The healthcare trap

Why do rich countries spend so much on health, when evidence shows it doesn't make much difference to life expectancy?

Richard Smith
guardian.co.uk, Tuesday 10 June 2008 11.00 BST

As countries get richer they spend more and more on healthcare. A congressional report (pdf) recently showed that the US might be spending 50% of its gross domestic product on health by 2082.

Could this happen in Britain? Is it possible or desirable?

Ariel Pablos-Mendez from the Rockefeller Foundation rather stunned the audience at a conference on global health that I've just attended in Geneva by showing a graph that related expenditure on health per head to gross domestic product per head for all countries. The correlation was extraordinarily close. (For those of you who like numbers the R2 was 0.956, a measure where 0 means no correlation and 1 complete correlation.) As Pablos-Mendez said, "Tell me a country's GDP per head and I can tell you almost exactly its health expenditure per head."

Pablos-Mendez saw inevitability in his graph. Attempts to limit health expenditure do not and cannot work. I thought back on a graph I saw years ago in Paris: it showed the straight line of inexorably rising health spend in France, and all the way along the line were arrows indicating failed attempts to limit the spending. Or I think of Tony Blair squirming in that famous television interview and committing on the spot to increase Britain's health spending from 7% of GDP to 9%. And, Pablo-Mendez argued, even if governments succeed in reducing public spending then private spending will increase – because his graph included both public and private spending. (He was taken to task for this conclusion by a savvy member of the audience who pointed out that a graph of private health spending against GDP would show no correlation – because it is the poorest countries (India, Bangladesh) and the richest (US and Switzerland) that have the highest proportions of private health spend.)

Another graph showed that since the second world war GDP has grown far faster than world population, and yet spending on healthcare grows even more rapidly than GDP. This is because of "Baumol's cost disease", which states that in labour-intensive activities like healthcare there is a "productivity lag" because automation goes slowly. As far as I can tell, no health system (as opposed to a health microsystem) has succeeded in increasing productivity right across the system for a sustained period of time.

And – worse and in contrast to most sectors – technological innovation in healthcare tends to increase rather than decrease costs – all those cancer drugs, for example, that are hugely expensive and yet increase life by only weeks in small numbers of patients. The congressional report shows that the big predicted increase in health spending will not be because of increasing numbers of old people but because of increased consumption of expensive technologies.

So it is perhaps possible that we will carry on increasing our spending on health. Indeed, Pablos-Mendez argues that an increase will be inevitable if our GDP continues to grow. The US currently spends 16% of its GDP on health and the UK 9%. We may not be able to avoid moving to a similar figure, although it's hard to imagine that such a level could be reached through taxation. It will surely have to come through private expenditure.

But would it be desirable to spend so much on health? I don't think so. A graph of GDP against life expectancy does not show continuing growth.

Indeed, life expectancy shows little increase after spend per head reaches around $500 – less than a tenth of what the US currently spends on healthcare. And what about morbidity? Amartya Sen, the Nobel prize winner, has shown that people in richer countries report more sickness in the past month than people in poorer countries – which might be little to do with actual sickness but more to do with perception. Feeling unwell is largely a matter of perception, whereas when you're dead you're dead.

I'm inclined to get all moral here. I hate the idea of us spending more and more money on "health" in what I perceive as a largely vain pursuit of "heaven of earth" as most of us no longer believe in the religious version. I'd much rather we spent our money on reducing the gross inequalities in the world and helping achieve the millennium development goals. But what I think will have no influence on the UK's spending on health. It will probably simply rise inexorably.

For More Information:
http://www.guardian.co.uk/commentisfree/2008/jun/10/health.health?gusrc=rss&feed=global