions. I’ll try to explain it more.

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6 Answers

JLeslie's avatar

I don’t think there would be a sudden 25% efficiency improvement, what I mean is so sudden that people who work in healthcare would not be able to find new positions within the system. Let’s say over 3–5 years we became 25% more efficient, our health needs in America only continue to increase. Never enough nurses, many cities recruit from out of our country. Administrative work, even at 25% improvement, there will still be a need for administrative workers, and if healthcare grows at the same as the US population, that is a lot. Plus, administrative people can work in many other industries. I am not worried for one second about health care employees if we get better and more efficient in the health care industry.

What I wrote does not answer your question. I have a question before I directly answer. When you say cut manufacturing costs, do you mean cutting the wages paid to labor? Needing fewer people to make a product? Or, cutting other expenses or tariffs?

Edit: did you possibly mean we might be able to treat disease more efficiently? Less about the system, and more about medical advances?

wundayatta's avatar

@JLeslie I just read an article in the New Yorker about ways of targeting the sickest of the sick (mostly on Medicaid, but it could happen anywhere), and different models for providing them services. This model allowed folks to cut health expenditures for these sickest of the sick by 56%, while making them much healthier.

If people are much healthier, there’s less for doctors to do. In fact, some “patient poaching” behavior on the part of some doctors was seen as they lost their cash cow sick patients and wanted them back. Apparently, the techniques they are using were installed in Denmark twenty years ago. Back then, there were more than 150 hospitals for 5 million people. Now there are 71 and in a few years they expect there will be only 40. And all with no loss in health for the people.

It’s about the system, not medical advances. It’s about paying doctors to work with patients over e-mail and in off hours. They use nurse-managers for complex care. They hire health “coaches” to work with people in their homes to encourage them to eat healthy, do exercise, quit smoking, and other health promotion activities. They took one 500 lb man who was in the hospital half the year for three years. They gave him a social worker to help with many of his life problems and other supports, and were able to help him lose 220 lbs, and he has fewer hospital visits for shorter periods of time.

As for manufacturing costs, I really don’t care how you do it. The point is that you are making more using less. What happens to the productive resources that are freed? Or what happens to the “multiplier effect.” I.e., when you invest in something, those dollars are spend several times over in the community. Spending with a higher multiplier effect is more valuable than spending with less of an effect. Military spending has the lowest multiplier effect, fwiw. A dollar spent on just about anything has more effect on the economy than a dollar spent on a tank.

My question is about whether health care spending is more like military spending or more like, say, education spending or road building spending in terms of it’s ability to goose the economy.

mattbrowne's avatar

The long-term benefits of good health care for everyone are very hard to measure. An important factor are free preventive measures being part of the health care plan. This can significantly reduce the number of sick days people have to take for example.

wundayatta's avatar

@mattbrowne And what is the consequence of reducing sick days? Obviously companies would get more product created from their employees. Similarly, the demand for health services would be reduced. What is the overall consequence of those kinds of changes?

ETpro's avatar

If we could make healthcare spending significantly more efficient, it would give an enormous boost to the US economy. The US spends more of our Gross Domestic Product on healthcare than any other nation. Healthcare spending is currently 17% of the US GDP. France has the world’s best healthcare system and spends about 11% of their GDP to achieve it—covering 100% of their people whereas we leave 50 million uninsured and another 46 million under-insured.

In other words, the French with the #1 system in healthcare outcomes spend 41% less as a portion of their GDP on healthcare, yet they cover 100% of their people where we leave nearly ⅓rd of ours completely uncovered or without adequate coverage. That is how broken our pre-reform system—the one House Republicans just voted to go back to—is. It works great for all those who are raking in 17% of the entire GDP, but not so great for the rest of us who pay for it yet don’t get much for our money.

If you improve healthcare while driving down cost, you keep people healthy and alive longer, so they produce more. I would guess that beats the heck out of the long term productivity of a house.

mattbrowne's avatar

@wundayatta – Productivity. Commitment. Creativity. Innovation. And it’s not just about sick days. People with poor health who show up at the office are less productive than people with good health. Plus people who worry more are less productive as well. The feeling of financial security even in the case of medical problems is a good thing. Feeling threatened all the time is a huge burden for people without health insurance. This is why we got this in Europe.

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