Europeanization? If Only

By Noah Millman • January 8, 2013, 11:50 AM

Rod Dreher, on our spending priorities:

I support the Chuck Hagel nomination for Defense Secretary, in large part because I think we should have a smaller military footprint around the world, and invest that money at home. But I’m not confident that that money will be used prudently at home. Instead, it will go to pay the doctor bills of old people; there won’t be much for anything else. This is not, of course, a good thing, but it is better than borrowing money we don’t have to pay for things we can’t afford, until the whole damn thing collapses. I appreciate David Brooks pointing out the real meaning of the Hagel nomination: the American people prefer Medicare to guns.

The title of his post is “the Europeanization of America,” suggesting that we are going the way of Europe in preferring health-care spending to defense spending.

Except:

That’s OECD data from 2009 for health care (from Wikipedia) and Stockholm International Peace Research estimates for 2012 for defense (also from Wikipedia).

Compared to my group of eight developed Western European nations, we spend about 3 times as much on defense, measured as percent of GDP (which is probably the right measure). And yes, that’s still a much smaller number than either we or they spend on health care. But we also spend 60% more than these Western European nations do on health care – and, because we’re talking about much bigger base numbers, our “excess” spending on health care (the difference, as a percentage of GDP, between our spending and the average spending across my comparison group) is twice our “excess” spending on defense.

Between defense and health care, our “excess” spending over these European comparison countries is almost 10% of GDP. That’s an enormous amount of money.

I’m not sure what my comparison nations are spending 10% of their GDP on that we aren’t. Education isn’t it; we spend about the same as a bunch of comparable European countries. Ditto for total spending on R&D. Interestingly, we spend a lot less than the EU average on agricultural producer supports, at least as a percentage of gross receipts. Perhaps that’s the difference: we subsidize health-care providers and weapons-manufacturers, they subsidize cheese- and sausage-makers.

Getting down to European levels of health-care spending is a very tall order. Shrinking is always harder than growing more slowly. In health care, it means either finding large opportunities to increase productivity, and therefore reduce employment, in health care (perhaps through the application of information technology, though that seems to be a promise that rarely if ever gets delivered), and/or a grinding restructuring of the whole sector to reduce high-cost services (which, inevitably, will also mean a reduction in some kinds of care), and/or reducing the revenue of the various levels of service providers (doctors, hospitals, insurers). Any and all of these will mean taking on very powerful constituencies. Because we’re starting from a much higher cost base, we shouldn’t assume that adopting European models for our health-care system will make it easy for us to achieve European spending levels.

Regardless, though, if our budgets were to become “Europeanized,” we’d be spending a lot less on health care for old people as well as much less on defense.

Tagged David Brooks, Defense, Europeanization, health care, Reihan Salam, Rod Dreher, spending.

11 Responses to Europeanization? If Only

Noah172 says:

January 8, 2013 at 12:21 pm

I’m not sure what my comparison nations are spending 10% of their GDP on that we aren’t.

I don’t have data in front of me, but what about non-health-care aspects of the welfare state: child care, pensions (Western Europeans tend to retire earlier than Americans), unemployment insurance (higher official unemployment rates), and other such transfer payments. Also, what about alternative energy? For example, all those German and Danish windmills in the North Sea receive heavy public subsidy. For that matter, what about conventional energy? Isn’t western Europe more reliant on imported oil and gas than the US, or am I mistaken? Then there is transportation: does western Europe spend more on its more extensive passenger rail networks than the US spends on its more extensive highway network?

I’d be interested to see data on these areas.
Adam says:

January 8, 2013 at 1:02 pm

The problem I have with the Republican approach to health care in this country is their insistence on throwing out everything rather than making targeted improvements of the existing system. I assume health care roughly follows the Pareto principle where 20% of the participants account for 80% of the costs. It actually may be more accutely weighted at something like 90/10. Empirically, I would argue it is caused by end of life treatment in the elderly, which maybe extends life by six months and costs a fortune on average, and uncoordinated treatment of those with long term conditions, ie, an under-insured or non-insured person with accute asthma that only gets treatment in the emergency room. To me, a conservative approach revolves around making what you have work better in a more cost effective manner.
Andrew says:

January 8, 2013 at 1:20 pm

Because we’re starting from a much higher cost base, we shouldn’t assume that adopting European models for our health-care system will make it easy for us to achieve European spending levels.

Excellent point and then….allow me to become a “devil’s advocate” for a minute. There is no denial of the fact that Pentagon’s budget is bloated, wasteful etc. and it could be reduced not least by the (inevitable, I might add) reformulation of the geopolitical imperatives. But here is the catch:

1. Great nation are different (there is a reason they are called great) in many respect from those middle-of-the-road guys;-) (nothing personal) and one of the major differences is geography.

2. United States is a gigantic country with enormous maritime border (and position) which dictates (even when adjusted) some maritime imperatives among which keeping the Shipping Lines Of Communications becomes an absolute imperative both for the United States and global economy. This is a legitimate national interest. This legitimate interest will always require a major naval force. Navies are enormously expensive (here we also refer to the “cost base”), the Navy United States needs, even when viewed within the framework of non-interventionism, will still be hyper-expensive.

3. And then, of course, comes Pacific Ocean and whatever those pesky guys around South China Sea will do. Here, the allied bonds will play its role. The question about the future war around Spratleys (as an example) is not IF, it is WHEN. Does United States have any interest in that?? Well, that’s debatable but I would be inclined to say–it does.

What will be (is) the cost of this Navy alone?? Even if we theoretically reformat it in terms of assets and operationally (yeah, right–good luck trying to do that;-) –it still is going to be enormous. How enormous?? Well… In general–geography is a bit..h, even when one factors in Mackinder’s dictum that, in the end, it is all up to us, humans, not geography.
cka2nd says:

January 8, 2013 at 3:52 pm

In my inexpert opinion, if we were to “Europeanize” our health care system – which could still include a private insurance sector, as in Germany – we’d have a much smaller health care bureaucracy, especially a vastly smaller health insurance bureaucracy. I heard once that where a large Canadian hospital might have a three-person billing department, a comparable U.S. one would have 100 or more folks working on billing. I wouldn’t mind finding a more productive use for all of those people, and all of the nurses and doctors currently engaged in finding ways to deny care would be much more useful actually providing care.
Josh McGee says:

January 8, 2013 at 5:00 pm

Hmm. Interesting.

Another way to consider it is that we spend 3-4 times as much on healthcare as we do on the military. Most of the others are at a multiple of 5-10 times as much on healthcare as the military. (If I’m reading the chart properly.) From that view, such a preference does seem to be revealed.

Also, it’s not considering the cover/protection that our military in some ways provides to many of the people in Europe. It’s not obvious right now that an ally exists who will provide us that luxury, and if we decline significantly militarily you may see some of those nations choose to boost their military spending at least a little, to make up the difference (or some of it).

P.S.
Please don’t interpret that to mean I believe no cuts should be made.
argh says:

January 8, 2013 at 7:13 pm

We have a less healthy population than the European countries America is compared to. Comparing white to white (German-American to German, etc), we have the same outcomes and LE, although it’s hard to break out the spending that way. However, a lot of spending goes towards trauma care due to levels of violence Europe doesn’t have to deal with.

Also, Americans have overall low co-pays but receive Cadillac services. This is not the case in European nations, who tend to pay more out of pocket than 0, quite a bit more, often more than Americans pay.

For example, they don’t do ultrasounds during pregnancy for most pregnant women– they do *one* ultrasound. Even their high-risk women do not receive weekly or monthly ultrasounds, as is quite typical in American OB practices. Those aren’t cheap, and most people don’t even think of that as relevant to costs, but it is the sort of extra spending America does that doesn’t shift outcome but does increase per capita spending averages.
libertarian jerry says:

January 8, 2013 at 9:55 pm

At the end of the Second World War much of Europe lay in ruins and or was bankrupt. On the other hand America was virtually unscathed. American aid plus a period of relative peace allowed Europe to rebuild. From the late 1940s onward much of western Europe was under the umbrella of the American Military,especially America’s Nuclear Deterrent. Up until the fall of the Berlin Wall and the collapse of the Soviet Union American Taxpayers subsidized the defense of western Europe against a possible Soviet takeover. In fact,America still does contribute to European defense even today. We still have thousands of military personnel still stationed there at great cost to the American Taxpayer. Because of the relative low cost to Europeans for their defense they could afford to have large expenditures for their Welfare States including Healthcare. If,over the last 30 years or so, western Europe had to go it alone in defending its borders against possible attack their balance sheets might have had a different look. They would be forced to take more resources out of their economies to support Defense as opposed to benefits. In essence, the American Taxpayer has subsidized,albeit in an indirect way,the European Welfare State.
Anthony says:

January 8, 2013 at 11:48 pm

In addition to government spending being lower on food in the U.S., consumer spending is also lower. The “Expenditures on food and alcoholic beverages that were consumed at home by selected countries” data* is not a precise comparison since it’s a) only “at home” and b) as a share of household final consumption expenditures (not GDP), but it still gives a general idea.
*http://www.ers.usda.gov/data-products/food-expenditures.aspx
Mightypeon says:

January 9, 2013 at 12:21 am

I should add certain things from a European perespective:

There are some PBS series on healthcare around the world, which I can heavily recommend.

Healthcare in the USA is grossly overregulated. I think thats your puritan streak. There is an optimum for regulation, and you are farther away from it then we are. Counterproductive things like forbidding customers to unionize (which, to an extent is what sickness funds in Germany are doing), or forbidding in many cases cooperation over state lines, are just dumb. And yes, the US are checking every single medicare/medicaid record, and the medicare/medicaid recording laws are out of friggin Kafka.
Things are a lot of more streamlined in Germany, meaning that our Doctors spend a lot less time on administrative stuff and a lot more time with patients, which is also more fun for doctors.
Between Germany and the USA, its a bit the Engineer versus lawyer divide I think.

It is also incredibly dumb to stop having health care when you get unemployed. Who possibly thought that this could ever be a good idea?

We are also, in the form of roughly tuition fees averaging around 250 Euro per semester, a rate completely unheard of in the USA, subsidize medicine (and other) education. I dont know where your education money goes to, but apperantly you manage to have a very meh education sector. Consider what kind of money you are playing with, the bang for the buck of the US education system is not very nice, one should also add that being a teacher in Switzerland, France, Germany or especially the Skandinavian countries is a lot nicer than being on in the USA.
You education system is also overregulated if you take into account how much time your students and teachers spend on administrative things compared to what Europeans spend on administrative things.

There is also the fact that denying normal health care, and making normal health care very costly, to poor people just makes things more expensive in the end. Nearly everyone (there are some cracks in the System, people can fall out of it), gets medical aid when he thinks he needs it in Germany. This means that stuff is treated early, which is a lot cheaper than doing so later. That individual health care costs are socialised also means that German does not have a word for medical bankrupcy. This also means that health fluctuations dont kill as many small buisnesses in the EU as they do in the USA.

Nevertheless, there still exist idiots that want to change the various European systems to be more US like (usually in the form of Liberal or center right parties). We also have our own issues on other things, but it isnt even close to the amount of crap you accumulated.
Sir says:

January 9, 2013 at 2:58 pm

Do the stats for U.S. Healthcare costs cover non-required medical services such as plastic surgery, lasik, lipo suction, etc.? I’d also be intersted to see a break down on the quantity and cost of non-life threatening conditions, but medically justificable, surgeries on knees, hips, and spines vs. what is spent in Europe. Further, I suspect medical costs skew toward not just the eldery, but toward the poor who are on medicaid, have no copays, and think nothing of going to ER or using ambulances for the most mundane of ailments………which also brings up the inflationary/cost shifting effects of having 15-20 million illegal aliens (the 12 million figure is WAY TOO low) in the country who have no health insurance, get treated, and force medical care providers to shift those unreimbursed costs to the insured.
Mightypeon says:

January 10, 2013 at 1:57 pm

Concerning plastic surgery, the US market is at about 17 billion, the EU market is about 2.5 billion. Which is a fairly significant difference.
One should not that no insurance i know of covers plastic surgery in the EU, unless it is in response to burns/accidents etc.
Nor does medicaid or medicare pay for voluntary plastic surgery.

The uninsured thing is a red herring though. Due to the solely for profit system in the USA, some people are simply “not insurable”. This does not exist in Germany. As a society, we do not wish to leave our chronically sick behind.
Also, US health care providers charge up to 9 times as much for a procedure performed on a “uninsured person” compared to one performed on someone with an insurance.

I also contest that people like usual ER waiting times if you come in with “trivial” stuff, if you look at statistics for avoidable deaths, the US looses thousands of excess deaths per year because people dont go see a doctor when they should have done so. The monetary damage caused by loosing this people will without a doubt be greater then the “monetary damage” caused by uninsured people in ER rooms.

http://www.commonwealthfund.org/Publications/In-the-Literature/2012/Aug/Variations-Amenable-Mortality.aspx