TCS Daily

Poverty and Spending on Health Care

By Arnold Kling - May 5, 2005 12:00 AM

One of the most persistent myths about the U.S. health care system is that poor people lack access. While we allegedly provide luxury health care for the rich, we do much less than other countries for those in poverty. However, the data tell a different story.


The government's Medical Expenditure Panel Survey (MEPS) tabulates health care spending for a sample of over 35,000 Americans. One of the variables included in the survey is household income relative to the poverty line.


When the data for 2002 (the latest survey year available) are extrapolated to the full noninstitutional population, one obtains these results for persons below the poverty line:


Number of Persons: 35.6 million


Total Spending: $106.3 billion


Per Capita Spending: $2,986


Next, look at data on per capita spending on health care in various countries, as compiled by the OECD. In 2002, per capita spending in Canada was $2,931, in France it was $2,736, in Germany it was $2,817, and in the United Kingdom it was $2,160. The United States spends more on the average poor person than those countries spend on the average person.


In fact, the MEPS data understate spending in the United States, in part, as it is limited to the noninstitutional population. Therefore, it excludes nursing home expenditures. When those are added in, the per capita spending in the United States on those in poverty will turn out to be higher.


Still, people who are above the poverty line receive much more medical care in the United States, right? Wrong. In the MEPS data, the per capita spending rate for people above the poverty line is $2,789, essentially the same as the rate for poor people. (Again, the MEPS data excludes spending on nursing homes, research and development, and other categories that show up in countries' national income accounts.)




As with all aggregate health care data, these statistics were not designed to answer the most penetrating questions. Some issues that come to mind are:


1. Do other countries spend much more per capita on their poor than they do on the average person?


2. Do poor people in the United States consume too much of the "wrong" health care resources -- too much acute care and not enough preventive care?


3. Do poor people in other countries require less health care than poor people in America? Are they healthier to begin with?


I suspect that the answer to (1) is "no," but that the answers to (2) and (3) are "yes." People who tend to make bad choices about how to care for themselves and how to spend money also tend to be poor. Taking this propensity to make bad choices as given, the poor need to spend more to achieve a given level of health. I believe that this effect is stronger in the United States than it is in other countries.


I suspect that severe substance abuse plays a big role in poverty, poor health, and mortality. My guess is that if substance abusers were excluded from the international statistics on health outcomes, the standing of the United States would improve considerably. If this is true, it still begs the question of whether our public health policies are inferior to those of other countries in the area of substance abuse.


I think it would be foolish to conclude that the United States does as well or better than other countries in providing health care to the poor. What the data do suggest, however, is that poor people in America do not suffer from a lack of total health care resources.


No Easy Answers


If the United States does not lag in spending on health care for the poor, then this undermines one of the arguments for adopting a more European or Canadian style health care system. Our challenge is not to redirect resources toward the poor but to come up with better approaches for improving public health.


In Medicaid, we already have the sort of state-funded health care system for the poor that other countries provide for everyone. It is difficult to see how expanding that system to the middle class (as Howard Dean, among others, has proposed) will make the poor better off.


I believe that there are genuine problems with our health care system. Studies and anecdotal evidence suggest that the uninsured and the poor receive inferior care. But I do not believe that there are any easy answers. In particular, I fail to see how any fair-minded individual could conclude that we ought to increase government's role in health care finance. If the poor under Medicaid are not as well cared for as the rest of us under private systems, then government-funded health care would seem to be part of the problem, not the solution.



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